Leasing Lessons from VA’s Academic Partnerships: Why Federal Contractors Should Pay Attention

The Government Accountability Office’s recent report on VA leasing may look, at first glance, like an inside-baseball story about academic medical centers. In reality, it offers a useful case study in how an agency implements new statutory flexibilities, manages infrastructure risk, and struggles—or succeeds—in converting policy authority into executable deals. Those themes are highly relevant to federal contractors that build, finance, staff, or operate health-care and research facilities for the government.

The report examines VA’s use of Section 704 of the PACT Act, which allows VA to award noncompetitive (sole-source) leases to academic affiliates and certain “covered entities” when it is in the department’s interest and supports delivery of health-care resources to veterans. As of June 2025, VA had signed five leases under this authority, with additional projects in the pipeline. These arrangements are not marginal: they involve research space, new or replacement medical centers, and colocated facilities designed to address toxic-exposure, mental health, and geriatric care needs.

For contractors, the report’s most striking contribution is its depiction of the benefits and frictions that arise when federal capital planning meets partner-owned infrastructure. On the benefit side, leasing in academic facilities gives VA quicker access to modern laboratories and clinical space than traditional construction, allows shared use of specialized equipment, and improves proximity to the veteran population. VA officials estimated, for example, that leasing advanced research space at UC Davis avoided tens of millions in construction costs and years of delay, while helping attract high-end research talent.

On the friction side, GAO documents familiar pain points that any federal contractor will recognize: opaque communication, form-driven processes that do not match the deal structure, long approval timelines, and uncertainty about when internal VA and congressional approvals will be secured. Academic affiliates—many effectively acting as landlords or developers—describe wrestling with 50-page federal lease templates, navigating floodplain compliance, and carrying substantial pre-lease financing risk for up to 36 months while waiting for VA to move in.

GAO’s central recommendation is that VA implement a formal, agency-wide lessons-learned process for these sole-source leases now, rather than waiting until ten such leases have been executed. It ties this to federal internal control standards and to program-management best practices: systematically collecting data, analyzing root causes, validating insights with internal and external stakeholders, documenting and disseminating lessons, and actually applying them to later projects.

Why should federal government contractors care? First, this report is a clear signal that VA intends to lean on leasing, including noncompetitive arrangements, to close critical infrastructure gaps created by aging facilities and expanded PACT Act eligibility. Contractors that understand the constraints GAO highlights—GSA delegations, prospectus thresholds, congressional approvals, internal capital scoring—will be better positioned to structure realistic schedules, financing plans, and risk-sharing mechanisms. Second, the emphasis on lessons learned and risk governance will likely migrate into VA solicitations, performance expectations, and oversight. Contractors that can help VA define, capture, and act on those lessons will differentiate themselves as strategic partners rather than mere lessors or service providers.

This report is not just about VA’s relationships with universities; it is about how a large cabinet department experiments with a new leasing authority under intense budget and mission pressure. Federal contractors who study these early case examples will gain advance insight into where the opportunities and bottlenecks in VA’s capital program are likely to emerge over the next decade.

Disclaimer: This blog post is for informational purposes only, is based on GAO’s published report as of November 2025, and may not reflect subsequent legal, policy, or factual developments. It does not constitute legal, financial, or professional advice. Readers should consult qualified counsel or advisors about their specific circumstances.