United Nations
Renovation Schedule Accelerated after Delays, but Risks Remain in Key Areas Gao ID: GAO-08-513R April 9, 2008The United Nations (UN) headquarters in New York City neither conforms to current building codes nor meets UN technology or security requirements. As the UN's host country and largest contributor, the United States has a substantial interest in the success of the Capital Master Plan (CMP), a project to renovate the complex. In this update, GAO reviewed the following key areas: renovation approach, schedule, cost, funding, risk management, project progress, procurement, and oversight. To perform this work, GAO reviewed UN documents and met with officials from the CMP office and other UN departments. To assess oversight and monitoring, GAO reviewed UN documents and oversight reports and interviewed UN officials from the Office of Internal Oversight Services (OIOS) and officials from the U.S. Department of State (State).
The UN accelerated the CMP schedule by changing the renovation approach, which it reported would make up for past delays, reduce costs, and mitigate key risks. It will now renovate buildings in single phases, rather than in multiple phases as previously planned. Under the accelerated approach, the UN plans to begin construction of the temporary building in 2008 and start renovations in early 2009. Barring delays, the UN now intends to complete the project by mid-2013. Under the previous approach, the completion date had slipped to mid-2015. Delays in relocating UN staff could extend the schedule, creating additional costs. UN officials told us the CMP's Executive Director would make relocation decisions in spring 2008, with most moves following in early 2009. The CMP office currently estimates the total cost is $2.07 billion--$190 million over the $1.88 billion budget. The CMP office is looking for cost savings, but this effort may not be sufficient to bring estimated costs back to budget without potentially impacting the buildings' functionality. According to CMP officials, projected payments from member states will be enough to cover expenditures under the accelerated schedule. As of December 31, 2007, member states had paid $380.9 million, and $127.5 million in payments were late, including $64.2 million from the United States. The CMP office identified risks to the schedule and cost and developed strategies to mitigate them. For example, cost increases resulting from decision-making delays are a major risk the CMP office intends to mitigate by having the CMP Executive Director communicate proactively with key UN stakeholders. To mitigate weaknesses in UN procurement, the UN is piloting a streamlined process for approving CMP contract amendments in an effort to balance timely decision making with adherence to the procurement manual. The Procurement Division obtained authority to approve amendments up to $2.5 million--increased from $200,000--which can expedite the approval of such amendments by about 5 weeks, according to officials. While a subcontracting process has been developed, it does not include a procedure for the UN to monitor issues that may arise between the construction manager and its subcontractors that could affect the cost and schedule. While OIOS had funding to hire staff, its inability to quickly fill vacancies resulted in minimal oversight of the CMP during 2007. In 2007, OIOS completed one audit report on CMP and identified no significant issues. OIOS has recently completed the hiring of two auditors dedicated to CMP. The Board of Auditors has continued to conduct oversight, and State has continued to monitor the CMP.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-08-513R, United Nations: Renovation Schedule Accelerated after Delays, but Risks Remain in Key Areas
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Correspondence to the Committee on Foreign Relations, U.S. Senate:
United States Government Accountability Office:
GAO:
April 2008:
United Nations:
Renovation Schedule Accelerated after Delays, but Risks Remain in Key
Areas:
UN Capital Master Plan:
GAO-08-513R:
GAO Highlights:
Highlights of GAO-08-513R, a correspondence to the Committee on Foreign
Relations, U.S. Senate.
Why GAO Did This Study:
The United Nations (UN) headquarters in New York City neither conforms
to current building codes nor meets UN technology or security
requirements. As the UN‘s host country and largest contributor, the
United States has a substantial interest in the success of the Capital
Master Plan (CMP), a project to renovate the complex. In this update,
GAO reviewed the following key areas: renovation approach, schedule,
cost, funding, risk management, project progress, procurement, and
oversight.
To perform this work, GAO reviewed UN documents and met with officials
from the CMP office and other UN departments. To assess oversight and
monitoring, GAO reviewed UN documents and oversight reports and
interviewed UN officials from the Office of Internal Oversight Services
(OIOS) and officials from the U.S. Department of State (State).
What GAO Found:
Renovation approach: The UN accelerated the CMP schedule by changing
the renovation approach, which it reported would make up for past
delays, reduce costs, and mitigate key risks. It will now renovate
buildings in single phases, rather than in multiple phases as
previously planned.
Schedule: Under the accelerated approach, the UN plans to begin
construction of the temporary building in 2008 and start renovations in
early 2009. Barring delays, the UN now intends to complete the project
by mid-2013. Under the previous approach, the completion date had
slipped to mid-2015. Delays in relocating UN staff could extend the
schedule, creating additional costs. UN officials told us the CMP‘s
Executive Director would make relocation decisions in spring 2008, with
most moves following in early 2009.
Cost: The CMP office currently estimates the total cost is $2.07
billion--$190 million over the $1.88 billion budget. The CMP office is
looking for cost savings, but this effort may not be sufficient to
bring estimated costs back to budget without potentially impacting the
buildings‘ functionality.
Funding: According to CMP officials, projected payments from member
states will be enough to cover expenditures under the accelerated
schedule. As of December 31, 2007, member states had paid $380.9
million, and $127.5 million in payments were late, including $64.2
million from the United States.
Risk management: The CMP office identified risks to the schedule and
cost and developed strategies to mitigate them. For example, cost
increases resulting from decision-making delays are a major risk the
CMP office intends to mitigate by having the CMP Executive Director
communicate proactively with key UN stakeholders.
Procurement: To mitigate weaknesses in UN procurement, the UN is
piloting a streamlined process for approving CMP contract amendments in
an effort to balance timely decision making with adherence to the
procurement manual. The Procurement Division obtained authority to
approve amendments up to $2.5 million”increased from $200,000”which can
expedite the approval of such amendments by about 5 weeks, according to
officials. While a subcontracting process has been developed, it does
not include a procedure for the UN to monitor issues that may arise
between the construction manager and its subcontractors that could
affect the cost and schedule.
Oversight: While OIOS had funding to hire staff, its inability to
quickly fill vacancies resulted in minimal oversight of the CMP during
2007. In 2007, OIOS completed one audit report on CMP and identified no
significant issues. OIOS has recently completed the hiring of two
auditors dedicated to CMP. The Board of Auditors has continued to
conduct oversight, and State has continued to monitor the CMP.
What GAO Recommends:
GAO recommends that the Secretary of State and the U.S. Permanent
Representative to the UN work with other member states to direct the
CMP office to establish a procedure that would require the construction
manager to inform the office of issues with its subcontractors that
could negatively affect the project‘s cost or schedule. State and the
UN agreed with GAO‘s findings and recommendation.
To view the full product, including the scope and methodology, click on
[http://www.gao.gov/cgi-bin/getrpt?GAO-08-513R]. For more information,
contact Terrell Dorn at (202) 512-6923 or dornt@gao.gov or Thomas
Melito at (202) 512-9601 or melitot@gao.gov
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
April 9, 2008:
The Honorable Joseph R. Biden, Jr.:
Chairman:
The Honorable Richard G. Lugar:
Ranking Member:
Committee on Foreign Relations:
United States Senate:
The 50-year-old United Nations (UN) headquarters complex in New York
City does not conform to current safety, fire, and building codes or
meet UN technology or security requirements, making it a potentially
hazardous environment for visitors, employees, and delegates. To
address these concerns, the UN has developed the Capital Master Plan
(CMP) for a comprehensive renovation of the entire complex. In December
2006, the UN General Assembly adopted a resolution for the project that
included a $1.88 billion budget and a schedule with a completion date
of 2014.[Footnote 1] The scope of the project approved at that time
included constructing a temporary building on the UN headquarters
grounds to house General Assembly meetings and conferences. It also
included renovating the Secretariat office building in multiple phases,
during which some staff would be moved to off-site leased office space,
while most staff would be moved within the building during the
renovation. In December 2007,[Footnote 2] the UN changed the project's
approach to renovate all buildings, including the Secretariat office
building, in a single phase. Under this approach, most UN employees
will move to temporary office space off site until the renovation is
completed.
We have previously reviewed UN efforts to develop and implement the
CMP, prepare cost estimates, and provide oversight. In June 2001 and
May 2003, we reported that the UN's renovation planning efforts had
been reasonable and conformed to leading industry practices.[Footnote
3] In November 2006, we reported that UN officials continued to use
leading industry practices to develop the UN headquarters renovation
project, but that the renovation could become vulnerable to UN
procurement weaknesses that we had previously identified. In addition,
we reported that the UN Office of Internal Oversight Services (OIOS)
relies on funds from the CMP budget and must negotiate for those funds
with the UN budget office, which may impair its independence.[Footnote
4] In February 2007, we provided information about the latest cost
estimate and reported that member states had the option of making a
single payment or equal payments over 5 years to fund the CMP.[Footnote
5]
You asked us to update our most recent reports and provide information
on the current status of the CMP renovation project. Accordingly, we
reviewed the following key areas: renovation approach, schedule, cost,
funding, risk management, renovation progress, procurement, and
oversight. To do this, we reviewed pertinent UN planning documents and
reports, including the latest cost and schedule estimates, the draft
procedures manual, and risk assessments. We also interviewed UN
officials in the CMP office and the procurement office. To assess
oversight and monitoring activities, we reviewed UN documents related
to CMP oversight and interviewed officials from OIOS and the U.S.
Department of State (State). We conducted this performance audit from
July 2007 to April 2008 in accordance with generally accepted
government auditing standards. Those standards require that we plan and
perform the audit to obtain sufficient, appropriate evidence to provide
a reasonable basis for our findings and conclusions based on our audit
objectives. We believe that the evidence obtained provides a reasonable
basis for our findings and conclusions based on our audit objectives.
Results in Brief:
Since our most recent reports on the CMP in November 2006 and February
2007, the UN has accelerated the CMP schedule and made progress in a
number of areas, but risks remain in some of the following key areas we
reviewed:
* Renovation approach: The UN accelerated the CMP schedule by changing
the renovation approach. It will now renovate buildings in single
phases, rather than in multiple phases as planned under the previous
approach. The CMP office reported that changing to this accelerated
approach will make up for past delays, reduce costs, and mitigate key
risks associated with renovating occupied buildings.
* Schedule: Under the accelerated approach, the UN plans to begin
construction of the temporary building in 2008 and renovations in early
2009. Barring delays, the UN now intends to complete the project by mid-
2013. Under the previous approach, the completion of the renovation had
slipped by about a year to mid-2015. Delays in relocating UN staff
could extend the renovation schedule, resulting in additional costs.
However, UN officials told us the CMP's Executive Director would decide
during spring 2008 where UN departments will be relocated, with most
moves following in early 2009.
* Cost: According to the CMP office's current estimate, the project's
total cost under the accelerated approach will be $2.07 billion, which
is $190 million over the $1.88 billion budget the General Assembly
approved in 2006. The CMP office is working with the construction
manager to identify cost savings, and the CMP Executive Director is
optimistic about being able to get the project back on budget. However,
this effort may not be sufficient to bring estimated costs in line with
the budget without potentially impacting the functionality of the UN
buildings.
* Funding: According to CMP officials, projected payments from member
states will cover the $1.88 billion CMP budget. Through 2007, member
states have paid $380.9 million for the CMP. As of December 31, 2007,
$127.5 million in member state payments were late, including $64.2
million from the United States.
* Risk management: The CMP office, working with a consultant,
identified risks to the CMP's schedule and cost and developed
strategies to mitigate them. For example, increased costs resulting
from delays in decision making are a major risk the CMP office intends
to mitigate by having the CMP Executive Director communicate
proactively with key UN stakeholders.
* Project progress: Delays slowed the CMP in 2007, but the UN made key
decisions to prepare for construction. In 2007, the UN hired a new
Executive Director for the project, contracted with a construction
manager, and completed environmental testing. Although the CMP office
has identified sufficient temporary office space to relocate UN
employees, the UN has yet to decide which UN departments will occupy
which spaces.
* Procurement: To mitigate identified weaknesses in the UN procurement
system, the UN is piloting a streamlined process for the CMP that is
intended to address the need for timely decision making while adhering
to the principles outlined in the procurement manual and maintain
accountability. The Procurement Division obtained increased authority
to approve contract amendments up to $2.5 million--increased from its
previous limit of $200,000. This change expedites the process for
approving such amendments by approximately 5 weeks, according to
officials. While a subcontracting process has been developed, it does
not include a procedure for the UN to monitor issues that may arise
between the construction manager and its subcontractors that could
affect the cost and schedule. We recommend that the Secretary of State
and the U.S. Permanent Representative to the United Nations work with
other member states to direct the CMP office to establish a procedure
that would require the construction manager to inform the office of
issues that may arise with its subcontractors that could increase the
cost or delay the schedule of the project.
* Oversight: Although OIOS had funding to hire staff, its inability to
quickly fill vacancies resulted in its conducting minimal oversight of
the CMP during 2007. In 2007, OIOS completed one audit report on the
CMP on the accuracy and validity of CMP disbursements and identified no
significant issues. OIOS recently completed the hiring of two auditors
dedicated to CMP, who have been assessing vulnerabilities to guide the
development of an audit plan for 2008. The Board of Auditors has
continued to conduct oversight and highlighted the financial
implications of the delays. State has continued to monitor issues such
as cost, schedule, and risks.
Detailed information on each area we reviewed follows in enclosure I.
Agency Comments and Our Evaluation:
We provided a draft of this correspondence to State, the UN Department
of Management, and OIOS for their review and comment. State and the UN
Department of Management provided written comments, which are
reproduced in enclosures II and III, and generally concurred with our
findings and recommendations. They also provided us with a number of
technical suggestions and clarifications that we have addressed in this
correspondence, as appropriate. OIOS stated that our correspondence was
accurate and did not provide additional comments.
We are sending copies of this correspondence to interested Members of
Congress, the Secretary of State, and the U.S. Permanent Representative
to the United Nations. We also will make copies available to others
upon request. In addition, the correspondence will be available at no
charge on the GAO Web site at [hyperlink, http://www.gao.gov].
If you or your staff have any questions about this correspondence,
please contact Thomas Melito at (202) 512-9601 or melitot@gao.gov or
Terrell Dorn at (202) 512-6923 or dornt@gao.gov. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this correspondence. Key contributors are listed on
the Scope and Methodology page of enclosure I.
Signed by:
Thomas Melito:
Director, International Affairs and Trade:
Terrell Dorn:
Director, Physical Infrastructure Issues:
Enclosures:
[End of section]
Enclosure I: Renovation Approach:
Change in Approach:
Accelerated Approach:
With approval from the General Assembly in December 2007, the Capital
Master Plan (CMP) office adopted the current accelerated approach to
the renovation, which calls for renovating buildings in one phase with
most of their occupants temporarily relocated off site. The United
Nation‘s (UN) preliminary estimate, reported in September 2007, is that
under this approach the renovation will be completed in mid-2013.
Previous Approach:
Under the previous approach, the UN had planned on renovating buildings
in multiple phases while moving some UN staff to rented office space
off site and others to floors within the Secretariat building where
there was no current construction activity. The General Assembly
approved this approach in June 2006 and, in December 2006, approved the
project‘s budget for $1.88 billion based on a completion date of mid-
2014. However, by September 2007, the UN reported that due to delays in
starting construction, under this approach, the renovation would not be
completed until mid-2015 and would cost $2.10 billion, which was
approximately $220 million above the approved budget.
Original Approach:
In 2003, the UN had proposed a renovation approach that included
renovating each building in a single phase while relocating most UN
staff and activities off site. This approach was abandoned in 2006
because, at that time, the UN had problems securing sufficient
temporary space for relocating most employees off site.
UN Changed the Renovation Approach in an Effort to Shorten the
Schedule, Reduce Costs, and Mitigate Key Risks:
The CMP office, with approval from the General Assembly in December
2007, changed the approach to the project to renovate each building in
a single phase, rather than in multiple phases as the UN planned under
the previous approach. This new approach accelerates the project, which
the UN now estimates it will complete in mid-2013. Under the previous
approach, the CMP office reported in September 2007 that delays had
pushed the completion of the project back to mid-2015”1 year later than
the CMP had reported in 2006”and the estimated cost of the project had
increased by $220 million over the approved budget of $1.88 billion.
Under the accelerated approach, the UN will temporarily relocate most
employees from the Secretariat and renovate it in one phase over the
course of 3 years, rather than in multiple phases over 6 years with UN
employees still working in the building. Additionally, the CMP office
plans to construct a temporary building large enough to enable the UN
to complete the conference building renovation in one phase over 2
years rather than in two phases over 3 years. Under the revised
schedule, the UN will begin construction in 2008 and complete the
renovation in 2013, 1 year ahead of the previous schedule.
Shortening the duration of a construction project can save money since
longer projects may be subject to higher overhead and escalation
costs”increases in future costs due to inflation in labor and materials
costs and other unforeseen market changes. Based on preliminary
estimates, the CMP office expects the accelerated approach to reduce
the cost of the renovation by almost $30 million but is optimistic that
it can find additional savings with this approach (see cost section).
Additionally, renovating buildings when they are unoccupied can reduce
risks of performing construction work while normal business is being
carried out in the same building. Such risks include work stoppages to
accommodate UN business and accidents involving UN employees working
close to construction. Figure 1 below shows the existing buildings of
the UN headquarters complex, along with the planned temporary building.
Figure 1: UN Headquarters Complex, New York City:
This figure is a diagram of the UN headquarters complex, in New York
City.
[See PDF for image]
Source: GAO and United Nations.
[End of figure]
Schedule:
Project Background:
The UN headquarters complex opened in New York City in 1952. Originally
designed to accommodate representatives of 70 member states, the
complex currently accommodates the needs of 192 member states and
approximately 4,700 UN staff and also hosts nearly 1 million visitors
per year from around the world.
2000: The Secretary-General proposed a comprehensive renovation. Under
the CMP, the UN intended to renovate the complex so that it would
conform to current safety, fire, and building codes and meet UN
technology and security requirements. This process would involve
upgrading or replacing all major building systems, including
electrical, plumbing, fire suppression, heating, and air conditioning,
as well as reinforcing structural integrity and removing asbestos from
the entire complex.
2002: The General Assembly authorized proceeding with the renovation.
2006: In June 2006, the General Assembly approved an approach to the
renovation under which some buildings would be renovated while still
partially occupied by UN staff, because of difficulties in securing off-
site space to temporarily relocate most UN staff and activities. In
December 2006, the General Assembly approved the project‘s current
scope and set its budget at $1.88 billion, with a completion date of
2014.
Construction Start Has Been Delayed, but Accelerated Approach May
Shorten Overall Project Duration:
The start of the UN headquarters renovation has been delayed for a
number of reasons, but the UN expects the accelerated approach will
shorten the estimated duration of the project. Between October 2006 and
September 2007, the schedule slipped as follows:
* In October 2006, the CMP annual report indicated that the renovation
would last 7 years, beginning in mid-2007 and ending in mid-2014. The
General Assembly approved this schedule in December 2006.
* In September 2007, the CMP annual report identified several factors
that had pushed the estimated start of construction back to late 2008
and the completion of the phased renovation back to mid-2015, with
landscaping due to be completed in mid-2016.
According to the UN, factors that delayed the project in 2007 included:
* the need for more time than expected to complete the selection of the
construction manager, including UN and independent reviews of the
selection process, which delayed the construction manager contract
award from November 2006 to July 2007;
* the increased time required to award contracts for the environmental
testing that is needed to design the temporary building, which delayed
completion of this testing until January 2008; and:
* the time needed to integrate additional requirements to address
security, improve the building‘s energy efficiency, and reduce its
environmental impact. These requirements resulted from further review
of the security and sustainability scope options approved by the
General Assembly in December 2006.
Additionally, the 2007 CMP annual report noted that delays also
resulted from the complexities of decision making within the UN.
Furthermore, both the UN Board of Auditors and the UN Advisory
Committee on Administrative and Budgetary Questions reiterated concerns
about decision-making delays in their 2007 reports on the CMP. This
advisory committee and the General Assembly both stressed the
importance of leadership and commitment by the Secretary-General and
senior UN management to avoid further delays.
Going forward, one of the CMP‘s next major steps requiring the broad
commitment of all UN departments will be moving UN staff to temporary
office spaces, including spaces off site and in the library, which will
be used as temporary office space during construction. Delays in
relocating UN staff could extend the renovation schedule, resulting in
additional costs. The UN delegated the authority to determine where UN
departments will be relocated to the CMP Executive Director. CMP
officials said this would be decided by spring 2008 and that
Secretariat staff would be moved in early 2009.
Schedule under Accelerated Approach:
The accelerated approach shortens the duration of the project from 7
years to 5 years. Under this approach, the UN plans to begin
construction of the temporary building in 2008 and renovation of the
Secretariat in 2009. At the completion of the renovation in mid-2013,
the temporary building would be disassembled. Figure 2 shows the
schedule for starting and completing work on each building of the UN
headquarters complex under the current schedule.
Figure 2: Current Schedule of UN Headquarters Renovation by Building
and Year:
This figure is a timeline of the current schedule of UN headquarters
renovation by building and year.
[See PDF for image]
Source: GAO and United Nations.
[End of figure]
Cost:
Budget Background:
In December 2006, the General Assembly approved the project‘s current
scope and set its budget at $1.88 billion with a completion date of
2014.
Cost Increases under Previous Approach:
As of September 2007, the cost estimate under the previous approach,
which called for renovating buildings in multiple phases, had increased
to $2.10 billion, about $220 million over the approved budget of $1.88
billion. Subsequently, the CMP office has reduced the cost estimate to
$2.07 billion.
Latest CMP Cost Estimate Has Increased to Over $2 Billion:
The CMP office estimates the project‘s total cost under the accelerated
approach to be $2.07 billion, an increase of $190 million over the
$1.88 billion budget approved by the General Assembly in December 2006.
The CMP office expects to receive a refined estimate from the
construction manager during the summer of 2008 after the completion and
review of the construction documents for the accelerated approach.
While the UN is looking for ways to bring this estimate back in line
with the budget, industry experts have noted that early construction
estimates can vary as much as 20 to 30 percent from actual costs, even
with estimates that include contingency funds in the budget, such as
the CMP estimate.
The CMP office estimates that, based on the estimate of $2.07 billion,
the change to the accelerated approach will result in a net savings of
almost $30 million over the $2.10 billion estimate under the previous
approach. The new accelerated approach decreases costs associated with
escalation and construction because the project can be completed in
less time but increases costs for leasing temporary office space
because the UN will relocate more staff. Additionally, according to CMP
officials, other construction costs increased as a result of changes
made to reflect refinement of the project‘s scope. Table 1 shows how
the current cost estimate reported in September 2007 compares with the
previous estimate used for the budget approved in December 2006.
Table: Comparison of 2006 (Previous Approach) and 2007 (Accelerated
Approach) CMP Cost Estimates by Cost Category:
[See PDF for image]
Source: GAO analysis of UN documents.
[A] Transfer from escalation was moved into the construction cost
category to account for actual inflation experienced in 2006.
[B] Some figures differ from those in the CMP‘s annual report of
September 2007 because of differences in rounding.
[End of figure]
Construction Estimates:
According to the Construction Industry Institute,[Footnote 6] the final
cost of any project may vary plus or minus 20 to 30 percent from
estimates derived during a project‘s design phase. This variation is in
addition to contingency funds that are built into a project‘s cost
estimate. As a project progresses, the uncertainty of cost estimates
decreases as construction documents are further refined and any
remaining scope decisions are finalized. However, events outside UN
officials‘ influence, such as the availability of construction
materials and labor, may affect the project‘s cost.
Letter of Credit:
The General Assembly approved the use of a letter of credit for the CMP
as a method to guarantee payment. The UN could obtain a letter of
credit if the construction manager required it as proof that the UN
could pay for the project or if the UN did not have enough cash on hand
to pay its contractors. As of March 2008, the construction manager had
not required the UN to provide a letter of credit, and UN officials do
not expect it will do so.
Obtaining a letter of credit would add costs to the CMP. We reported in
November 2006 that, according to UN officials, the transaction fee
associated with a letter of credit could range from $3 million to $21
million.
Efforts Being Made to Reduce CMP Cost Estimate:
To bring the project‘s estimated cost in line with the approved budget,
the CMP office is working with the construction manager and
architectural and engineering firms to explore options to reduce costs
under the accelerated approach. The CMP Executive Director is
optimistic this process will net enough savings to offset the current
estimated cost overrun; however, the CMP office has not yet determined
how it will achieve these savings, and the CMP office has previously
conducted some reviews to identify cost savings on the project.
In February 2007, we reported that the CMP office, through its previous
reviews, had already identified $54.3 million in construction cost
savings that could be achieved without compromising the quality,
reliability, and performance of the project. In December 2007, the CMP
office and the construction manager began a similar effort to
brainstorm additional ideas for reducing costs, followed by several
weeks of more detailed examination of these ideas by CMP‘s
architectural and engineering firms. According to CMP officials,
changing the approach by renovating buildings in single phases may
present opportunities to work more efficiently and thus reduce costs.
As changes are made to the project, timely communication and
stakeholder acceptance are important to ensure that the UN‘s
expectations for the renovation are met. In addition, if it is later
determined during construction that these changes could not be made
without changing the functionality of the space, the UN would have to
choose to either reduce functionality or add the cost back to the
estimate. While these efforts to identify cost savings may reduce the
estimated cost, they may or may not be sufficient to bring the
estimated cost in line with the $1.88 billion budget. The CMP‘s budget
cannot increase without the General Assembly‘s approval.
The next cost estimate will be finalized by the construction manager
during the summer of 2008 for inclusion in the next CMP annual report.
This estimate will be based on revised construction documents that
reflect the accelerated approach and, therefore, should present a more
refined estimate of costs than the current estimate. This estimate will
also serve as the basis for the UN to negotiate multiple construction
contracts with the construction manager”reflecting the various
buildings and construction time frames for each. According to CMP
officials, these negotiations would begin in early 2009.
Funding:
Funding Background:
The General Assembly approved a strategy to assess member states for
the cost of the project, which they could choose to pay in a single
lump sum in 2007 or in equal payments over 5 years from 2007 through
2011. The General Assembly also approved a $45 million working capital
reserve to cover any temporary cash flow deficits. The 2006 CMP annual
report states that this reserve would be credited back to member states
at the end of construction. Member states were assessed for the CMP in
proportion to their regular UN budget assessment rate for 2007.
Member states‘ payment of the lump sum or first assessment and the
working capital reserve was due around May 1, 2007. We reported in
February 2007 that the United States is expected to pay its assessment
of $377.7 million over 5 years, in equal payments of $75.5 million per
year. Also, the UN assessed the United States about $9.9 million for
its share of the working capital reserve.
The President‘s fiscal year 2008 budget request included fully funding
the CMP as part of the Department of State‘s (State) funds to pay
international organizations. Congress appropriated these funds, and
State is finalizing plans to pay the United States‘ 2007 CMP
assessment. According to the UN, as of December 31, 2007, the United
States had paid its share of the working capital reserve and $11.3
million of its 2007 CMP assessment, leaving an outstanding balance of
$64.2 million. The President‘s fiscal year 2009 budget includes $75.5
million for the CMP, which would fully fund the 2008 assessment.
UN Expects Member State Payments Will Cover Costs:
According to CMP officials, projected payments from member states from
2007 through 2011 will cover renovation expenditures, even under the
shorter disbursement schedule of the accelerated approach. According to
CMP officials, the years with the largest disbursements are toward the
end of the project, 2010 through 2012. For 2002 through 2007, the UN
assessed member states $504.8 million for the CMP and, as of December
31, 2007, the UN had received $380.9 million in payments from member
states for the CMP. This included $3.5 million from member states that
have paid later-year assessments in advance and $12.0 million from
member states that chose to pay the assessment in a single lump sum.
As of December 31, 2007, member states had a $127.5 million outstanding
balance for the CMP, of which the U.S. share was $64.2 million. Table 2
below shows the status of CMP contributions from all member states and
the largest contributors as of December 31, 2007. According to the UN,
member states have paid $44.9 million of the $45 million working
capital reserve, leaving $125,000 outstanding. The UN credits CMP
contributions from member states to the reserve fund first under its
financial rules and regulations, before the general renovation fund.
Table 2: Member States‘ CMP Assessments Paid and Outstanding, as of
December 31, 2007[A]:
[See PDF for image]
Source: United Nations.
[A] This table does not include assessments and payments related to the
capital reserve fund, which are recorded separately from other CMP
funds.
[B] Japan‘s government has pledged to pay its entire 5-year CMP
assessment”about $285 million”in one payment in spring 2008.
[C] The sum of cumulative payments and balance outstanding exceeds
cumulative assessments because some member states chose to pay
contributions for future-year assessments in advance.
[End of figure]
Funds the UN collects from member state assessments, like all UN funds,
are pooled together and invested to earn interest. While the UN can use
interest earned on assessments paid for the CMP to cover cash flow
shortages, any interest earned is to be returned to member states upon
completion of the CMP. The General Assembly must approve any increase
in the budget of the project and, therefore, interest earned cannot be
used to increase the project‘s budget without the General Assembly‘s
approval. The General Assembly‘s budget resolution indicates that the
UN will assess member states any cost overruns approved by the General
Assembly.
Risk Management:
Background:
Major construction projects involve a wide variety of risks. Using risk
management, a project team can identify and quantify specific risks and
take steps to mitigate their impact. Experts define construction risk
management as a sequential process to:
1. identify and assess risks,
2. analyze the impact of risks, and:
3. manage the response to risks.[Footnote 7]
The UN recognizes that the headquarters renovation is a complex, high-
risk project. In its 2007 annual report, OIOS stated that the highly
complex nature of the CMP, coupled with the significant financial
exposure and safety-related concerns, make the project the riskiest
construction project the UN has ever undertaken. In a December 2007
resolution, the General Assembly requested the Secretary-General to
provide regular updates to member states on all aspects of CMP
implementation, including information about identified risks.
THe CMP Office identified Risks and Strategies to Mitigate Them:
The CMP office, working with a consultant, has identified risks to the
project‘s schedule and cost, as well as strategies to mitigate these
risks. The CMP office conducted an initial assessment in February 2007,
which it updated in December 2007. This process involved interviewing
key CMP personnel, contract managers, and the project management
consultant to identify risks to the overall project and specific
contracts; evaluating their potential impact in terms of cost and
schedule delays; identifying and implementing mitigating strategies;
and reviewing the effectiveness of the mitigation and any residual
risk.
In the initial February assessment, CMP identified major areas of risk,
which included the lack of delegated procurement authority, delay in
appointing the construction manager, and security requirements during
construction. A December 2007 update noted less risk in some areas, but
new risks as well. For example, the December update indicated that the
lack of a construction manager was no longer a risk, since one had been
appointed, and noted that the lack of delegated procurement authority
had been downgraded from a ’high“ to a ’medium“ risk, since the
Procurement Division had obtained increased authority to approve
contract amendments. The update also noted that the change in project
approaches had reduced or eliminated a number of risks identified
previously. The December assessment also identified a number of new
major risk areas such as the:
* cost of any delays that result from slow decision making,
* adequacy and size of the CMP staff, given its upcoming workload, and
* extent to which savings can be identified to make up for cost
increases due to delays.
Strategies to mitigate these risks identified in the update include
having the CMP Executive Director reach out to UN stakeholders
proactively and seek the support of the Secretary-General to improve
decision making, review resource requirements such as staffing needs
against the current schedule, and review the UN‘s expectations for the
project‘s requirements and functionality that may affect its cost.
The risk assessment work was conducted by an official from the CMP
office‘s project management contractor, who is independent from the
project team assigned to the CMP. The February 2007 assessment
recommended that the CMP office conduct further risk reviews when there
are significant changes that warrant review or when the project reaches
major milestones. According to CMP officials, they plan to update the
assessments about every 6 months. The project manager‘s contract was
amended to include the risk assessment work but does not establish
dates for conducting follow-up reviews.
Project Progress:
What GAO Had Said:
June 2001 and May 2003: GAO reported that the UN‘s early renovation
planning was reasonable and consistent with leading industry practices
(GAO-01-788 and GAO-03-566).
November 2006: GAO reported that UN officials continued to use leading
industry practices in developing the UN headquarters renovation project
(GAO-07-31).
Several Factors Hindered Project Progress, but Some Key Decisions Made
in Preparation for Construction:
A combination of several factors hindered the UN‘s progress on the CMP
in 2007, but the UN made some key decisions necessary to advance the
project to the construction phase. Preparing temporary office space and
starting construction of the temporary building did not begin as
planned in 2007 because of delays in contracting for a construction
manager and completing the environmental testing needed to properly
design the temporary building. However, in July 2007, the UN hired a
new Executive Director for the project and contracted with a
construction manager. Additionally, as of January 2008, the UN had
completed the environmental testing for the temporary building, which
the CMP office plans to begin building in June 2008. The CMP office
made progress in the following areas:
* Executive Director: The UN hired a new Executive Director for the CMP
in July 2007, a position that had been vacant since June 2006. The UN
Board of Auditors identified the lengthy vacancy in this position as
one of the underlying causes of the UN‘s lack of commitment to the
project and resulting unresponsiveness. Having an effective Executive
Director for such a large project is critical for providing project
management leadership to guide decision making and coordinate
resources.
* Construction manager: The UN contracted with Skanska USA Building
Inc. (Skanska USA), the U.S. subsidiary of an international
construction firm, to serve as the CMP construction manager during the
preconstruction phase. The contract awarded to Skanska USA for
preconstruction covers reviewing designs to determine how to construct
the buildings and achieve cost savings, preparing temporary office
space for UN employees, and constructing the temporary building.
Skanska USA will also develop cost proposals to complete the remaining
construction work. The UN has the option to select Skanska USA as
construction manager to oversee the construction phase if Skanska USA
and the UN can agree on a price for the construction. The CMP office is
working on a strategy and time line for this negotiation.
* Temporary office space: According to CMP officials, the UN has leased
sufficient temporary office space for relocating most UN employees and
activities off site during the renovation. The CMP construction manager
is overseeing the preparation of this space to meet UN needs. The UN
will need to decide which departments will occupy which temporary
spaces. As discussed earlier, these decisions are key to moving the
staff and beginning the renovation as scheduled.
* Design: CMP design work continued through 2007. To accommodate the
accelerated approach, the CMP office and its architectural and
engineering firms are redesigning a larger temporary building and other
aspects of the project.
* Environmental testing: In August 2007, the UN contracted to complete
the survey work necessary to properly design the temporary conference
building. CMP officials reported that this work was completed in
January 2008 and that they are working with the architectural and
engineering firms to address the issues found.
* Staffing: All CMP-related positions are currently filled in both the
CMP office and other UN offices. The CMP office funds positions in
other UN offices and requires them to submit annual reports on how they
used resources to support the CMP. The CMP then uses these reports, in
part, to determine the project‘s continued need for UN resources
outside of the CMP office.[Footnote 8] According to the CMP‘s 2007
annual report, the CMP office has 19 positions and funds 8 positions in
other departments”the Office of Internal Oversight Services (OIOS), the
Information Technology Services Division, the Department of Safety and
Security, the Office of Legal Affairs, and the Procurement Division.
* Contractor performance: The CMP office and its project manager
regularly review the performance of its contractors in both delivering
products as required in the contract and providing administrative
services. Contractors are paid for these administrative services
through a general services fee, which accounts for about 10 percent of
a contract's value. Each month, the CMP office reviews the performance
of its contractors in providing administrative services, also called
general services, by having CMP contract managers review whether a
contractor has met agreed-upon performance targets. If so, the CMP
office pays the monthly allotment of the contractor‘s general services
fee, but if not, the CMP office does not pay the fee for that month.
According to CMP officials, this system has worked well to ensure
satisfactory contractor performance. For example, CMP officials said
that after they once withheld a contractor‘s payment because of poor
general services performance, the contracting firm assigned different
staff to the contract, and performance improved. The CMP office and its
project manager also review products delivered as required in
contracts, and contractors are paid for these in accordance with the
terms of the contract.
As of February 2008, the CMP office was working with Skanska USA to
develop a framework for reviewing its performance. This framework is to
be codified in the CMP procedures manual. Skanska USA currently has a
set fee for its advisory services, submits monthly reports to the CMP
office, and meets weekly with CMP officials.
* Code compliance: In January 2007, the New York City government
reported a number of concerns with the current fire and safety systems
within the UN headquarters. Although long-term upgrades to these
systems will be addressed by the CMP, the UN has taken interim measures
to address these concerns. For example, until permanent sprinklers are
installed as part of the CMP, the UN is installing additional smoke
alarms and plans to install barriers to prevent fire from spreading
between buildings.
The UN, consistent with U.S. government practices, plans to voluntarily
comply with local building codes. Under this process, the UN will
invite local government inspectors to visit the construction site and
review related documents. The CMP office will consider implementing any
subsequent recommendations, but it is not required to do so.
* Communication strategy: The CMP office developed both internal and
external strategies for communicating information about the project‘s
status and responding to stated concerns. Approximately every month,
the CMP Public Information Officer posts a new article to the UN‘s
internal staff Web site about various aspects of the project. UN
employees can contact the CMP office through this Web site or through
the external CMP Web site available to the public. Additionally, in
response to the December 2007 General Assembly resolution calling for
more reporting about the CMP, the CMP office is providing more
information to staff and scheduling briefings with member states and
the UN‘s Fifth Committee, which is the General Assembly‘s committee
that addresses budget issues. The CMP Executive Director also plans to
issue information letters to the press and to the permanent missions at
the UN.
* Advisory board: Since 2000, the UN has reported that it will
establish an advisory board for the CMP. The General Assembly, in a
December 2007 resolution, reaffirmed its request that the UN establish
an advisory board to provide technical supervision of the CMP. As of
March 2008, the UN had not yet formed such a board.
U.S. Practice for Local Code Compliance:
As the federal government‘s acquisition agency, the General Services
Administration (GSA) acquires and manages federal buildings. According
to GSA, buildings built on federal property are exempt from state and
local building codes. However, GSA‘s policy is to comply with state and
local building codes to the maximum extent practicable.[Footnote 9] For
example, GSA officials involved with the renovation of the U.S. Mission
to the United Nations office building in New York City told us that
they had worked with the city to address a concern the city had with
the project.
For a federal construction project, GSA policy provides that:
* local government officials have the opportunity to review the project
for building code compliance;
* GSA and its contractors are not required to pay for related local
government actions, such as inspections; and:
* GSA shall review and consider all recommendations made by local
government officials; however, GSA has the final authority to accept or
reject any recommendation from local government officials.
Procurement:
Background:
An effective procurement process is one of the keys to success for any
large-scale construction project. The UN Department of Management,
through the UN Procurement Division, is ultimately responsible for
developing UN procurement policies.
The Headquarters Committee on Contracts (HCC) reviews the procurement
process and advises the Department of Management as to whether the
procurement process used is in accordance with the UN procurement
manual and UN financial rules and regulations. GAO has previously
reported that the HCC Chairman had stated that his committee did not
have the resources to keep up with its expanding workload (GAO, United
Nations: Procurement Internal Controls Are Weak, GAO-06-577
[Washington, D.C.: Apr. 25, 2006]). According to the UN‘s budget
office, the HCC received additional posts in 2007.
For more than a decade, experts have called on the UN to correct
serious weaknesses in its procurement process. In recent years, reports
of corruption and mismanagement in procurement have suggested that
millions of dollars contributed to the UN by the United States and
other member states are at risk of fraud, waste, and abuse. To date, UN
auditors have found no reports of corruption or mismanagement in
procurements related to the CMP.
Streamlined Process Could Facilitate Timely Decision Making:
In an effort to mitigate weaknesses in the UN procurement system as it
relates to the CMP, UN officials have added resources dedicated to the
CMP and are working to ensure transparency and accountability while
allowing for timely decision making. The UN currently has three
officials and one support staff in the Procurement Division dedicated
to CMP-related procurements.
New Process Streamlines Approval of Contract Amendments:
Because the process outlined in the UN‘s procurement manual can be time-
consuming, the CMP office and the UN Procurement Division sought ways
to expedite the process while maintaining accountability and adhering
to the principles outlined in the procurement manual in accordance with
UN financial rules and regulations. To streamline the process for
approving contract amendments, the UN Controller increased the value of
the individual contract amendments that Procurement Division officials
may approve without prior review by the HCC from $200,000 to $2.5
million. This new authority has been delegated on a pilot 6-month basis
and applies only to contract amendments, not to new procurements.
Procurement Division officials will brief the HCC monthly about how
they have been using the increased authority. Any amendments greater
than $2.5 million or any new contracts greater than $200,000 must still
be reviewed and approved by the HCC.[Footnote 10]
According to Procurement Division officials, the new authority enables
them to process contract amendments, as needed without delay, while
adhering to the principles of transparency and accountability outlined
in the procurement manual. These officials stated that, since obtaining
the new authority in November 2007, they have used it to approve
amendments for additional design work needed for the new renovation
approach. The officials told us the new process has cut 5 weeks from
the normal process for approving these contract amendments.
No Major Concerns Found in Reviews of Process to Select Skanska:
UN and independent reviews of the process for procuring Skanska USA as
construction manager did not identify issues that would affect the
recommendation to award the contract. A consulting firm conducted an
independent review by comparing the procurement process used with the
processes and procedures outlined in the UN procurement manual. This
review did not uncover or identify any major procedural gaps or
discrepancies that would have any impact on the recommendation
presented to the HCC. The review noted that the project and contract
type are unique to the usual processes the procurement manual governs.
For this reason, the review stated that a number of procedures were not
applicable to the process. In addition, a UN ethics committee conducted
due diligence by reviewing information on litigation brought by non-UN
parties against the successful bidder, Skanska USA, and its parent
company, and concluded that there had been no known fraud or criminal
conduct on the part of Skanska USA that would negatively affect its
ability to perform its contract with the UN.
What GAO Has Said:
April 2006: GAO reported that the UN was vulnerable to procurement
weaknesses, including the lack of an independent process to consider
vendor protests that could alert senior officials to failures by
procurement staff to comply with stated procedures (GAO-06-577).
November 2006: GAO reiterated its concerns and recommended that the
Secretary of State and the U.S. Permanent Representative to the UN work
with other members states to identify a CMP procurement strategy to
mitigate weaknesses in UN procurement processes (GAO-07-31).
Procurement Process:
November 2007: In a review of UN management reforms, we reported that
the UN had made some progress in the area of procurement but had made
little or no progress in establishing an independent bid protest system
(GAO, United Nations: Progress on Management Reform Efforts Has Varied,
GAO-08-84 [Washington, D.C.: Nov. 14, 2007]).
According to a November 2007 UN report, the UN finalized a concept
paper for a system to review vendor inquiries and complaints, consider
allegations of vendor misconduct and unethical behavior, and further
promote transparency and fairness. When piloted in 2008, the system
will include a debriefing procedure for unsuccessful vendors.
Subcontracting Process Developed, but Procedure Not Yet Established to
Monitor Issues between Construction Manager and Its Subcontractors:
CMP and UN procurement officials, working with the construction manager
(Skanska USA), developed a draft subcontracting process for
construction, which officials told us will cover most remaining
contract work. The process would enable UN officials to review
subcontractor awards at various points in the procurement process to
ensure adherence to the principles of the UN‘s procurement manual. For
example, UN officials can review prequalification criteria, approve the
solicitation method Skanska USA will use, consent to the list of
bidders, and have an opportunity to object to award recommendations.
Once these subcontracts are awarded, the construction manager will be
contractually responsible for addressing issues that may arise from its
subcontractors. Although CMP officials stated that they would like to
be kept aware of such issues, they acknowledged they have not yet
established a procedure to ensure they receive this information. Given
that a renovation project of this magnitude involves coordination among
many subcontractors that provide a wide variety of services, even a
small issue could affect work in multiple areas and ultimately
contribute to cost increases or schedule slippages.
Oversight:
Background:
In a 2003 resolution, the General Assembly stressed the importance of
oversight in implementing the CMP and requested that all relevant
oversight bodies, including OIOS, initiate immediate oversight
activities.[Footnote 11] In a December 2007 resolution, the General
Assembly reaffirmed the importance of oversight and requested that all
relevant oversight bodies continue to report to the General Assembly
annually on the CMP. The resolution also requested OIOS to ensure
effective audit coverage of the CMP.
OIOS Oversight Was Limited by Lack of Staff:
Although OIOS[Footnote 12] had funding from the CMP office to hire
staff, it was unable to quickly fill vacancies and, therefore, provided
minimal oversight of the CMP during 2007. Officials stated that,
without CMP-dedicated staff, they were unable to conduct most of the
audits outlined in the audit plan they had developed for the year.
Since the renovation project was delayed, officials saw little risk in
not completing the audits as planned, particularly since the Board of
Auditors”another UN oversight body”was doing extensive work on CMP
activities. According to its annual report covering July 2006 through
June 2007, OIOS issued comments, observations, and recommendations in
memorandums and via e-mail rather than in audit reports. OIOS also
reported that it participated in regular meetings with the Board of
Auditors to share information on the status and results of ongoing
audits on the CMP. In February 2007, OIOS updated the status of its
recommendations related to its audits on code consulting services bid
and construction law counsel, as well as draft agreements for
preconstruction services and construction management. The CMP office
accepted all 18 recommendations. In addition, in October 2007, OIOS
issued a report on the accuracy and validity of CMP disbursements and
identified no significant issues.
Although OIOS received funding for staff in January 2007, the office
lacked staff dedicated to reviewing the CMP throughout much of the
year, because it did not complete the hiring of two new oversight
officials until January 2008. In 2006, OIOS had two officials dedicated
to providing oversight of CMP activities, but one retired early in
2007, and the other left mid-year. In June 2006, the General Assembly
noted that the CMP office would provide resources to OIOS to conduct an
appropriate construction audit. In August of that year, OIOS requested
that the Department of Management fund an additional auditor post and a
consultant that specialized in construction auditing in New York State.
The department made the funds available to OIOS in January 2007.
However, because of delays in the hiring process, one auditor did not
begin until October 2007, and the other did not arrive at the UN until
January 2008. Currently, according to OIOS officials, one auditor is on
a 2-year contract, while the other has a permanent appointment with the
UN. OIOS officials stated that they expect funding to continue and
anticipate requiring additional resources as CMP activities increase.
OIOS Is Developing an Oversight Plan:
The December 2007 General Assembly resolution requested the Secretary-
General to entrust OIOS with a comprehensive review focusing on the
structure of the CMP office, compliance with UN procurement and
contracting regulations and rules, adherence to the terms of contracts,
internal controls, processes in place to properly manage the project,
and other high-risk areas. According to OIOS officials, auditors
assessed vulnerabilities and areas of potential concern, which guided
their development of an audit plan for 2008-2009. OIOS officials
expected the head of OIOS to approve this plan in spring 2008.
What GAO Recommended:
2006: Because OIOS relied on funds from the CMP budget and had to
negotiate with the UN budget office, its ability to secure sufficient
funds may have been impaired. GAO recommended that the Secretary of
State and the U.S. Permanent Representative to the UN work with other
member states to ensure that OIOS receives sufficient funding for
oversight of the CMP (GAO-07-31). In January 2007, the Department of
Management provided OIOS funds from the CMP budget for oversight of the
CMP.
UN Board of Auditors;
The UN Board of Auditors is appointed by the General Assembly to audit
accounts of UN organizations and programs and to report findings and
recommendations to the General Assembly through the Advisory Committee
on Administrative and Budgetary Questions.
U.S. Department of State:
As the UN‘s host country and largest contributor, the United States has
a substantial interest in the success of the CMP. State‘s Bureau of
International Organization Affairs develops and implements U.S. policy
in the UN, the UN's specialized agencies, and other international
organizations.
UN Board of Auditors Has Continued to Conduct Oversight of the
Project‘s Finances and Program Management:
The UN Board of Auditors, an external oversight entity that reports to
the General Assembly, highlighted financial implications of the delays
to the project in its June 2007 report. The board‘s broad objectives
for auditing the CMP, as established in its first report on the project
in 2003, are to examine CMP financial statements, including an
evaluation of project accounting, payment, and reporting systems;
ascertain compliance with UN regulations and rules on procurement and
contracting; determine adherence to the terms of contracts, such as
deliverables, time, and significant provisions; and review the
controls, including internal audit controls, and processes established
to properly manage the project.
In its June 2007 report, the board reviewed project management,
planning, risk management, and human resources. For example, the board
highlighted the lengthy vacancy in the office‘s Executive Director post
and outlined the delays to the project, as well as the financial
implications of the delays. The board recommended that the CMP office
examine the impact of delays on the budget and propose measures to
reduce that impact. The board also reported that a lack of geotechnical
surveys and studies on blast protections could cause delays in
finalizing construction documents and recommended that these surveys
and studies be conducted. The CMP office agreed with the board‘s
recommendations.
The board did not identify any significant departures from the
regulations and rules set out in the procurement manual. In addition,
the board did not note any cases of fraud or presumptive fraud within
the CMP office during the reporting period.
The U.S. Department of State Continued to Monitor CMP:
Since 2003, the U.S. Department of State‘s Bureau of International
Organization Affairs (IO) has continued to monitor areas including the
CMP‘s schedule, cost estimates, and risk assessments. It has a task
force to monitor the CMP composed of officials from IO and State‘s
Office of Overseas Building Operations, an examiner from the Office of
Management and Budget, and a consultant to provide input on security
issues. According to State officials, various members of the task force
make monitoring visits to the CMP office in New York City approximately
every quarter. Issues that the task force has identified as concerns
include the possibility of cost overruns and questions about whether
the CMP office has a formal, regular process to assess risks to the
project. State officials told us they discuss these concerns with CMP
officials and also have the opportunity to raise issues during meetings
of the UN‘s Fifth Committee, which is the main committee of the General
Assembly entrusted with responsibilities for administration and
budgetary matters.
Conclusions and Recommendation:
Conclusion:
Continued support for and commitment to the CMP from senior UN
management and all UN departments will be critical as the project moves
into the construction phase. The project‘s history has demonstrated the
cost impact of delaying decisions. Despite delays in the project,
during the last year, the UN has been able to position the CMP to move
forward with a new Executive Director, a construction manager, and an
approach that the CMP office expects will address the delays and
related concerns over increased costs. Additionally, the Procurement
Division‘s agreement to complete a pilot test of a streamlined process
for approving contract amendments for the CMP shows the division‘s
commitment to and understanding of the need for timely decision making
while maintaining controls for transparency and accountability.
Furthermore, OIOS‘s hiring of two auditors with construction auditing
experience should allow OIOS to increase its oversight of CMP
activities.
With the accelerated approach approved, the CMP office is going forward
with designing the renovation, constructing the temporary building, and
completing efforts to obtain temporary space for UN employees. The
timely movement of UN employees into temporary office spaces will
require the firm leadership and cooperation of senior UN management.
Any delays in vacating headquarters buildings could create additional
costs if they affect the construction schedule.
The success of the UN renovation will ultimately be judged not only by
whether the project is completed within budget and on time but also by
the extent to which it meets the UN‘s needs. As the CMP office works to
identify ways of cutting about $200 million from the cost estimate, it
will be important to maintain the functionality of the space as
expected by UN staff and member states and communicate changes that may
deviate from expectations. Additionally, while much of the contracting
during the construction phase will be between the construction manager
and subcontractors, the UN will have a significant oversight role. In
order to provide effective oversight of the project, the UN must be
kept aware of any issues that could affect the pace or cost of the
work. Timely and effective oversight not only will help to ensure the
success of the project but also will enhance the organization‘s
reputation as a responsible steward of member state contributions.
Recommendation:
We recommend that the Secretary of State and the U.S. Permanent
Representative to the United Nations work with other member states to
direct the CMP office to establish a procedure that would require the
construction manager to inform the office of issues that may arise with
its subcontractors that could increase the cost or delay the schedule
of the project.
Scope and Methodology:
GAO Contacts:
Thomas Melito, (202) 512-9601, or melitot@gao.gov:
Terrell Dorn, (202) 512-6923, or dornt@gao.gov:
Staff Acknowledgements:
In addition to the contacts named above, individuals making key
contributions to this report include Maria Edelstein, Assistant
Director; Debbie J. Chung; Bess Eisenstadt; Andrew Huddleston; Bruce
Kutnick; Josh Ormond; and Christina Werth. Mark Dowling, Brandon
Haller, and Bill Woods provided technical assistance.
Scope and Methodology:
To describe the change in CMP approach and evaluate its impact on the
project‘s schedule and cost, we reviewed the 2007 CMP annual report
that described the new approach and interviewed CMP officials about the
change. We reviewed the schedule for the accelerated approach presented
in the annual report and compared it with the schedule presented in the
2006 report, which reflected the previous approach. To evaluate how the
new approach affects the project‘s cost, we reviewed the latest CMP
cost estimate and compared it with the CMP budget the General Assembly
approved in December 2006. To describe reasons for changes in the
schedule and cost estimates, we reviewed and analyzed the 2007 CMP
annual report and monthly reports and other data developed by the
project management consultant and interviewed CMP officials.
Additionally, to report on the status of the project‘s funding,
including the collection and use of member states‘ CMP assessment
payments, we reviewed projected assessments and UN data on payments
received and outstanding from member states and interviewed UN budget
officials about the collection and use of these payments.
To describe the CMP‘s risk management efforts, we reviewed risk
assessment reports from the project management contractor and
interviewed CMP officials about the risk assessments conducted.
To describe progress on the CMP since our last report, we reviewed UN
documents, including the CMP‘s annual reports to the General Assembly
and documentation of CMP office procedures. We discussed various
aspects of the project with UN renovation project staff and consultants.
To describe the procurement process for the CMP, we reviewed relevant
documents, including the UN‘s procurement manual, and interviewed
officials from the UN Procurement Division and the CMP office.
To describe UN oversight efforts, we reviewed the annual OIOS report
and the UN Board of Auditors‘ latest report on the CMP and interviewed
officials. We also interviewed officials from State‘s Bureau of
International Organizations to describe its monitoring of the project.
We conducted this performance audit from July 2007 to April 2008 in
accordance with generally accepted government auditing standards. Those
standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
[End of section]
Enclosure II: Comments from the Department of State:
United States Department of State:
Assistant Secretary for Resource Management and Chief Financial
Officer:
Washington, D.C. 20520:
Ms. Jacquelyn Williams-Bridgers:
Managing Director:
International Affairs and Trade:
Government Accountability Office:
441 G Street, N.W.:
Washington, D.C. 20548-0001:
March 27, 2008:
Dear Ms. Williams-Bridgers:
We appreciate the opportunity to review your draft report, "United
Nations: Renovation Schedule Accelerated After Delays, but Risks Remain
in Key Areas," GAO Job Code 545062.
The enclosed Department of State comments are provided for
incorporation with this letter as an appendix to the final report.
If you have any questions concerning this response, please contact Lisa
Spratt, Program Analyst, Bureau of International Organization Affairs,
at (202) 647-6395.
Sincerely,
Signed by:
Bradford R. Higgins:
cc: GAO ” Tom Melito:
IO ” Kristen Silverberg:
State/OIG ” Mark Duda:
Department of State Comments on GAO Draft Report:
United Nations: Renovation Schedule Accelerated After Delays, but Risks
Remain in Key Areas (GAO-08-513R, GAO Code--545062):
Thank you for the opportunity to comment on your draft report entitled
United Nations: Renovation Schedule Accelerated after Delays, but Risks
Remain in Key Areas. The Department of State welcomes the GAO report
and concurs with its recommendation that the CMP Office should
establish a procedure that would require the construction manager to
inform the office of issues that may arise with its subcontractors that
could increase cost or delay the schedule.
The Department agrees that the CMP Office should establish procedures
that support effective management of the project and that help them
stay fully informed on issues that may affect the project cost or
schedule. These procedures should allow the CMP Office to perform the
necessary oversight role while respecting the contractual relationship
between the construction manager and subcontractors. We believe that
timely and effective oversight is an important element in the UN's
ability to successfully execute the project and control costs.
The Department remains concerned with the current projected cost
overruns and will closely review the refined cost estimate when it
becomes available. Although we acknowledge the point made in the GAO
report that it is not uncommon for actual project costs to vary 20%-30%
from early estimates derived during design, we expect the UN to meet
its commitment to do everything possible to absorb cost increases and
stay within the budget approved by member states.
[End of section]
Enclosure III: Comments from the United Nations:
United Nations:
Nations Unies:
Reference:
Headquarters Siege:
New York. NY 10017:
Telephone: (212) 963 8227:
FAX: (212) 963 8424
New York, 25 March 2008:
Dear Mr. Dorn and Mr. Melito:
Thank you very much for your letter dated 12 March 2008 in which you
requested comments regarding the draft GAO report on the Capital Master
Plan (GAO- 08-513R).
In summary, I find the draft GAO report to be a valuable and accurate
assessment of the current state of planning for the United Nations
renovation project, and in general concur with your findings and
recommendations,
Upon receipt of your draft report, staff members from the concerned
offices within the Department of Management were in contact with
members of your team and provided several suggestions regarding the
report. I understand your team will be taking these suggestions into
account as you finalize your report.
Among those suggestions were clarifications on the role of the
Headquarters Committee on Contracts (HCC), a correction on the number
of procurement staff assigned to the CMP, an update on a new decision
to increase the threshold of the delegation of authority provided to
the Director of the Procurement Division concerning CMP contract
amendments, and several other comments and suggestions on matters of
fact.
Since his appointment in .July 2007, Assistant Secretary-General
Michael Adlerstein has provided outstanding executive direction to this
project, and I am certain that he will offer continued cooperation to
the Government Accountability Office as you continue your oversight
efforts on behalf of the Host Country on this historic and much-needed
project.
Mr. Terrell G. Dorn, Director, Physical Infrastructure Issues:
Mr. Thomas Melito, Director, International Affairs and Trade:
United States Government Accountability Office:
Washington DC 20548:
I wish to extend my appreciation to your team for their continued
courtesy and professionalism. We look forward to the issuance of your
final report.
Signed by:
Alicia Barcena:
Under-Secretary-General for Management:
[End of section]
Related GAO Products:
United Nations (UN) Capital Master Plan:
Update on the United Nations Capital Master Plan. GAO-07-414R.
Washington, D.C.: February 15, 2007.
United Nations: Renovation Planning Follows Industry Practices, but
Procurement and Oversight Could Present Challenges. GAO-07-31.
Washington, D.C.: November 16, 2006.
United Nations: Early Renovation Planning Reasonable, but Additional
Management Controls and Oversight Will Be Needed. GAO-03-566.
Washington, D.C.: May 30, 2003.
United Nations: Planning for Headquarters Renovation Is Reasonable;
United States Needs to Decide whether to Support Work. GAO-01-788.
Washington, D.C.: June 15, 2001.
UN Management, Procurement, and Oversight Issues:
United Nations: Progress on Management Reform Efforts Has Varied. GAO-
08-84. Washington, D.C.: November 14, 2007.
United Nations: Weaknesses in Internal Oversight and Procurement Could
Affect the Effective Implementation of the Planned Renovation. GAO-06-
877T. Washington, D.C.: June 20, 2006.
United Nations: Procurement Internal Controls Are Weak. GAO-06-577.
Washington, D.C.: April 25, 2006.
United Nations: Funding Arrangements Impede Independence of Internal
Auditors. GAO-06-575. Washington, D.C.: April 25, 2006.
[End of section]
Footnotes:
[1] United Nations General Assembly, Resolution Adopted by the General
Assembly, A/RES/61/251 (New York, N.Y.: Dec. 22, 2006).
[2] United Nations General Assembly, Resolution Adopted by the General
Assembly, A/RES/62/87 (New York, N.Y.: Dec. 10, 2007).
[3] GAO, United Nations: Planning for Headquarters Renovation Is
Reasonable; United States Needs to Decide whether to Support Work, GAO-
01-788 (Washington, D.C.: June 15, 2001); GAO, United Nations: Early
Renovation Planning Reasonable, but Additional Management Controls and
Oversight Will Be Needed, GAO-03-566 (Washington, D.C.: May 30, 2003).
[4] GAO, United Nations: Weaknesses in Internal Oversight and
Procurement Could Affect the Effective Implementation of the Planned
Renovation, GAO-06-877T (Washington, D.C.: June 20, 2006); and GAO,
United Nations: Renovation Planning Follows Industry Practices, but
Procurement and Oversight Could Present Challenges, GAO-07-31
(Washington, D.C.: Nov. 16, 2006).
[5] GAO, Update on the United Nations' Capital Master Plan, GAO-07-414R
(Washington, D.C.: Feb. 15, 2007).
[6] The Construction Industry Institute is a research organization
composed of construction contractors and owners that seeks to improve
the construction and capital investment process.
[7] John Walewski and G. Edward Gibson, Jr., International Project Risk
Assessment: Methods, Procedures, and Critical Factors, Center for
Construction Industry Studies and Construction Industry Institute, The
University of Texas at Austin (Austin, Texas.: September 2003).
[8] OIOS, however, does not follow this staffing process. Instead, it
independently determines the level of resources it needs to provide CMP
oversight. The Department of Management provides OIOS funding from the
CMP budget for oversight of the CMP.
[9] GSA, Facility Standards for the Public Buildings Service (PBS-P100)
(rev. March 2005).
[10] In March 2008, the UN Controller increased the delegation of
authority for approving contract amendments to $5 million, effective
May 15, 2008 until the project‘s completion.
[11] United Nations, Resolution Adopted by the General Assembly,
A/RES/57/292 (New York, N.Y.: Feb. 13, 2003).
[12] OIOS conducts oversight of UN activities that are under the
authority of the Secretary-General through monitoring, inspection, and
evaluation. The December 2007 General Assembly resolution requires that
OIOS reports on the CMP be submitted to the General Assembly.
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