.

To the 300,000 visitors winding their way through UN headquarters’ gutted, scaffolding-laden monuments each year, the latest oversight report on the nine-year, $2 billion renovation project, dubbed the Capital Master Plan (CMP), may not mean much. The report may not even mean that much to the 5,000 on-site employees recently moved to temporary offices to accommodate the latest phase of the project. Indeed, to many of those even aware of the document’s existence, it is merely one of dozens of others churned out daily by Turtle Bay’s bureaucratic machinery.

Nonetheless, the Capital Master Plan Report of the Advisory Committee on Administrative and Budgetary Questions (henceforth referred as ‘the Report’ to preserve reader sanity and respect article word limits), should not be overlooked.

Two points in particular should appeal not only to UN visitors and on-site employees, but to citizens of all 192 UN Member States whose taxes are funding the project. First is the Report’s attention to cost overruns; second, its emphasis on insufficient procedures for amending CMP construction contracts. Both points have become recurring themes in the renovation project, and both beg the question of whether the CMP’s costs are starting to outweigh its benefits.

Swelling Budgets and Accounting Gaps

Cost overruns have plagued the CMP project ever since it was approved in 2002. When builders finally broke ground in 2005, total cost estimates were about $1.1 billion; since then, the estimate has nearly doubled. Summing up the current fiscal situation, the Committee advised that an “anticipated a cash flow problem over the long term needs to be addressed in a timely manner, without eventually placing an additional financial burden on the Member States.” Whether the advice will be heeded, however, is uncertain given the project’s history of persistent swelling.

One of the Report’s primary points of reference, a 2009 audit by the Board of Auditors, outlined similar cost concerns and revealed virtually nonexistent CMP accounting practices after requesting information about the rising costs. In an attempt to more fully understand the situation, the auditors requested detailed assessments and financial volumes of significant sources of the cost overruns. The Office of the Capital Master Plan, however, could not produce such documentation. The Board expressed dismay at the missing data, warning that its absence “limits the ability of the Administration to draw lessons for upcoming operations.”

The other significant aspect of the Report, discussion of insufficient procedures for amending renovation contracts, was also highlighted by the 2009 audit. Of the 88 amendments signed in 2009, worth $20.6 million, the Board examined 37, observing “that some amendments represented significant amounts without any direct linkage to the initial scope of [UN restoration] services contained in the original contracts.” Acting on its findings, the Board advised the Administration to act in three ways to provide more accountability in the contract amendment process. The Administration rejected two of the recommendations, assuring the Board that a “post-award review committee” would be established by October 2009 to alleviate oversight and procedural problems; however, the review committee did not become functional until April 2010. Both the Board and the Advisory Committee were surprised that such a fundamental check against potential corruption or waste had yet to be implemented six years into the renovation project.

Necessary and Beneficial

As significant as its cost overruns and procedural incompetence may be, the Capital Master Plan is still regarded by many as both necessary and beneficial to UN stakeholders. It is necessary because most of the headquarters’ buildings do not meet NY fire code, asbestos lines all of their walls and, perhaps most importantly, the world capital of diplomacy where world leaders convene to address the most urgent global problems, is virtually unprotected from terrorist attacks--the CMP aims to fix all of the foregoing. The benefits are numerous too: renovated buildings will consume 50% less energy, their overall carbon footprint will shrink by 45%, fresh water consumption will drop by 40%, and other efficiency-enhancing measures, such as new telecommunication technologies and open pod floor plans, will greatly facilitate the work of bureaucrats. The final result should give sightseers reason to believe the complex is lauded as New York’s number one annual tourist destination.

Are Costs Outweighing Benefits?

When completed in late 2013 (though recent changes will likely extend the completion date into 2014) UN headquarters will represent a model of environmental responsibility, safety standards and, perhaps ironically, bureaucratic efficiency. The question, then, is whether these benefits are outweighed by the project’s costs: a price tag that has ballooned from $1.1 billion to $2 billion in six short years and insufficient procedures for documenting amendments to multi-million dollar contracts. If future UN-sponsored projects are mismanaged in similar ways, the incentive to continue funding them should start to mean a lot more to all stakeholders concerned.

The views presented in this article are the author’s own and do not necessarily represent the views of any other organization.

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UN Capital Master Plan: Costly Benefits

March 6, 2011

To the 300,000 visitors winding their way through UN headquarters’ gutted, scaffolding-laden monuments each year, the latest oversight report on the nine-year, $2 billion renovation project, dubbed the Capital Master Plan (CMP), may not mean much. The report may not even mean that much to the 5,000 on-site employees recently moved to temporary offices to accommodate the latest phase of the project. Indeed, to many of those even aware of the document’s existence, it is merely one of dozens of others churned out daily by Turtle Bay’s bureaucratic machinery.

Nonetheless, the Capital Master Plan Report of the Advisory Committee on Administrative and Budgetary Questions (henceforth referred as ‘the Report’ to preserve reader sanity and respect article word limits), should not be overlooked.

Two points in particular should appeal not only to UN visitors and on-site employees, but to citizens of all 192 UN Member States whose taxes are funding the project. First is the Report’s attention to cost overruns; second, its emphasis on insufficient procedures for amending CMP construction contracts. Both points have become recurring themes in the renovation project, and both beg the question of whether the CMP’s costs are starting to outweigh its benefits.

Swelling Budgets and Accounting Gaps

Cost overruns have plagued the CMP project ever since it was approved in 2002. When builders finally broke ground in 2005, total cost estimates were about $1.1 billion; since then, the estimate has nearly doubled. Summing up the current fiscal situation, the Committee advised that an “anticipated a cash flow problem over the long term needs to be addressed in a timely manner, without eventually placing an additional financial burden on the Member States.” Whether the advice will be heeded, however, is uncertain given the project’s history of persistent swelling.

One of the Report’s primary points of reference, a 2009 audit by the Board of Auditors, outlined similar cost concerns and revealed virtually nonexistent CMP accounting practices after requesting information about the rising costs. In an attempt to more fully understand the situation, the auditors requested detailed assessments and financial volumes of significant sources of the cost overruns. The Office of the Capital Master Plan, however, could not produce such documentation. The Board expressed dismay at the missing data, warning that its absence “limits the ability of the Administration to draw lessons for upcoming operations.”

The other significant aspect of the Report, discussion of insufficient procedures for amending renovation contracts, was also highlighted by the 2009 audit. Of the 88 amendments signed in 2009, worth $20.6 million, the Board examined 37, observing “that some amendments represented significant amounts without any direct linkage to the initial scope of [UN restoration] services contained in the original contracts.” Acting on its findings, the Board advised the Administration to act in three ways to provide more accountability in the contract amendment process. The Administration rejected two of the recommendations, assuring the Board that a “post-award review committee” would be established by October 2009 to alleviate oversight and procedural problems; however, the review committee did not become functional until April 2010. Both the Board and the Advisory Committee were surprised that such a fundamental check against potential corruption or waste had yet to be implemented six years into the renovation project.

Necessary and Beneficial

As significant as its cost overruns and procedural incompetence may be, the Capital Master Plan is still regarded by many as both necessary and beneficial to UN stakeholders. It is necessary because most of the headquarters’ buildings do not meet NY fire code, asbestos lines all of their walls and, perhaps most importantly, the world capital of diplomacy where world leaders convene to address the most urgent global problems, is virtually unprotected from terrorist attacks--the CMP aims to fix all of the foregoing. The benefits are numerous too: renovated buildings will consume 50% less energy, their overall carbon footprint will shrink by 45%, fresh water consumption will drop by 40%, and other efficiency-enhancing measures, such as new telecommunication technologies and open pod floor plans, will greatly facilitate the work of bureaucrats. The final result should give sightseers reason to believe the complex is lauded as New York’s number one annual tourist destination.

Are Costs Outweighing Benefits?

When completed in late 2013 (though recent changes will likely extend the completion date into 2014) UN headquarters will represent a model of environmental responsibility, safety standards and, perhaps ironically, bureaucratic efficiency. The question, then, is whether these benefits are outweighed by the project’s costs: a price tag that has ballooned from $1.1 billion to $2 billion in six short years and insufficient procedures for documenting amendments to multi-million dollar contracts. If future UN-sponsored projects are mismanaged in similar ways, the incentive to continue funding them should start to mean a lot more to all stakeholders concerned.

The views presented in this article are the author’s own and do not necessarily represent the views of any other organization.