Fifth Committee Seeks to Curb Capital Master Plan Cost Overruns while Keeping $2.2 Billion Headquarters Renovation Project on Track for 2015 Completion

20 March 2014
GA/AB/4101

Fifth Committee Seeks to Curb Capital Master Plan Cost Overruns while Keeping $2.2 Billion Headquarters Renovation Project on Track for 2015 Completion

20 March 2014
General Assembly
GA/AB/4101
Department of Public Information • News and Media Division • New York

Sixty-eighth General Assembly

Fifth Committee

31st Meeting (AM)

Fifth Committee Seeks to Curb Capital Master Plan Cost Overruns while Keeping

 

$2.2 Billion Headquarters Renovation Project on Track for 2015 Completion

 

Questioning ‘Associated Costs’ of Project, Delegates Stress Fiscal Discipline

Commending the progress made towards completing the massive, $2.2 billion renovation of the United Nations Headquarters begun eight years ago, delegates in the Fifth Committee (Administrative and Budgetary) today sought new ways to rein in cost overruns, relocate the functions of the Dag Hammarskjöld Library and South Annex buildings, and keep the project on track for completion by 2015.

While delegates generally welcomed the recent reopening of the staff entrance and screening building at 42nd Street, as well as the security upgrades along First Avenue, several expressed worries that the $140.3 million in “associated costs” for the Capital Master Plan and the $15 million earmarked for the secondary data centre could delay plans to reopen the General Assembly Hall in time to host the 2014 general debate in September.

“While we are near the end of the project, we should not give up on finding every dollar of savings that remain,” emphasized the representative of the United States, calling on the Secretary-General to scrutinize each outstanding contract and potential claim against vendors and to seek voluntary contributions from Member States.  Describing the Secretary-General’s proposals for relocating the Library and the South Annex building housing the staff cafeteria as costly, he asked for more concrete, viable proposals for review by the General Assembly.  Given the project’s time-sensitive nature, the Fifth Committee must find a timely, affordable and fiscally responsible solution that would not jeopardize the important work of the United Nations, he added.

The representative of the Republic of Korea agreed, saying that a cash-bridging mechanism and strict fiscal management were needed to find savings and ascertain the project’s final cost.

Japan’s representative said it was imperative that the Secretary-General do his utmost to determine whether there was still room to contain and absorb the “so-called associated costs and secondary data centre costs”.

Bolivia’s representative, however, speaking for the “Group of 77” developing countries and China, said it was no longer feasible for the associated costs to be absorbed by the Capital Master Plan Fund.  The Group therefore supported the immediate appropriation of more funds so that the Assembly Hall could reopen by September, and would not consider the Plan completed until the Library and South Annex buildings were renovated.  She also requested additional information on the host city’s delay in issuing permits for the renovation of service ramps at 42nd and 48th streets.

The representative of the European Union Delegation supported a call by the Advisory Committee on Administrative and Budgetary Questions (ACABQ) for the Secretary-General to report on his plans for managing and supervising delayed work at the 42nd Street and 48th Street entrances, including the possible reduction of the projected 18-month work schedule.

Yukio Takasu, Under-Secretary-General for Management, presented the eleventh annual progress report on the Capital Master Plan and the final expenditure for associated costs from 2008 to 2013, saying that the Plan’s total projected cost had stood at $2.2149 billion by the end of 2013.  Its associated costs and the cost of the secondary data centre could no longer be absorbed within the approved budget, and unless the Committee found a solution during its resumed session, the cash balance in the Capital Master Plan Fund would run out by June, endangering the project’s completion.  Moreover, it was no longer feasible to renovate the Library and South Annex buildings due to security concerns, he said, emphasizing that suspending the renovation would allow the Organization to complete the project within budget.

Carlos Gabriel Ruiz Massieu Aguirre, Chair of the Advisory Committee on Administrative and Budgetary Questions (ACABQ), presented that body’s related report, recommending that the General Assembly appropriate an amount, based on the most up-to-date information provided by the Secretary-General, to fund the cumulative associated costs and the cost of the secondary data centre before the funds were exhausted.

At the outset of the meeting, the Committee recommended that the Assembly appoint two members of the Committee on Contributions to replace members who had resigned.  Edward Faris (United States) would replace Susan McLurg, effective immediately until 31 December 2015, and Shigeki Sumi (Japan) would replace Kazuo Watanabe, effective 1 April 2014 until 31 December 2015.  It also recommended the appointment of Patricia Arriagada (Chile) to the Independent Audit Advisory Committee effective immediately until 31 December 2016.

The Fifth Committee will reconvene at 3 p.m. on Monday, 24 March, to discuss the 2014-2015 programme budget in relation to the United Nations Joint Staff Pension Fund, and to consider the programme budget implications of the human rights treaty body system.

Background

The Fifth Committee (Administrative and Budgetary) met this morning to fill vacancies in two subsidiary bodies — the Committee on Contributions (document A/68/102/Add.1 )and the Independent Audit Advisory Committee (document A/68/106/Add.2).  It was also expected to discuss the 2014-2015 programme budget in relation to the Capital Master Plan (documents A/68/352/Add.2, Add.3, A/68/797).

Introduction of Reports

YUKIO TAKASU, Under-Secretary-General for Management, introduced the Secretary-General’s reports “Update of the eleventh annual progress report on the implementation of the capital master plan” (document A/68/352/Add.2) and “Updated information on final expenditure for associated costs for the period from 2008 to 2013” (document A/68/352/Add.3).  He said that despite construction delays due to the recent winter weather, renovations on the General Assembly Building were on track for completion in time for the Assembly’s general debate in September 2014.

To address security concerns, construction of the South Screening Building and a line of bollards on First Avenue was complete, he said, but the Organization was still awaiting permits from the City of New York to work at the 42nd and 48th street entrances.  The report cited options for relocating the functions of the Library to the Second and Third Basements at Headquarters, those of the South Annex Building to a new cafeteria on the fourth floor of the Conference Building and those of a food take-away counter elsewhere in the complex.  The latter would cost an estimated $4 million.  Those options, as well as the remaining functions of the South Annex Building, were estimated to cost between $17.6 million and $20.9 million.  Since the Plan lacked the resources to carry them out, external funding would be needed.

The projected cost of completing the Plan had increased by $233,000 since June 2013 to $2.2149 billion as of 31 December 2013, due to an increase in voluntary contributions, he continued.  Renovating the Library and the South Annex Building remained within the Plan’s scope.  Available financing of $2.15 billion was being applied to ongoing active renovation activities and contracts.  Due to security concerns, however, it was no longer feasible to renovate the Library and South Annex Buildings.  If the Assembly approved the Secretary-General’s proposal to extend their renovation, the Organization would be able to complete the project within the estimated cost.  As for associated expenditures, he said that every year since 2008, the Assembly had approved them after careful consideration, charging them to the Capital Master Plan Fund and asking the Secretary-General to make every effort to absorb them.  Associated costs stood at $155.3 million, including $15 million for the secondary data centre.

Regarding the Plan’s cash flow situation, he said the Office of the Capital Master Plan had disbursed $168.5 million, or $21 million per month on average, over the last eight months.  On 19 March 2014, the cash balance had stood at $214 million.  While cash outflows had fallen in December 2013 and January 2014 due to the slowdown in exterior work caused by inclement weather over the last three months, renovation of the General Assembly Building was proceeding rapidly, he said.  As it progressed, a much higher monthly cash outflow was expected over the next few months.  The cash balance of the Capital Master Plan Fund would be exhausted by June unless a decision was made immediately on financing associated costs, he warned.  The associated costs and that of the secondary data centre could no longer be absorbed by the Plan’s approved budget without endangering the project’s completion.  The Committee must resolve that problem during its first resumed session, he emphasized, warning:  “The lack of a decision on this point will imperil the ability of the Secretariat to complete the General Assembly Building.”

CARLOS GABRIEL RUIZ MASSIEU AGUIRRE, Chair of the Advisory Committee on Administrative and Budgetary Questions (ACABQ), presented that body’s report (document A/68/797), expressing concern that the Plan’s projected completion timeline had been postponed by one year, until late 2015.  The work on the 42nd and 48th street entrances was yet to start, contingent upon approval of permits by the host city, and since the Office of the Capital Master Plan would be closed in mid-2015, as currently planned, the delay would raise a number of issues, including the management of remaining activities and accountability for the costs arising from the delay.  ACABQ recommended that the General Assembly request the Secretary-General to report on his plans for managing and supervising the delayed work on the street entrances, including the possibility of shortening the projected 18-month work schedule, and to confirm the timing of the Office’s closure in his twelfth annual progress report on the Plan.

The Secretary-General had revised the projected final expenditure of associated costs for the period 2008-2013 to $140.25 million as of 10 February 2014, down $1.15 million from the previous estimate, he said.  Of the total projected final expenditure, the provision of $179,500 had now been re-allocated from 2013 to 2014 for delayed handover activities due to storm Sandy.  No concrete financing proposals had been submitted by the Secretary-General, who noted that the cash balance was expected to be fully used towards the end of June 2014.  The Assembly should decide to appropriate an amount based on the most up-to-date information, to be provided by the Secretary-General, to finance the cumulative associated costs as well as that of the secondary data centre before the Plan’s funds were exhausted.

On the South Annex Building and the Dag Hammarskjöld Library Building, the Secretary-General had not presented options for interim solutions, he said, adding that the Assembly should request him to submit new proposals.  ACABQ had requested, but had not received, information such as plans for the continued use of the two buildings.  The Advisory Committee had requested that the Secretary-General provide relevant information to the Assembly.  The Under-Secretaries-General for Management and for Safety and Security had requested the host city to take action to protect Headquarters by closing the 42nd Street off-ramp to all but authorized vehicles, but the Permanent Mission of the United States had replied that closing or relocating the ramp would not be feasible.  The Assembly should request the Secretary-General to ensure that the Office of the Capital Master Plan would be phased out with the completion of remaining activities and would not be extended for the planning and management of future solutions relating to the two buildings, the functions of which should be assumed by the Office of Central Support Services.

Statements

DAYANA ANGELA RIOS REQUENA (Bolivia), speaking on behalf of the “Group of 77” developing countries and China, said there was an imperative need for the General Assembly to take a final decision on financing the associated costs and the secondary data centre during the current session in order to ensure that the project would be completed in time for the general debate later this year.  The Group of 77 and China recognized that the Assembly’s previous request for absorption of the associated costs could no longer be maintained, and therefore supported an immediate appropriation and assessment of the associated costs under the Plan.

On the South Annex and Library buildings, she said the Group would not consider the Plan completed until those two facilities had been renovated.  It would also seek further clarification concerning the delays caused by the host city’s late issuance of permits to renovate the service drives at the 42nd and 48th street entrances, she said, stressing the host country’s special role in providing support for United Nations Headquarters.  The Group of 77 and China was extremely concerned about the disregard shown by the Secretariat for the permanent relocation of its office to the Secretariat Building, and was yet to see a concrete proposal, she added.

GERTON VAN DEN AKKER, European Union Delegation, said he strongly supported the Plan, but expressed concern over its schedule, financial position and lessons learned in view of other upcoming major construction projects.  Noting with deep concern that the completion timeline had been postponed by a year, he agreed with ACABQ’s recommendation and request that the Secretary-General explain the newly disclosed delays relating to the work on the 42nd and 48th street entrances, and to report on his plans for managing and supervising it, including the possibility of reducing the projected 18-month work schedule.  He also sought additional information on the delay in handing activities over to the Office of Central Support Services, and confirmation of the timing of the closure of the Office of the Capital Master Plan.  Meanwhile, the Secretariat should stick as closely as possible to the initial timeline without additional costs, he emphasized.

The European Union had expressed concern several times over the project’s cost overruns, he recalled, noting that they exceeded the approved $1.876 billion budget by approximately 26 per cent, including the $155 million in associated costs and those relating to the secondary data centre.  Stressing the need for strict financial management, he said Member States had already consented to an important financial effort when they had agreed to use the interest accumulated in the working capital reserve fund.  With the cash balance expected to run out by the end of June, the European Union looked forward to constructive discussions on ensuring the project’s continuity and timely completion, while receiving a full, up-to-date picture of final expenditures before funding decisions were made.

He concurred with ACABQ on the need for feasible, alternative options for the functions of the Library and South Annex buildings, and for clarification of their funding.  The European Union also endorsed ACABQ’s view that the Office of the Capital Master Plan should be phased out on completion of remaining activities, scheduled for November 2015, and not be extended for the future planning and management of the two buildings.  All major capital expenditure plans should be held to a very high level of scrutiny before decisions were made or a major phase of the project was initiated, he said.  A robust governance structure as well as oversight mechanisms to increase accountability were vital.  Lessons learned concerning occupancy levels before and after the renovation, as well as issues of flexible working arrangements, swing-space and the budgeting of so-called associated costs, deserved thorough attention.

SHO ONO (Japan) expressed regret over the late issuance of the required documents, noting that with one week left to the closure of the first resumed session, the time for a thorough consideration of the agenda item had been eroded.  The introduction of a study on the long-term accommodation needs at United Nations Headquarters for the period from 2014 to 2034 had been expected only two days before the end of the session, which would have made it impossible to finalize consideration of how to treat the Library and South Annex buildings.  The relevant options should be thoroughly examined in the context of the Secretary-General’s proposals regarding the long-term accommodation needs of United Nations Headquarters, he said.  The main focus of the current session was how to deal with the unfunded portion of the Plan, namely the “so-called associated costs and secondary data centre costs”.  It was imperative that the Secretary-General do his utmost to determine whether there was still room to contain and absorb those costs.

JIHOON KIM (Republic of Korea) said he was encouraged that the Plan was in its final stages, but cautioned that project delays and cost overruns that could hinder its completion on time and within budget would inevitably increase the burden on Member States if not resolved, and damage the Organization’s functioning.  The Committee was at a critical juncture that required careful but significant deliberations on the project’s financing and future.  In light of the shortfall in the Plan’s accounts, a cash bridging mechanism was needed, he said.  “It is high time that Member States summon their collective wisdom to quench this financial thirst,” he added, calling upon the Secretariat to maximize efforts to find savings and promptly ascertain the final figures.  Accountability was more vital than ever, he said, emphasizing that Member States must work to find better solutions.  Fiscal discipline must not be diminished.

STEPHEN L. LIEBERMAN (United States) welcomed the reopening of the staff entrance and screening building at 42nd Street and the security upgrades on First Avenue, saying he looked forward to the reopening of the General Assembly Hall and the project’s conclusion by 2015.  Still, the $156 million shortfall could jeopardize the Assembly Hall’s reopening in September, he cautioned.  “We must be clear that the funds we are asked to provide now are to replenish the CMP account for expenditures that were not envisioned in A/RES/61/251,” he said, noting that the bills came at a time when many Governments continued to face tremendous fiscal pressure.  To complete the project on time and within budget, he proposed options that could reduce the shortfall and provide the needed influx of cash.  “First, while we are near the end of the project, we should not give up on finding every dollar of savings that remains,” he said, calling on the Secretary-General to consider each outstanding contract and potential claim against vendors to find savings, and to look for any remaining value engineering savings in the months ahead.

Secondly, the Secretary-General should seek sponsorships and voluntary contributions from Member States, he continued.  The $2 billion project had only benefitted from $114 million in voluntary contributions, of which the United States had provided the $100 million needed for security upgrades.  Not convinced that potential alternative funding sources had been exhausted, he said:  “It is unlikely that the Secretary-General will be able to find $156 million in savings and voluntary contributions at this late stage of the project.  So we must be pragmatic and look for an innovative solution for addressing the remaining cash-flow needs, including exploring the advice we have received from the ACABQ.”  The Secretary-General’s proposal for relocating the library and cafeteria was a costly option, he said, asking for more concrete, viable recommendations for the Assembly’s review in the near future, as ACABQ had requested.  Given the project’s time sensitivity, it was incumbent upon the Committee to find a timely, affordable and fiscally responsible solution that would not jeopardize the important work of the United Nations, he stressed.

Mr. TAKASU, responding to comments from the floor, said the issue of late documentation was an ongoing concern for the Secretariat, which was doing everything it could to provide documentation on time.

Concerning the Plan, he said he was confident that work on the General Assembly Hall and the Secretariat building basement would be completed, but the strengthening of security on First Avenue as well as 42nd and 48th Streets depended on permits from the host city.  The Secretariat had just received one for the work on First Avenue, he noted.

Regarding the offices of the Group of 77 and China, he said the Secretariat was committed to finding space for them, pointing out that their pre-relocation one on the thirty-ninth floor of the Secretariat Building was no longer available.

Mr. RUIZ MASSIEU AGUIRRE said he shared the concerns expressed by Member States about the late issuance of documentation, emphasizing that sufficient time was needed to consider reports fully.  The Advisory Committee also needed timely responses from the Secretariat in order to complete its own reports on time.  There was need for a structural solution, including the possibility of starting the Fifth Committee’s session early, provided that the Secretariat could issue documentation early.

* *** *

For information media • not an official record
For information media. Not an official record.