FIFTH COMMITTEE TAKES UP REPORTS ON OUTSOURCING

Press Release
GA/AB/3358

FIFTH COMMITTEE TAKES UP REPORTS ON OUTSOURCING

The Fifth Committee (Administrative and Budgetary) met this morning to consider reports on ways the United Nations Secretariat could use outsourcing as a means of performing certain of its functions.

Toshiyuki Niwa, Assistant Secretary-General for Central Support Services, introduced the Secretary-General’s report on outsourcing and answered delegates’ questions. Written a year ago, the report sets forth the basic policy and guidelines to be followed in considering the use of outsourcing.

Mr. Niwa explained that outsourcing should be one of the many options in the armory of programme managers. The report was not an attempt to define which activities should be outsourced –- a decision which should be made by programme managers on a case-by-case basis. Rather, it addressed how outsourcing should be used. Transparency in the process of awarding outsourcing contracts would be assured, he added.

The representatives of Syria and Japan expressed concern about the use in the report of the concept of “core” and “non-core” United Nations activities and functions. The Advisory Committee on Administrative and Budgetary Questions (ACABQ) shared this concern, stating that, as their use could lead to “endless debate and disagreement” among Member States, the terms should be discarded.

Both in his opening address and in response to questions, Mr. Niwa stressed that the Secretariat agreed with this.

Among matters raised by Member States were concerns about the possible use of outsourcing for interpretation and for recruitment.

The representatives of Portugal (speaking for the European Union and associated States), Poland, United States, Cameroon, Turkey, Latvia, Morocco and India also spoke this morning.

The Committee is next scheduled to meet at 10 a.m. on Tuesday, 21 March, to discuss its agenda items on review of efficiency, programme budget for 1998- 1999 and programme planning.

Fifth Committee - 2 - Press Release GA/AB/3358 52nd Meeting (AM) 17 March 2000

Committee Work Programme

The Fifth Committee (Administrative and Budgetary) met this morning to consider the question of United Nations outsourcing practices, under its agenda item, entitled review of the efficiency of the administrative and financial functioning of the United Nations.

It had before it a report from the Secretary-General on outsourcing (document A/53/818). The report states that the Secretary-General is now committed to viewing outsourcing as one option among many that programme managers should consider in seeking to provide or upgrade the quality or cost- effectiveness of non-core activities and services. The report does not mandate that specific non-core activities and service be outsourced, only that the practice be considered in a meaningful manner as part of the Organization's regular management decision-making process.

The report also establishes the policy and guidelines to be followed in considering the use of outsourcing. For example, the guidelines set out mechanisms for defining the service, establishing preliminary cost estimates, identifying a vendor list, assessing quality and risk criteria and for the bid process. The guidelines aim to ensure a transparent unbiased procedure, thereby reducing the risks and maximizing the benefits of outsourcing.

The Secretary-General states that, although the United Nations has a long- standing practice of using outsourcing, it might not be well prepared or equipped to take on the added responsibility of managing a much larger number of outsourced contracts, and thus an incremental approach should be adopted. That would involve continuing to concentrate on non-core, support-style activities and services, and of these, only activities that could be easily performed by an outside supplier. As the Organization’s experience and confidence with outsourcing grows, consideration could then be given to increasing the potential field of outsourced activities and services, perhaps, over time, to non-core substantive activities and services. But that decision should be taken later

According to the policy section of the report, the four basic reasons for outsourcing are: to acquire technical skills not readily available internally; to achieve cost-savings; to provide a source more effectively, efficiently or expeditiously; and to provide an activity or service not needed on a long-term basis. The policy has five key features: it is limited to non-core support activities or services; it provides criteria for determining when to consider outsourcing; it mandates a rigorous pre-bid process before making outsourcing decisions; it calls for strengthening the procurement process for outsourced goods or services; and it requires rigorous contract administration.

The Committee also had before it a related report from the Advisory Committee on Administrative and Budgetary Questions (ACABQ) (document A/53/942) stating that the identification of those functions that could be contracted out were not specific and had not been based on experience within the Secretariat. The report lacked any analysis of experience within the Secretariat and provided insufficient statistical data. A decision on whether a function should be contracted out had to be made on a case-by-case basis; the primary responsibility rested with the programme manager.

The Advisory Committee says the categorization of “core” and “non-core” functions should be dispensed with, as this classification had the potential for creating “endless debate and disagreement” among Member States and within the Secretariat as to whether an activity should be classified to be contracted out.

In other comments, the ACABQ recommends that outsourcing should result in “significant” cost benefits, and not be simply “at least” as cost-effective as when the United Nations performed the functions itself. Also, it stresses that there must be transparency through the budgetary process to maintain sustained support from Member States. In the context of the proposed programme budget, the Secretariat should provide appropriate information on the extent to which budgetary provisions were being requested for activities that had been or would be contracted out.

Statements

The Acting Chairman of the Committee, AHMED DARWISH (Egypt), reminded Member States that they had decided to defer consideration of outsourcing at the fifty-third General Assembly session pending the submission of the Secretary- General’s report and the related ACABQ comments.

Toshiyuki Niwa, Assistant Secretary-General for Central Support Services, then introduced the Secretary-General’s report. He said the report set forth basic policies and guidelines to incorporate outsourcing into United Nations management decision-making practices. The report of the Joint Inspection Unit (JIU) had been taken into account in preparing the Secretary-General’s report. The establishment of policy and guidelines was only the beginning of a process, and the harder part was yet to come. Consideration of outsourcing as an option must become part of management’s thought processes. Given the civil service character of the Organization, that would be a challenge.

The Secretariat appreciated the thoughtful consideration of the matter by the ACABQ, he said. He agreed the role of the facilitator should not create an additional bureaucratic layer, as the ACABQ noted. The intention was not to create a separate function called “facilitator”, but rather that the activity would be something undertaken by the Department of Management, with no resource implications. He also agreed with the ACABQ’s observations on the need for training and for cost-benefit analyses.

What was important was how outsourcing was deployed, rather than what it was deployed for, he said. Coherent planning was needed, as was the coherent procurement process now in place as a consequence of procurement reform. There was also a need for guidance and supervision of contractors by programme managers. Just as with procurement reform, there were competing demands -- the need for economy, for fairness, for cost-effectiveness, for political propriety and to preserve the international character of the Organization. The purpose of outsourcing was to improve efficiency and cost effectiveness.

It was also important to recognize that outsourcing should not be limited to commercial contractual arrangements, but should extend between United Nations system organizations, where it could improve efficiency. That possibility was being explored in the Secretary-General's Task Force on Common Services. That body was looking, for example, at printing in the Secretariat as outsourcing for the funds and programmes.

ABDOU AL-MOULA NAKKARI (Syria) said the policies and guidelines in the Secretary-General’s report should regulate the practice of outsourcing well. He noted the assurance that performance of the task of facilitator would not have financial implications.

He noted that interpretation was listed as an activity to be considered for outsourcing. He sought clarification of that.

EDUARDO MANUEL DA FONSECA FERNANDES RAMOS (Portugal), speaking on behalf of the European Union, said that the Union believed that outsourcing should be considered an option in the provision of goods and services in the light of the criteria established in the Secretary-General’s report. The concern that the introduction of outsourcing should be incremental was noted, but the United Nations should continue to pursue outsourcing.

He asked what steps had been taken to appoint a facilitator, and asked whether such an appointment had financial implications.

JAN JAREMCZUK (Poland) aligned his delegation with the statement made by Portugal, on behalf of the European Union.

KOJI F.X. YAMAGIWA (Japan) thanked the Secretariat for its firm commitment to outsourcing. He agreed with the concern expressed by Mr. Niwa about the utility of the concept of core or non-core activities, in the context of a determination of whether a particular activity should be considered for outsourcing. That concern did not merely relate to a definition of core or non- core, but also to whether or not that concept should be a criterion for the decision-making.

In the Secretary-General’s report, recruitment of United Nations staff members was referred to as a non-core category activity, and thus one with potential to be outsourced, he said. Japan had a strong reservation about that, unless some restrictions were imposed. As the report of the JIU illustrated, a certain number of activities categorized as substantive services had been, in reality, outsourced by some of the United Nations specialized agencies, funds and programmes.

THOMAS REPASCH (United States) said the United States shared the overall conclusions of the JIU that the value of outsourcing came from cost savings and other improvements. He also agreed with that body’s assessment that problems could arise, but that the Secretary-General’s report dealt with those potential problems in an appropriate way.

The United States agreed with the ACABQ caution on establishing additional layers of bureaucracy in the Secretariat, he said. There must be transparency in the process to engender confidence and sustain support for it. Outsourcing was an important tool –- one of many –- that programme managers should have to perform their duties, and was a good alternative to other ways of obtaining goods and services.

He added that he had understood that the Fifth Committee’s role was to discuss each of the JIU’s recommendations on this matter, and either endorse or not endorse each one.

The Acting Chairman said that the Committee had not yet discussed those recommendations.

PAUL EKORONG A DONG (Cameroon), speaking on behalf of the African Group of countries, said that the Group had heard the official introduction of the report and would be making preliminary comments. It had no major difficulty with the introduction of outsourcing as a concept. If applied correctly, it could lead to benefits. However, he drew attention to the fact that outsourcing should not fall out of the purview of the current system for bids and contracts presently. Regarding peacekeeping bids, Member States were often not sure of the details, as they fell outside the Assembly’s purview. However, that should not be the case with outsourcing. The General Assembly should be informed of every stage of the process.

FIKRET DEMIR (Turkey) aligned his delegation with the statement made by Portugal, on behalf of the European Union.

BAIBA RUDZITIS-PINNIS (Latvia) aligned Latvia with the statement made by Portugal, on behalf of the European Union.

Mr. Niwa then responded to questions raised. Regarding the inclusion of interpretation, he said he thought it should be an area where outsourcing was a possibility, as it was part of the service functions performed by the Secretariat. However, the viability of using outsourcing for interpretation, as for any other activity, had to be determined by programme managers. There were many factors that must be taken into account in deciding to outsource, including staff welfare, the international character of the Organization, and so on.

To date there had been no progress in the appointment of a facilitator, he said. What was really important at present was to try to come up with a coherent set of outsourcing activities. The ombudsmen’s role clearly belonged to the Department of Management, and the Department would work with programme managers to find the best means of undertaking activities. There was no intention to make the facilitator a full-time function. It had to be performed through his office, just as it was for procurement. Clearly, there should not be an additional layer of bureaucracy.

When the report was written, the idea of core and non-core activities appeared to have a currency, he said, but he now felt the definition was a little too programmatic to be very useful. The list of activities that could be outsourced should not to be taken as exhaustive. What the report was trying to say was that the preservation of the international character of the Organization was something the Secretariat was concerned about. If for political or other reasons it would not be wise to go outside the Secretariat, then there would not be outsourcing.

Regarding recruitment, he said some lessons could be learned from the way things were done in United Nations funds and programmes. Recruitment was a Secretariat function, but the funds and agencies employed outside firms to identify good candidates, without prejudice to the final selection process. Not the whole recruitment process, but part of it, could be subject to outsourcing.

He was not advocating that the whole responsibility for any activity should be given to an outside body, but rather that there should be the option to buy support from outside for activities, he said. Programme managers would remain responsible for the process and its outcomes, and must oversee the process.

Regarding cost-effectiveness, he said there were certain activities where outsourcing might be an answer, but other activities might affect, for example, job security or the international character of the Organization. Those things must be balanced. The process would be also be transparent.

Regarding the bidding process, he underscored that any decision would be taken in accordance with the rules governing procurement. However, certain activities that were outside procurement such as letters of assist used by the Department of Peacekeeping Operations, would remain as they were. All outsourcing other than in those areas would be subject to the normal procurement processes.

Mr. NAKKARI (Syria) said he noted that interpretation was subject to outsourcing, taking cost-efficiency into account. As interpretation was not a non-core activity, there was a contradiction in the report. He also noted that some third parties did not meet the requirements set up in the report.

ABDESALAM MEDINA (Morocco) sought clarification and additional detail on the definition of non-core activities. He also sought clarification on the parameters for quality that would be required by the Secretariat, if it was to decide to outsource a particular service. Recently, everyone had noted that the quality of some services at the United Nations left a great deal to be desired. He would not take up the Committee’s time by listing them.

He also sought information on the length of outsourcing contracts that would be used, and asked what the maximum length of a contract would be for any supplier and how that length was be decided..

Regarding outsourcing for recruitment, he sought a further explanation of that proposal. He asked if outsourcing was being proposed for recruitment because the Office of Human Resources Management did not have adequate resources to perform the task.

He fully supported the continuing responsibility of programme managers for outsourced activities and for the quality of services provided, he said. But if a manager deviated from established criteria by allowing an outsourcing contract that did not insist on delivery of the highest quality of service, what actions could be taken to remedy that situation and to ensure that the United Nations could take back its losses?

A.V.S. RAMESH CHANDRA (India) agreed with the ACABQ that decisions on whether a particular function should be contracted out must be taken on a case- by-case basis, and that the primary responsibility rested with the programme manager. The main part of the fifty-fourth General Assembly had adopted a good

resolution on procurement. His delegation hoped that procurement from developing countries would continue to be encouraged. He then commended the Procurement Division on its Web site. While it had been updated on a monthly basis in January and February, it seemed that it was now being updated daily.

Mr. NIWA said it seemed that there were two issues being discussed: outsourcing as a policy decision, and how to exercise it in procurement. Outsourcing was not a new phenomenon in the United Nations. Even in the 1950s, outsourcing had already been in practice. Questions about contractors were issues of procurement, rather than of outsourcing as such.

When the General Assembly had asked the Secretariat to elaborate on the policy of outsourcing, it had been difficult to capture the practice in the form of a policy, he said. Part of the difficulty was reflected in the report’s section defining outsourcing and the explanation given to delegates today concerning core and non-core functions, and also in the observations of the ACABQ. He agreed with the ACABQ that what had been attempted, in terms of that classification, had not made much sense.

In the final analysis, the decisions on outsourcing had to be made on a case-by-case basis, by programme managers, he continued. If the explanation had caused confusion, he apologized.

He then explained that he had not meant that interpretation was subject to outsourcing. Rather, he had said that the programme manager responsible for interpretation should consider whether the practice should be used or not. He himself had no opinion on that.

All he was trying to underscore was that certain activities related to procurement could be outsourced, he said. The United Nations funds and agencies, with voluntary funding, might be different than the Secretariat. If it was the considered opinion that the Secretariat should not be outsourced, then so be it. But his judgement was that certain activities could be considered for outsourcing. When the report had been produced, the core/non-core definition had seemed to make sense, but the definition no longer seemed valid.

The performance of a contractor must be judged on the basis of performance, he said. It was not an issue of outsourcing, but one of performance and evaluation.

Mr. NAKKARI (Syria) clarified that he had not said that Mr. Niwa had said interpretation was a non-core function. Paragraph 8 in the Secretary-General’s report should be reworded to avoid misunderstanding, particularly the sentence: “For the purposes of this report, non-core activities and services refer to support-type activities and services such as –- but not limited to -– ... .”

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