Sixty-second General Assembly

Fifth Committee

31^st Meeting (PM)

BUDGET COMMITTEE TAKES UP UNITED NATIONS PROCUREMENT

 

Speakers in the Fifth Committee (Administrative and Budgetary) this afternoon stressed the need to broaden access to United Nations procurement for suppliers from developing countries and countries with economies in transition, as the Committee took up the issue of United Nations procurement, including a comprehensive report on United Nations procurement activities and an Office of Internal Oversight Services (OIOS) report on the audit of the application of the “best value for money” principle.

The representative of the Russian Federation told the Committee that Member States should take the initiative and, independently and on the basis of complaints from their own suppliers, work out measures to resolve the problem of broadening access for developing countries.  They should analyse the feasibility of a performance bond, which could be prohibitive for small- and medium-sized businesses, as well as the procedures for pre-bid conferences, he said.

He added that his country shared the concern of the Advisory Committee on Administrative and Budgetary Questions (ACABQ) that the report before the Committee was of an interim nature and reflected only a few aspects of procurement reform.  Such aspects as the review of accountability, the delegation of authority, the work of the Committee on Contracts and procurement in the field had not been included and would supposedly be reflected in the comprehensive report on governance in procurement, to be submitted in May.  He agreed with ACABQ that the General Assembly should evaluate the course of procurement reform and said it would be logical to continue the discussion of the present report during the second part of the resumed session of the Committee, together with the comprehensive report, with a view to adopting a comprehensive resolution on procurement.

The representative of Antigua and Barbuda, speaking on behalf of the “Group of 77” developing countries and China, strongly affirmed that increasing procurement opportunities for vendors from developing countries was an integral part of procurement reform.  Equal, fair and non-discriminatory access must be given to companies from developing countries and no procurement reform would be complete or effective without a significant increase, in that regard.

He said the Group of 77 had been expecting a report that would respond to certain requests made by the Assembly, but the current report focused mainly on the internal controls, optimization of the acquisition process and strategic management over procurement activities.  In essence, the report provided information on the procurement activities for the past 12 months and indicated that the Secretary-General would continue to provide “updates on the progress” in reforming procurement.  He expressed the Group’s regret that many issues were still pending.

The representative of Mexico, speaking on behalf of the Rio Group, said procurement opportunities should be extended to all Member States transparently and openly on an equal, fair and non-discriminatory basis.  The issue of diversification of the origin of vendors in United Nations procurement had not been properly addressed and she called on the Secretary-General to provide information about the total procurement of goods and services from the Latin America and the Caribbean region, including for operational activities of the United Nations system.  The Secretary-General should also intensify his efforts to find additional, innovative ways to promote procurement that came from developing countries.

The representative of the United States noted that progress had been achieved in improving the internal control framework as it related to procurement and that many of the goals for improving the integrity of the procurement process, such as ethics training for both Headquarters and field staff, revision of the policy on financial disclosure, revision of the procurement manual and procurement training for peacekeeping staff were on track to be met this year.  He expressed the hope that the establishment of the procurement reform and implementation team and the Planning, Compliance and Monitoring Section would help ensure that reform efforts were not neglected.  He also expressed concern that a number of other reform measures had experienced delay, including the independent bid protest system.

Statements were also made by the representatives of Slovenia (on behalf of the European Union), Japan and Brazil.

Paul Baudes, Chief, Procurement Division, introduced the reports of the Secretary-General, while Inga-Britt Ahlenius, Under-Secretary-General for Internal Oversight Services, introduced the report of her Office on the audit of the application of the best value for money principle in United Nations procurement.  Susan McLurg, Chairman of ACABQ, introduced the report of that Committee.

The Committee will take up the strengthening of the Department of Political Affairs at 10 a.m. Thursday, 13 March.

Background

The Fifth Committee (Administrative and Budgetary) met this afternoon to take up the issues of United Nations procurement.

The Committee had before it a comprehensive report on United Nations procurement activities (document A/62/525), which provides information on the procurement activities of the Secretariat for the last 12 months, in particular the efforts undertaken towards the implementation of the procurement reform agenda, which was proposed in the report of the Secretary-General of 14 June 2006 (A/60/846/Add.5 and Corr.1).  It includes details and describes the approach taken by the Secretariat on a number of measures designed to strengthen the system of internal control; optimize the acquisition process; and enhance strategic management over United Nations procurement activities.

According to the report, the Secretariat is striving to do its utmost to advance the procurement reform agenda within the shortest time frame, while continuing to ensure the efficient execution of the Organization’s mandates.  In that regard, the continued support of Member States is required to maintain the momentum of the procurement reform programme.

The Secretary-General states that the procurement reform programme will evolve to embrace new commercial, social and legal concepts and issues.  He plans to continue to provide the General Assembly with timely and relevant updates on the progress of the efforts of the Secretariat in reforming the United Nations procurement function.

The Secretary-General says that the Procurement Division responded to a total of 86 recommendations of the Office of Internal Oversight Services (OIOS) Procurement Task Force contained in 22 reports over the biennium 2006-2007.  With the institutional structure now in place, including the establishment of the Planning, Compliance and Monitoring Section, the Division is now in a better position to respond to audit recommendations in a timely manner and to significantly increase the implementation rate of audit recommendations.  Moreover, with adequate resources, the Division would be able to conduct more in-depth self-evaluations of its operations and identify potential problems at an earlier stage.

The Secretary-General further states that, on average, the organizations of the United Nations system purchase approximately 60 per cent of their goods and services from developing countries and countries with economies in transition.  The percentage in some organizations rose to as much as 70 per cent, or more, largely due to the specific nature of the goods and services procured by the specialized funds, programmes and agencies.  Overall, the percentage of procurement from developing countries has increased significantly over the last biennium.  The total value of Secretariat procurement reached $2.13 billion in 2006, of which approximately 53 per cent represented combined purchases from developing countries and countries with economies in transition.  That represents a continuing positive trend in procurement from those countries during the period from 2003 to 2006.

The United Nations is strengthening collaboration with field-focused entities, including the United Nations information centres and the United Nations Development Programme (UNDP), with a view to improving ways of disseminating information at the grass-roots level on procurement opportunities within the United Nations system, the Secretary-General states.  The Secretariat also intends to review and issue other informational tools, including a more comprehensive “General Business Guide” in a small compact booklet, for potential suppliers, which will more succinctly outline procedures to engage in business with the organizations of the United Nations system.

The report of OIOS on the audit of the application of “the best value for money principle” in United Nations procurement (document A/61/846) notes that the United Nations financial regulations and rules list four main procurement principles, including best value for money, but that the Secretariat had not provided the legislative bodies with a clarification of that principle prior to its adoption.  The principle has also not been fully explained since its adoption, thus precluding legislative bodies and managers, as well as staff of the Secretariat involved in the procurement process, from sharing a common understanding of the results to be derived from its use in United Nations procurement.

While Member States have consistently expressed their commitment to increasing the Secretariat’s procurement from developing countries and countries with economies in transition, OIOS determines that there is no specific evidence that the Secretariat reflected this commitment in applying the best value for money principle to procurement activities, states the report.  OIOS also concludes that there is currently no specific evidence that international competition is effectively achieved in procurement.

The report further states that, although the principle is not clearly defined, the Procurement Manual sets out a weight-based methodology to achieve best value for money in evaluating bids received in response to requests for proposals.  However, the Manual does not prescribe the use of the best value for money evaluation method for requests for quotation and invitations to bid, the two other types of solicitations used by the United Nations.  In all cases tested by OIOS where the best value for money evaluation methodology was used, the contracts were awarded to the lowest bidders.  The corresponding procurement files, however, contained insufficient documentation to demonstrate that a “best value” concept was properly formulated and translated into specific vendor evaluation criteria.  Additionally, the best value for money method was used selectively, presenting the risk that vendor evaluation criteria may be inconsistent.

The report goes on to state that the extent of supervision exercised by Procurement Division management to ensure the fullest application of the principle was not evident in the procurement case files.  There was no clear audit trail in the files to demonstrate the transparency and integrity of the procurement process in general, and the use of the best value for money principle in particular.  Management information on the application of the best value for money principle was also not readily available in a comprehensive format, hindering efforts to monitor and assess its application.

Further, the lack of an agreed understanding of the principle by all United Nations procurement stakeholders and insufficient documentation of the awards made using the evaluation method precluded OIOS from determining whether the principle had been applied in the Secretariat, while ensuring that the other three procurement principles of fairness, integrity and transparency, effective international competition and the interest of the United Nations had been adhered to, the report stated.

To address those weaknesses, OIOS makes recommendations pertaining to the need to further clarify the principle and to strengthen the management controls of the Procurement Division, the report goes on.  It adds that the Department of Management agreed with the OIOS assessment that certain areas of application of the principle in United Nations procurement were in need of improvement and accepted the broad recommendations.

Outlined in the addendum to the OIOS report (document A/61/846/Add.1), are several issues in the audit that the Administration believes require clarification.

First, the document emphasizes that the Administration does not agree with OIOS that the best value for money principle is inconsistently applied by the Procurement Division.  Rather, the principle embraces factors in the total supply chain that are beyond the control of the Division and more comprehensive than an evaluation method of offers or bids.  Thus, the document notes that a conclusion based solely on an evaluation method is limited and incorrect.

Next, the report takes up OIOS’s assertion that “the processes used by the Procurement Division do not ensure effective international competition”.  Noting that the latter conclusion is based on findings with regard to vendors’ expressions of interest in procurement and the number of vendors invited for each solicitation, the Division says the assertion is unsubstantiated.  The Division acknowledges that procurement opportunities should be given to all registered vendors in the United Nations procurement process.  The procurement system utilized by the Division is designed to ensure that all vendors registered under specific commodity codes are included in the solicitations calls.  With regard to the use of expression of attention, the Division wants to draw attention to a large number of “open” requests for expression of interest, which do not have a closing date and are continuously posted on the Division’s website.

The document also addresses the OIOS statement that the Procurement Manual establishes “a minimum number of vendors from whom proposals should be solicited”.  Rather, the minimum numbers are guidelines, not a firm quota.  Regarding the filing of hard copy e-mails to the Procurement Division from the Information Technology Services Division containing the request to post expressions of interest on the Division’s website, the report says the filing of such e-mails would be irrelevant and duplicative.  Concluding, the report notes that the Department of Management called for a more in-depth review on the relationship between the best value for money principle and procurement from developing countries and countries in transition.

In a related report of the Advisory Committee on Administrative and Budgetary Questions (ACABQ) (document A/62/721), the Advisory Committee recommends that, subject to a series of comments, the General assembly should take note of the report of the Secretary-General.

Among the comments, the Advisory Committee says that, while it is aware that a full review of procurement reform measures would be possible only once the entire reform programme has been implemented, it encourages the Secretary-General to broaden the scope of the annual report on procurement activities to include more evidence and analysis, in order to facilitate the Assembly’s assessment of the progress being reported and the impact of the activities accomplished on an ongoing basis.  The report should include data and other evidence to substantiate the statements on the progress achieved, information on the mechanisms that have been put into place to monitor progress and ensure that the new procedures implemented are indeed being applied and producing the intended effects, and information on the problems encountered and measures planned to redress them.  Inordinate or repeated delays in the implementation of key reform measures should also be explained more fully.

The Advisory Committee also expresses concern about the delay in issuing key ethics guidelines for staff, given the sensitive nature of matters related to ethics and procurement. It reiterates that every effort should be made to resolve any outstanding issues as a matter of priority and to issue the ethics guidelines for procurement staff in the working languages without further delay.

The Advisory Committee encourages the Secretary-General to launch the pilot project for the independent bid protest system and to report thereon to the General Assembly, including the experience gained, along with proposals for the implementation of the system across the Secretariat, in the context of the next report on procurement activities.  It also notes the efforts to review and update the vendor database and recommends that the Secretary-General be requested to accelerate the implementation of the simplified vendor registration process across the Secretariat.  It also urges the Secretary-General to pursue discussions within the High-Level Committee on Management Procurement Network actively, in order to reach an agreement on the proposals regarding suspect vendors and to implement them expeditiously.

With regard to accountability and delegation of authority, the Advisory Committee recommends that the Secretary-General be requested to specify how managers would actually be held personally accountable for the proper application of procedures, the performance of their duties and ethical conduct.

The Advisory Committee further recommends that a clear definition of the best value for money principle be established and that unambiguous and transparent guidelines for its application in procurement activities be developed in order to ensure fairness, integrity and transparency, as well as effective international competition and protection of the interests of the United Nations when awarding contracts.  Further, the Advisory Committee emphasizes that attention should be paid when developing the definition, policy and guidelines to ensuring that its application enables the full participation of vendors from all countries and that it does not have the effect of restricting procurement opportunities for developing countries and countries with economies in transition.

Introduction of Reports

PAUL BAUDES, Chief, Procurement Division, introduced the report of the Secretary-General on United Nations procurement activities (document A/62/525), saying that, in order to facilitate the development and implementation of procurement reform measures, the Division had established a procurement reform implementation team.  That team was mandated to coordinate and implement reform initiatives and subsequent measures.  One of the most significant achievements of the team was the development of a comprehensive and tailored procurement training programme, which included important modules such as “best value for money” and ethics and integrity in procurement activities.  The team had also contributed to updating the Procurement Manual and to drafting a proposal for streamlining the vendor registration system, which would be implemented first at United Nations Headquarters.

In order to strengthen its operation, the Procurement Division had established a Planning, Compliance and Monitoring Section in 2007, he went on. That Section was responsible for the coordination of acquisition plans and monitoring of compliance with procurement policies, guidelines and procedures.  It had already organized management visits to peacekeeping missions in 2007 to advise peacekeeping personnel on the latest policy and practices.

As requested by the General Assembly, he said, a vendor registration and management team had been established in 2007 and had started working with Member States to explore opportunities for further collaboration, including the continuation and improvement of the business seminar programme, which remained a key vehicle for relaying information for vendor registration and United Nations business opportunities.

He announced that the governance structure of the Procurement Division had been reinforced with the establishment of a D-2 post of Director and two D-1 posts approved by the General Assembly.  The Department of Management and the Department of Field Support had also agreed on the general principle for an immediate improvement of the governance structure of procurement at United Nations Headquarters and in peacekeeping missions.

With the surge in peacekeeping procurement, the Procurement Division would need to meet the immediate requirements for deployment to new missions and would also need to enhance its in-house expertise in cost analysis of complex logistical requirements for new missions, he continued.  There was also an urgent need for expertise to manage procurement of complex information technology support requirements, such as enterprise resource planning, talent management, and fuel and food contract management applications.

Introducing the OIOS report, INGA-BRITT AHLENIUS, Under-Secretary-General for Internal Oversight Services, said OIOS had noted that the Secretariat had not provided the legislative bodies with a clarification of the best value for money principle prior to its adoption, nor had the principle been fully explained since its adoption.  The lack of a common understanding of the principle and insufficient documentation for the awards that had been made using the best value for money evaluation method had precluded OIOS from determining whether the principle had been appropriately applied in the Secretariat.

She said that, among other weaknesses in the application of the best value for money principle, OIOS had determined that there was no specific evidence that the Secretariat had reflected its commitment to increasing procurement from developing and in-transition countries in applying the best value for money principle.  There was currently no specific evidence that international competition was effectively achieved in procurement.  Among other things, procurement files contained insufficient documentation to demonstrate that a “best value” concept was properly formulated and translated into specific vendor evaluation criteria.  The extent of supervision exercised by Procurement Division management to ensure the fullest application of the principle was not evident in the procurement case files.

The Secretariat had agreed, in principle, with the OIOS general assessment that certain areas were in need of further improvement and accepted the broad recommendations made, she continued.  However, it had not subscribed to some of the findings and conclusions and had provided further clarifications in document A/61/846/Add.1.  The Secretariat had also since provided updates on its efforts in implementing the recommendations.  Based on that update, OIOS had closed one recommendation and considered two other recommendations in progress.

Mr BAUDES introduced the comments of the Secretary-General on the OIOS report on the audit of the application of the best value for money principle in United Nations procurement (document A/61/846/Add.1).  He said the Secretariat agreed in principle with the OIOS general assessment that certain areas were in need of further improvement and accepted the broad recommendations made in the report.  It, however, did not subscribe to some specific findings in the report, including the conclusion that the principle was inconsistently applied by the Procurement Division.  The principle was much more comprehensive and inclusive from concept to execution.  It should be accepted that it must encompass at least the requisitioning offices and contract management staff, who were beyond the procurement control and operations.

OIOS findings did not substantiate the conclusion as to how the processes used by the Procurement Division did not ensure effective international competition, he continued.  It should be equally noted that “effective international competition” was also a procurement principle and was an organizational policy translated into a process in the Procurement Manual for the use of all staff involved in procurement-related activities.  The Secretariat was of the view that the current procurement processes, albeit subject to further improvements, allowed for both effective international competition and the application of the “best value” principle.

The Procurement Division had already taken numerous steps to improve the application of the principle in procurement process, he added.  Those included update to the Procurement Manual, training, introduction of a new filing system and update of the vendor database.

SUSAN MCLUNG, Chairman of ACABQ, introduced the related ACABQ report (document A/62/721).  She said the Advisory Committee had taken note of the detailed information provided by the Secretary-General’s annual report on procurement reform activities and progress achieved thus far.  It encouraged him to broaden the scope of the comprehensive report on procurement activities to include more evidence and analysis in order to facilitate the Assembly’s assessment of the progress being reported and the impact of the activities accomplished.  She recommended that the Assembly take note of the Secretary-General’s report, subject to the observations of ACABQ contained in its report.

Statements

MATEJA BIZILJ (Slovenia) speaking on behalf of the European Union and associated States, said the Union had always been supportive of reform of the United Nations, including procurement, which represented one of the crucial parts of that reform.  Due to the steep increase in procurement activities in recent years, the strategic function of procurement posed new risks and technical challenges for the United Nations.  For that reason, a strict policy regarding procurement must be transparent and efficient in the context of the four general principles governing procurement in the United Nations.  The Union welcomed the information on the implementation of procurement reform.  At the same time, it looked forward to the announced report on procurement governance due at the second resumed session this year.

Reforming procurement was a very challenging task, and she appreciated the work of the Secretariat so far; among others, the measures regarding improvements of internal control, increased training, progress in the implementation of the best value for money principle, progress in the areas of ethics, the independent bid protest system and vendor registration.  Nevertheless, there was still space for further improvement.  She was also going to seek more information during informal consultations.

ACABQ’s recommendations presented a good basis for the Committee’s discussion, she continued.  She also took note of the OIOS report before the Committee, while also noting the work the Secretariat had done so far in that area.  As the OIOS report and the comments by the Secretary-General had been issued during the last session, she would welcome an update on the current status of the implementation of the OIOS recommendations.

CONROD HUNTE (Antigua and Barbuda), speaking on behalf of the “Group of 77” developing countries and China, said that the Group of 77 had been very actively involved in procurement reform, making proposals aimed at increasing efficiency, transparency and cost-effectiveness.  It had also stressed the importance of strengthened accountability of the Secretary-General to Member States for full implementation of legislative mandates on procurement, and supported training in ethics and integrity for staff, including at senior levels.  The Group strongly affirmed that increasing procurement opportunities for vendors from developing countries was an integral part of procurement reform.  Equal, fair and non-discriminatory access must be given to companies from developing countries.  No procurement reform would be complete or effective without a significant increase in that regard.

He said that, in its resolution 61/246, the Assembly noted that the report of the Secretary-General (document A/60/846/Add.5) focused mainly on strengthening internal controls and optimization of acquisition of procurement management.  It had made a number of additional requests, including in the areas of governance, internal controls, management and procurement opportunities for vendors from developing countries and countries with economies in transition, both at Headquarters and in the field.  The Group of 77 had been expecting a report that would respond to the Assembly’s requests.  However, the current report had focused again mainly on the internal controls, optimization of the acquisition process and strategic management over procurement activities.  In essence, the report provided information on the procurement activities for the past 12 months and indicated that the Secretary-General would continue to provide “updates on the progress” in reforming procurement.

Some progress had been made, and he welcomed the work by the Procurement Division in implementing some parts of the reform agenda, in particular in the areas of training and internal organization of different teams to support specific areas of United Nations procurement.  He also welcomed the establishment of the vendor registration and management team, which should promote diversification of the origin of vendors among all Member States, including developing countries, simplify vendor registration, manage the vendor database and liaise with vendors.  He looked forward to receiving detailed information on the progress made in those areas.

He regretted that many issues were still pending and were not in front of the Assembly today, including in the area of governance, accountability, delegation of authority, coordination between the Department of Field Support and the Department of Management, the independent bid protest system and concrete proposals on increasing procurement opportunities for developing countries and countries with economies in transition.  He stressed once again the need for a comprehensive report that would take fully into account the needs of procurement in the field and at Headquarters.  As stressed by ACABQ, there had been no attempt by the Secretariat to review the policies and procedures in order to improve the procurement process in peacekeeping.  It was necessary to avoid a piecemeal or selective approach to procurement reform.

The recommendations of ACABQ would certainly help the Committee to achieve progress during the first resumed session, he said.  He agreed with ACABQ that the Secretary-General must intensify his efforts to explore additional and innovative ways to promote procurement from developing countries and countries with economies in transition.

The need for a comprehensive reform was indeed very relevant if one considered recent events during the sixty-second session, in particular with regard to the Secretary-General’s decision to utilize a single-source contract without competitive bidding in the context of the African Union-United Nations Hybrid Operation in Darfur (UNAMID), he continued.  In resolution 62/601, the Assembly had requested the Secretary-General to take immediate action to supply goods and services in compliance with the established procedures for procurement, based on international competitive bidding and the widest possible geographical base of procurement.  It had also reaffirmed the need for the procurement system to be transparent, open, impartial and cost-effective, based on competitive bidding and fully reflecting the international character of the Organization.  He looked forward to the comprehensive review to be undertaken by OIOS on the use of extraordinary measures for UNAMID, as requested in that resolution.  He noted with concern, in that regard, the handling of that contract both at the initial phase of the Mission and even recently.  He would like to receive clarification from the Secretariat on the information contained in an article of the publication Inner City Press, for the record, in a formal meeting.

He added that the Group of 77 endorsed all the OIOS recommendations on the best value for money principle.  Appropriate action should be taken by the Secretariat to change the perception among vendors in developing countries that they would not be competitive for bids using the best value for money principle.  He also wanted clarifications with regard to procurement opportunities for vendors from developing countries, asking why there had been more business seminars in industrialized countries than in developing ones in 2006 and 2007; and what criteria had been used by the Secretariat to determine that the percentage of procurement from developing and in-transition countries approximated 53 per cent.  He also wanted to receive a list of countries that had hosted business seminars since the adoption of 61/246 and information on the impact of such seminars with regard to vendor registration.  He also had questions regarding the concept of “green” procurement.  The Assembly had not yet approved such a concept.

SOCORRO ROVIROSA (Mexico), speaking on behalf of the Rio Group, welcomed the progress made by the Procurement Division in implementing part of the reform agenda, in particular in the areas of ethics, training and the internal organization of different teams to support specific areas of United Nations procurement, as well as the establishment of the vendor registration and management team.  It, however, had to be recognized that there were other important areas in the procurement reform agenda that were still pending.  The Rio Group expected the Secretariat to promptly put under the consideration of Member States all the issues that were to be included in the comprehensive report, so that procurement could be given a holistic treatment.  The Secretary-General should broaden the scope of the annual report on procurement activities to include more evidence and analysis, in order to facilitate the Assembly’s assessment of the progress reported and the activities accomplished.

She said procurement opportunities should be extended to all Member States transparently and openly on an equal, fair and non-discriminatory basis.  Further, the issue of diversification of the origin of vendors in United Nations procurement had not been properly addressed.  The Secretary-General should provide information about the total procurement of goods and services from the Latin America and the Caribbean region, including for operational activities of the United Nations system.  The Secretary-General should also intensify his efforts to find additional, innovative ways to promote procurement from developing countries.

Regarding the concept of green procurement, she said that, while the Rio Group shared the general thrust of the idea, it was concerned about possible additional obstacles in the effort to diversify the origin of vendors.  It was, therefore, very important that the Secretariat explain and clarify the criteria for the use of that concept, before a decision could be adopted by the General Assembly.

MAXIM N. GOLOVINOV ( Russian Federation) said that, since the beginning of the 1990s, Member States had adopted over a dozen resolutions on procurement, which reflected almost all the problems being actively discussed at the current stage of the reform.  The guarantee of success lay in the implementation of the decisions made by Member States.

He shared the concern of ACABQ that the report before the Committee was of an interim nature and reflected only a few aspects of the reform, he said.  Such aspects as the review of accountability, delegation of authority, the work of the Committee on Contracts and procurement in the field were not included, and would be supposedly reflected in the comprehensive report on governance in procurement, to be submitted only in May.  He agreed with the Advisory Committee that the Assembly should evaluate the course of procurement reform.  It was apparent that adoption of two resolutions on procurement reform in the course of one session was hardly reasonable, and he believed it would be logical to continue the discussion of the report submitted today during the second part of the resumed session, together with the comprehensive report, with a view to adopting a comprehensive resolution on procurement.

Continuing, he expressed concern that the Secretariat, as stated in the report, had already raised the level of delegation of authority for procurement in the field, whereas the General Assembly had frequently -- and so far in vain -- requested a substantive account of the state of the implementation of the most recent levels of delegation of authority and corresponding mechanisms of control.  He also noted insufficient progress in the training of staff responsible for field procurement.  He did not believe that the division of training into two courses -- on ethical and technical aspects of procurement -- was an optimal solution.  Those aspects were closely interconnected, and all procurement staff should be obliged to go through a single training course before being allowed to fulfil their functions.

He regretted that, following the adoption of resolution 61/246, the Secretariat had been unable to present the specific parameters and procedures for creating an independent bid protest system, including the relevant financial implications.  In the current report, the Committee was only told about some kind of pilot project, in that regard.  On the conflict of interest, he was disappointed that, regardless of the Assembly’s requests in five resolutions -- the first adopted 10 years ago and the last in July 2007 -- the report of the Secretary-General still lacked proposals to include in the financial rules and regulations of the United Nations provisions that would prevent the conflict of interest from arising.  Instead, the document contained an extensive list of internal instructions and initiatives, undertaken, as acknowledged in the report, without any clear definition of the term “conflict of interest” that could be approved by the General Assembly.  He called on the Secretary-General to finally implement the relevant resolutions in that regard.

Turning to the best value for money methodology, he shared the concerns of OIOS with regard to its selective use, which could lead to increased subjectivity when selecting suppliers and higher prices for contracts.  In connection with the efforts to ensure international competition and access for companies from developing countries and countries with economies in transition, he said that most of the measures undertaken were either ineffective or cancelled out through other tendencies in the work of the United Nations procurement service, such as contract bundling.  A typical example, in that regard, was a $250-million contract for UNAMID, which had been awarded on a no-bid basis in October 2007.  Such contracts not only blocked access to the United Nations market for companies from developing countries and countries with economies in transition, but removed a significant proportion of procurement from the purview of procurement rules and regulations.  Such a practice was not new for the United Nations; in the 1990s, such contracts had been a cause of serious financial loss and loss of reputation for the Organization, serving as a catalyst for procurement reform.  In other words, the Organization was now dealing with a flare-up of an old disease that the United Nations had been fighting for 10 years.  Thus, the OIOS conclusion on the lack of effective international competition did not seem to be a huge exaggeration.

Returning to broadening access for suppliers from developing countries and countries with economies in transition, he said that Member States should take the initiative into their own hands and, independently and on the basis of complaints from their own suppliers, work out measures to resolve the problem.  To begin with, it was worthwhile to analyse the feasibility of a performance bond, which could be prohibitive for small- and medium-sized businesses, as well as the procedures for pre-bid conferences.  He requested additional information on the specific wording of the amendments to be made to the Procurement Manual and commended the work of the United Nations in the global market place.

In conclusion, he reiterated that an objective picture of procurement reform would be impossible without a comparative analysis of what procurement practices had been like 10 to 15 years ago and what they were now.  Had there been real progress?  Were there more possibilities for abuse?  What difficulties still existed and how could the Organization get rid of them?  In that connection, he made an urgent request to the Secretariat that, in the future report on procurement, due attention be given to such an analysis.

MICHAEL SCANLON (United States) said that the Secretary-General’s report on procurement activities, issued last November, should be viewed as a progress report on the efforts to bring about real reform in all areas of procurement, recognizing that, while some measures could be instituted quickly, others required more time.  ACABQ, in its report, had acknowledged the efforts to date and focused on the considerable work that remained to be done.  Progress had been achieved in improving the internal controls framework as it related to procurement.  Many of the goals for improving the integrity of the procurement process, such as ethics training for both Headquarters and field staff, revision of the policy on financial disclosure, revision of the Procurement Manual and procurement training for peacekeeping staff, were on track to be met this year.  Likewise, he hoped that the establishment of the procurement reform and implementation team and the Planning, Compliance and Monitoring Section would help ensure that reform efforts were not neglected.

At the same time, he was concerned that, as noted by ACABQ, a number of other reform measures had experienced delay.  One of the most important and eagerly awaited was the independent bid protest system.  That was one of the key strategies for enhancing transparency in the way procurement decisions were made.  It had been hoped that the new system would be launched more than a year ago.  Now it appeared that a pilot programme would be launched in the coming months.  He urged the Secretariat to implement an independent bid protest system throughout the Secretariat, as soon as possible.  In addition to transparency, the report addressed the importance of personal accountability of procurement staff.  He supported the ACABQ recommendation that the Secretary-General indicate the steps to be taken so that procurement managers were indeed held personally accountable for ensuring that all procurement actions were in accordance with established rules and procedures.

Continuing, he said he had touched on only a few of the many elements of the procurement process that required decisive action.  ACABQ had rightly called attention to other areas, such as the need to strengthen coordination and cooperation among various organizations of the system, particularly adoption of the lead agency concept for commonly procured goods and services, and the need to improve the process in peacekeeping operations.  Successful reform required leadership, and he was concerned about the delay in filling the position of Director of the Procurement Division and urged the Secretary-General to act on that appointment.

TAKESHI MATSUNAGA ( Japan) said his delegation placed the greatest importance on strengthening procurement activities and improving relevant procedures.  It was particularly concerned about the adequacy of checks and balances in the procurement system, the sufficiency of internal monitoring mechanisms and the roles and responsibilities of the Committee on Contracts at Headquarters and in the field.  The United Nations had taken a number of concrete measures to strengthen internal control measures.  In that regard, he appreciated the detailed explanation provided in the Secretary-General’s report and noted that, since its establishment in May last year, a dedicated reform implementation team had helped advance reform efforts.  Progress had been made on a number of fronts, but the task was still not yet complete.  Initiatives still in progress included the long-awaited establishment of an independent vendor protest system and the development of a governance structure.

He acknowledged the special requirements that peacekeeping procurement activities entailed, but expressed concern that weak internal control over peacekeeping procurement under the new governance structure might continue to expose United Nations resources to a significant risk of waste and fraud.  The Secretariat should brief Member States about the status of preparation of that critical report during the informal sessions.

On the presentation of the Secretary-General’s report, he said that Japan concurred with the recommendation of ACABQ that the Secretary-General should be requested to specify how managers would actually be held individually accountable for the proper application of the procedures in place regarding accountability and delegation of procurement authority.  The Secretariat should provide the Committee with relevant information in the informal setting, explaining how managers would be held accountable for the proper application of those procedures, the satisfactory performance of their duties and ethical conduct.  During those informal discussions, Japan would also be requesting additional information as to the effectiveness of the Headquarters Committee on Contracts as an internal control mechanism, including on the question of whether the independence of that Committee was being safeguarded.   Japan was equally concerned about the lack of a clear and easy-to-understand definition of the best value for money principle.  That ambiguity might undermine, rather than strengthen, the United Nations procurement system.

Mr. BAUDES, responding to some of the questions raised in the discussion, said procurement reform went beyond the procurement staff and encompassed other groups related to the procurement function.  Thus, the report was not just talking about a limited group of procurement staff.  There was a huge task in order to relay the information to staff that were not necessarily under procurement control.  The process had to do with human resources and legal issues as those aspects had to be teamed up with procurement staff in order to achieve procurement reform.  The comments by Member States had demonstrated the support that could be expected from delegations.  In that regard, the Secretariat considered it important to be receptive to the signals being sent internally and externally.

Turning to the holding of business seminars in industrialized and developing countries, he explained that they were meetings of minds.  Business seminars held in developing countries were paid for by the United Nations, in the case of those held in industrialized countries, the host countries covered staff travel and mission subsistence allowance.  Enough information had been made available on the website with regard to contract awards.

Turning to the values of contracts that went to developing countries and countries in transition, he said that, in 2006, 45 per cent of the $1.6 billion in contracts awarded had gone to such countries.  The following year, the percentage had gone up to 56 per cent of the $2 billion in contracts awarded.  However, it was not certain that the available tools would be able to support the level of detail being requested.  At the moment, the calculation took into account the location of the headquarters of the vendors.  The available tools were unable to go to the level of goods and subcomponents, but, from 2006 to 2007, the same tool had been used, so the same reference points had been maintained.

He said that the Secretariat would share the list of countries where business seminars had been held with the Committee during the informal discussions.  Those seminars were held to make vendors aware of the opportunities of doing business with the United Nations.  It was difficult to see if there was any direct impact for them, however, since, after the seminars, it was up to the individual businesses to take the next step by engaging with the United Nations.  The Procurement Division provided assistance to such companies, for instance, through debriefing of vendors who fail on a tender, by helping them understand why their tenders did not succeed.

FERNANDO DE OLIVEIRA SENA ( Brazil) said the position of his country had already been expressed by the representatives of the Group of 77 and the Rio Group, but he wanted to make some remarks on several aspects of the item under consideration.  With regard to business seminars, it was important to discuss the issue that was new to him -- the fact that Member States could pay for staff travel and mission subsistence allowance.  That could be one of the reasons why industrialized countries held more seminars.  He wanted to pay close attention to that question and maybe the ethics involved.  He was glad that proposals had been made on the diversification of the origin of vendors, and he would be willing to consider the means to improve the present situation.  As mentioned by the Group of 77, the establishment of the vendor registration and management team should promote the diversification of the origin of vendors and simplify vendor registration and management of the vendor database.  The Group of 77 had raised important questions, and it was important to receive full information on those queries.

* *** *

For information media • not an official record