Sixty-eighth General Assembly

Fifth Committee

19^th Meeting (AM)

Concern over Rising Cost Estimates, Possible Delays Dominate Fifth Committee

Debate as Secretariat Unveils New Outlay for Geneva Office Renovation

 

As the Fifth Committee (Administrative and Budgetary) today took stock of progress in the planned refurbishment of the United Nations Geneva headquarters, delegates raised concerns over the project’s growing cost estimates and potential delays in implementation.

Yukio Takasu, Under-Secretary-General for Management, introduced a Secretary-General report that said the budget cost estimate of the 10-year strategic heritage plan to renovate the Palais des Nations by 2023 had increased CHF 219 million to CHF 837 million, due mainly to application of lessons learned from projects like the Capital Master Plan, particularly the need to provide for contingencies, inflation, insurance, and associated and support costs left out of the initial cost estimate.  In addition, a robust governance structure as well as risk management and cost control mechanisms would keep expenses from rising.

The Secretary-General should “spare no effort to keeps costs in check,” said Switzerland’s representative.  Nonetheless, he approved the Secretary-General’s strategy for completing the project, which was not only an investment in the Organization’s future but which would, according to a cost-benefit analysis completed by the Secretariat, render annual savings of $51.2 million over 25 years when compared to the reactive approach.  Those savings derived from reduced rental fees, lower energy consumption and the end of urgent maintenance work.

He called on the General Assembly to authorize the project’s continuation during the current Assembly session, and noted that as host country of the Palais des Nations, Switzerland had donated CHF 50 million for work on energy efficiency measures, and would respond favourably to any requests by the Assembly for preferential loans to finance the renovation.

Fiji’s representative, who spoke on behalf of the “Group of 77” developing countries and China, also identified the Office’s deficiencies, pointing to health and safety issues, structural weaknesses and lack of accessibility for persons with disabilities.  That the United Nations had premises that did not fully comply with the Convention on the Rights of Persons with Disabilities was unacceptable but “having accessibility problems in the premises where most of the discussions on rights of persons with disabilities take place was even worse,” he said.

He was concerned that a public-private arrangement had been considered for funding the renovation project, and was glad that the Secretary-General recognized the major risks associated with such an approach and did not support its further consideration.

Meanwhile, the representative of the European Union Delegation wished for more exploration of such alternative sources of financing, particularly the possible sale of land, and stressed the importance of applying the lessons learned from the Capital Master Plan.  The Russian Federation’s representative cited the need to reduce design deadlines without sacrificing the quality of the completed project, and for the Secretariat to establish oversight mechanisms and ensure accountability to Member States.

Also today, Carlos Ruiz Massieu, Chairman of the Advisory Committee on Administrative and Budgetary Questions (ACABQ), introduced that body’s report on the refurbishment of the Geneva Office.

The Committee will meet next at 10 a.m., on Monday, 25 November, to take up human resources management.

Background

The Fifth Committee (Administrative and Budgetary) met today to discuss construction and property management, part of the Programme budget:  biennium 2014-2015 agenda item.  It had before it the Secretary-General’s report on the Strategic heritage plan of the United Nations Office at Geneva (document A/68/372) and the accompanying report of the Advisory Committee on Administrative and Budgetary Questions of the same name (document A/68/585).

Introduction of Reports

YUKIO TAKASU, Under-Secretary-General for Management, introduced the Secretary-General’s report on the Strategic heritage plan of the United Nations Office at Geneva (document A/68/372).  He said a preliminary study of structural risks had found significant structural deficiencies and health and safety risks at the Office, and confirmed the need for a strategic, comprehensive plan to renovate the Palais des Nations.  Renovation would work out cheaper than ever-increasing reactive maintenance, and allow consolidation of operations within the complex.

The report had analysed three project plans and favoured the third option, which entailed construction of a new permanent office building, dismantling of the upper seven floors of the office tower and full refurbishment of the conference space, he said.  It was to be executed in four construction phases and was the most cost-effective option, requiring no additional swing space, having the shortest project duration, meeting all key objectives and causing the least disruption to normal operations.  He outlined the timescales of design, procurement and construction and stressed the importance of allowing the team adequate time to complete the design phase, a lesson learned from the Capital Master Plan and other recent capital projects undertaken by the Organization.

The budget cost estimate had increased from CHF 618 million to CHF 837 million ($891.37 million based on preliminary 2014-2015 exchange rates), he said.  The significant increase was mainly due to application of lessons learned from projects like the Capital Master Plan, particularly the need to provide for contingencies, inflation, insurance, and associated and support costs not previously included in the cost estimate.  The contingencies included were expected to be adequate to cover unforeseen cost requirements and the report described the robust governance structure and risk management and cost control mechanisms aimed at containing project costs.  The report had assessed options for voluntary funding and recommended combining a long-term loan guaranteed by the host country with assessed contributions from Member States.  The host country had offered a loan of up to 50 per cent of the total project costs at a favourable interest rate, which could be repaid over 30 years.

He stressed the need for building a dedicated project team and liaison support staff in order to implement crucial forthcoming project tasks.  Dedicated consultancy services were needed to draft project design documentation, establish the project governance structure, make assessments and report to Member States as the project progressed.  A project management team was needed by early 2014 to lay the foundations of effective and efficient project management.

For the biennium 2014-2015, resource requirements of CHF 42 million were required, he said.  Of those resources, CHF 7 million would go to establishing a dedicated, 25-strong project management team, with the rest geared to design, programme management and other consultancy services, as well as provisions for contingencies.  The next project step, where design documentation would be prepared, was vital to the project schedule.  Delaying a decision would mean demobilizing and then re-mobilizing the current project team and would generate continued safety risks and cost increases.  He called for approval of the implementation strategy and budget by the end of the year in order to maintain project capacity, establish a project team, begin the design phase and stay on track for completion of the renovations by 2023.

CARLOS RUIZ MASSIEU, Chairman of the Advisory Committee on Administrative and Budgetary Questions, introduced the Advisory Committee’s report on the Strategic heritage plan of the United Nations Office at Geneva (document A/68/585) and said the three-year design phase that would begin in 2014, and was part of the 10-year implementation plan that would run from 2014 to 2023, appeared to be “unduly prolonged”.  The construction and renovation phases could start, as soon as feasible, after the Capital Master Plan was completed.  In paragraphs 15 to 16 of its report, the Advisory Committee had commented on the priorities of capital expenditure projects, sequencing and definitions for such projects.

The Advisory Committee recommended the Assembly ask the Secretary-General to scrutinize the proposed requirements based on actual needs, he said.  It also believed the term “associated costs”, used in the Capital Master Plan, should continue to be used in this project, instead of the term “ancillary works/costs” used in the Secretariat report.  The Advisory Committee had discussed alternative funding options in paragraphs 36 to 58 of its report, particularly the option of financing through assessments, combined with a preferential long-term loan from the host country.  This had been recommended by the Secretary-General.  ACABQ recommended that the Assembly allow the Secretary-General to negotiate with the host country on loan arrangements and report back to the Assembly at its sixty-ninth session.  The Advisory Committee did not object to the creation of a multi-year, special account to finance the strategic heritage plan.

Estimated resource requirements for 2014-2015 totalled about CHF 42 million, or $44.7 million at preliminary 2014-2015 rates, he said.  The Advisory Committee recommended the Assembly approve resource requirements for the project for 2014 for CHF 16.6 million or $17.7 million.  It believed that a phased manner should be used to fill staffing requirements for the project management team and liaison staffing.  Beginning with the requirements for 2014 on an annual basis, the Advisory Committee did not object to the creation of 24 of the 25 positions proposed for 2014.

Turning to lessons learned from other major capital projects, Mr. Ruiz Massieu said one important lesson involved the project oversight mechanism.  ACABQ believed the arrangements proposed by the Secretary-General were not sufficient to guarantee oversight of the project by Member States.  Instead, it recommended the creation of an independent and external oversight mechanism with the expertise to scrutinize, inter alia, project costs, schedules and scope, and report to the Assembly.  The Advisory Committee also was concerned that the contingency planning and management envisioned for the project had not enveloped lessons learned from the Capital Master Plan.  He recommended the Secretariat review and adjust the contingency requirements and improve its management by assigning responsibility to a project governing body.  The impact of new management initiatives, such as the new global service delivery model, should be factored into all major capital projects as they would impact the number, skills and location of staff.

Statements

LUKE DAUNIVALU (Fiji), speaking on behalf of the Group of 77 developing countries and China, said the Secretariat report identified multiple deficiencies at the Palais des Nations, including health and safety issues, structural weaknesses and the lack of accessibility for persons with disabilities.  The Group was very concerned with these risks and it would carefully look at the proposals made to address them.  United Nations premises that did not fully comply with the Convention on the Rights of Persons with Disabilities were unacceptable.  “Having accessibility problems in the premises where most of the discussions on rights of persons with disabilities take place was even worse,” he added.  The Group noted that revised project estimated costs were much higher than the first estimates given to the Assembly, and the prolonged, proposed design phase would lead to the project’s implementation in 2017.  These elements would be considered during informal consultations.

Regarding financing of the renovation project, he said the Group had been very concerned by the consideration of a public-private arrangement.  It was glad the Secretary-General recognized the major risks, at the intergovernmental level, in using such an approach and did not support further consideration of this funding option.  Though happy to learn that lessons gained from the Capital Master Plan were being applied to this project, the Group wanted to ensure the project included proper oversight, including the creation of an independent and external oversight mechanism.

GERTON VAN DEN AKKER, a representative of the European Union Delegation, said the important refurbishment of the Palais des Nations needed to be completed as cost efficiently as possible.  He agreed with the Advisory Committee that major capital projects and related resource requirements should be included in the strategic capital review to allow comprehensive analysis and planning by the Organization, and reiterated that decisions on capital projects and their funding modalities were to be made only by the General Assembly.  It would be important to account for the results of the ongoing study on flexible workplace strategies and the ongoing evolution of the United Nations staffing and skills requirements during the design phase.  He agreed with the Advisory Committee that resource requirements needed to reflect real needs.  The increase in estimated requirements was therefore of real concern, and lessons learned from the Capital Master Plan on associated costs, contingency funding and cost forecasting must be taken into account.  More exploration of alternative sources of financing was needed, and he was particularly keen to see more detail on the possible sale of land.  He underscored the value of formal, independent, external oversight to the project team and to Member States as the project progressed.

PAUL SEGER ( Switzerland) said the Palais des Nations was a symbol of the international community and the seat of the League of Nations before becoming the second-largest hub of the United Nations in 1946.  To let the Palais maintain its role as a dynamic centre for multilateral conferences, it had to remain operational.  The Secretariat report laid out the building’s state of degradation and showed a complete renovation was needed.  Its renovation was an investment in the Organization’s future.  The cost-benefit analysis completed by the Secretariat showed that a full renovation was less expensive than the status quo.  It identified annual savings of $51.2 million over 25 years, compared with a reactive approach.  These savings derived from reduced rental costs, the decline in energy consumption and an end to the increasing amount of urgent maintenance work.  A renovated Palais would also expand the building’s uses and ensure the security and health of workers.  In addition, the greater range of actors using the Palais would strengthen the Organization’s work.

Switzerland approved the Secretary-General’s strategy yet was concerned by the plan’s soaring estimated costs and asked the Secretary-General to “spare no effort to keeps costs in check”, he said.  He stressed the project’s urgency.  It was crucial that the Assembly authorize the project’s continuation during this session.  In its capacity as host country, Switzerland had a responsibility that went beyond its role as a Member State.  In 2011, the Swiss Government donated CHF 50 million for work on energy efficiency measures.  After a request from the Secretary-General, Switzerland also decided this year to reply favourably to any possible Assembly requests for one or more preferential loans to finance the Palais’ renovation.  Switzerland expected Member States to accept their responsibility as owners of the Palais and contribute to its renovation and, in this way, to the Organization’s future as a strong, modern, efficient and effective institution.

ALEXANDER KALUGIN ( Russian Federation) supported the United Nations Office at Geneva as a centre for global diplomacy and its work on many international issues, including sustainable development, human rights and disarmament.  The launch of the renovation was timely as the building now posed risks for staff and guests.  A delay could increase risks and construction costs.  He supported the Advisory Committee’s recommendations and called on the Secretariat to reduce design deadlines without sacrificing the quality of the completed project.  He emphasized the importance of learning from mistakes made during similar construction projects, especially the Capital Master Plan in New York.  Before the active phase, the Secretariat needed to set down oversight mechanisms and ensure accountability to Member States.  The project cost of CHF 837 million was preliminary and to determine the final account, more research would be required.  The associate costs and the size of account could not be moved upward.  Regarding the funding mechanisms, he appreciated the Swiss Government’s work to implement this project through complex loans and its cooperation with the United Nations.  He welcomed more detailed information on the parameters of the agreement and did not mind the project costs’ denomination in Swiss francs.  In addition, he hoped the Secretariat would optimize the use of work space in the renovated building and reduce leasing requirements for United Nations organizations located in Geneva.

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For information media • not an official record