Delegates Voice Concerns over Added Costs, Plans for Library, South Annex, North Lawn Buildings, as Budget Committee Examines Status of Headquarters’ Renovation
Eight years after they gave the go-ahead for the massive, $2.21 billion-dollar renovation of the United Nations historic Headquarters building, delegates at the Fifth Committee (Administrative and Budgetary) aired their concerns about financing nearly $155 million in additional costs, plans to make the Library and South Annex buildings secure, and the dismantling of the temporary North Lawn Building.
Bolivia’s delegate, speaking on behalf of the Group of 77 developing countries and China, said it had consistently maintained that the Capital Master Plan be completed on time and within the approved budget. The Group supported financing the additional costs through assessments made under the Plan, in order to immediately replenish the Working Capital Fund and the Special Account. Those accounts, part of the Organization’s Regular Budget, were to be used as a bridging mechanism on an exceptional basis, according to General Assembly resolution 68/247B.
Introducing the Secretary-General’s annual progress report on the project,
Yukio Takasu, Under-Secretary-General for Management, urged the Assembly to make a definitive decision on the financing, which included $139.8 million in cumulative associated costs and $15 million for a secondary data centre.
Regarding the renovation of the South Annex and Library buildings, the Group of 77 and China was very concerned that the Secretariat had not presented plans for the future of both buildings, which were an integral part of the Plan’s original scope. The Group would not consider the Plan’s work completed until these buildings were renovated. Japan’s representative supported the Secretary-General’s view that it was best to incorporate plans for the library and cafeteria into the Assembly’s future decision on a long-term solution for the two buildings.
During his remarks, Mr. Takasu told the delegates that the Library and South Annex Buildings could not be renovated at a reasonable cost to meet heightened security standards, due to technical constraints created by the building structures. Since it would cost several hundred millions of dollars to build new buildings which could withstand a blast attack, their renovation had been suspended since 2011. Their security could not be fully guaranteed for high-intensity use and their future needed to be determined. “A formal decision by the General Assembly is invited,” he said.
The Russian Federation’s delegate called for the effective handover of business from the Office of the Capital Master Plan to the Office of Central Support Services and agreed with the Group of 77 and China that the unforeseen associated costs should be financed through the regular assessed contributions, rather than the bridging mechanism.
Regarding the North Lawn building, the Russian Federation was open to maintaining the facility for a limited time. The Group of 77 and China questioned the rationale of using the temporary North Lawn Building for unrelated Plan activities. It agreed with the Advisory Committee on Administrative and Budgetary Questions (ACABQ) that such use would delay the building’s planned dismantling. The Group reaffirmed its long-standing position that the architectural integrity of the United Nations complex had to be preserved by dismantling the building. Mr. Takasu said the dismantling was to take place in 2015.
The representative of Kenya, associating himself with the Group of 77 and China, asked the Assembly to consider moving the North Lawn Building materials to the United Nations premises in Nairobi as that would be the best use for the materials.
Steven Townley, Director of External Audit and Chair of the Audit Operations Committee of the Board of Auditors, introduced his body’s report on the Capital Master Plan for the year ended 31 December 2013. The Board made four recommendations on how the project would best be completed and how the maximum return on investment would be secured. No new risks or significant cost increases occurred in the reporting period and, as of March 2014, the cost overrun was estimated at $370 million — a 19 per cent increase.
Carlos G. Ruiz Massieu, Chairman of the Advisory Committee, introduced his body’s report on implementing the Plan, specifically its schedule, final costs and options for the Dag Hammarskjöld Library and the South Annex buildings. The Advisory Board was concerned about additional delays that would push the project’s completion from late 2015 to late 2016, due to the completion of security-related work at the two main entrances of the building on First Avenue. The 18-month work was yet to start, dependent on the issuance of permits by the Host City.
A representative of the European Union Delegation also spoke at today’s meeting.
The Committee will reconvene at 10 a.m. Wednesday, 12 November, to discuss construction and property management, part of the programme budget 2014-2015 agenda item.
Introduction of Reports
Yukio Takasu, Under-Secretary-General for Management, introduced the Secretary-General’s Twelfth Annual Progress Report on the Capital Master Plan (document A/69/360), which gave an update on the implementation of the Plan, the project’s financial picture and the associated costs. He said the Plan had been the largest renovation work ever undertaken by the United Nations and had delivered the promised results and benefits to Member States. Those promised results included the modernization of Headquarters facilities to meet twenty-first century fire and safety codes, the elimination of materials containing asbestos and full access for people with disabilities. The Secretary-General was grateful for Member States’ strong political and financial support and he thanked the Office of the Capital Master Plan and its Executive Director, Assistant Secretary-General Michael Adlerstein, for their diligent work.
The last construction phase would focus on completing ongoing work in the General Assembly building’s basement, he said. All other major portions of the project had been completed. The renovation phase would be completed in 2014. Close-out and demobilization activities had to be carried out, including the removal of the temporary North Lawn Building, the final landscaping of the compound and security-related work at forty-second and forty-eighth streets. The demolition and removal of the temporary North Lawn Building and subsequent landscaping would be completed in 2015, unless guided otherwise by the Assembly.
The Library and South Annex Buildings could not be renovated at a reasonable cost to meet heightened security standards, due to technical constraints created by the building structures. It would cost several hundred millions of dollars to build new buildings which could withstand a blast attack. Therefore, planning and renovating those two buildings had been suspended since 2011. Their security could not be fully guaranteed for high intensity use and their future needed to be determined. “A formal decision by the General Assembly is invited,” he said.
The project’s financial position was consistent with the projection outlined in the update to the eleventh annual progress project, after accounting for Assembly decisions in December 2013 and April 2014. As of 30 June 2014, the cost to complete the project was estimated at $2.21 billion. That compared with approved resources of $2.15 billion, comprising the original budget and donations of $1.89 billion, enhanced security upgrades of $100 million, plus interest income and the Working Capital Reserve Fund of $159.4 million. All approved funding of $2.15 billion was being applied to ongoing active renovation activities and contracts. He did not project a need for an additional assessment to complete ongoing activities.
“The financing of the associated costs is a different story, however,” he said. The progress report indicated that the final cost of activities associated with the Plan totalled $139.8 million and the cost of the secondary data centre totalled $15 million (net of the $4.2 million contribution from the support account for peacekeeping operations). Expenditures totalled $154.8 million.
The Assembly had authorized the Secretary-General to use the Working Capital Fund and the Special Account as a bridging mechanism to meet the liquidity challenges resulting from the financing of the associated costs and the secondary data centre. As reported earlier this year, the Organization’s financial situation was tight. During the resumed session earlier this year, the Assembly had decided to make a decision on the necessary final appropriations during the sixty-ninth session, based on information provided by the Secretary-General in the current annual progress report.
Mr. Takasu said it was very important that a definitive decision be made, during that regular session, on the financing of the cumulative associated costs and the secondary data centre at $154.8 million, in order to keep the regular budget solvent.
Since the report was finalized, the Secretariat had been officially notified by the Permanent Mission of the Host Country, as well as New York City, that it would not be feasible to close or relocate the FDR off-ramp, he said. The Host City had recently agreed to strengthen the presence of law enforcement authorities at the southern perimeter of the United Nations campus, particularly the FDR off-ramp. With the most recent security mitigation measures, the Department of Safety and Security believed a limited occupancy should be permitted in the Dag Hammarskjold Library Building and South Annex Building after completion of the enhanced security upgrades. The Secretariat was seeking to identify the most cost-efficient way, independent of a decision on long-term arrangements, to achieve a limited occupancy concept for both buildings. Some of the parameters to consider would be the installation of a security catchment system to separate the office space from the southern façade along forty-second street and a revised occupancy limit of 120 to 140 staff members.
Those were interim measures, but were compatible with any option the Assembly followed for the long-term and they would not prejudge any long-term solution, he said. He looked forward to the Assembly’s guidance during the current session.
STEVEN TOWNLEY, Director of External Audit and Chair of the Audit Operations Committee of the Board of Auditors, introduced his body’s report on the Capital Master Plan for the year ended 31 December 2013 (document A/69/5 Vol.V), noting that the Board recognized the substantial delivery of the Plan was a significant achievement. The Board made four recommendations on how the project would be completed and how the maximum return on investment would be secured. No new risks or significant cost increases occurred in the reporting period. As of March 2014, the cost overrun was estimated at $370 million — a 19 per cent increase. The Board previously had reported an uncertainty about how the Plan would be financed through to completion, but Assembly approval of the use of the Working Capital Fund and the Special Account as an interim finance mechanism had mitigated that key risk.
He noted that work of the Office of the Plan was expected to end in June 2015, with remaining tasks including the completion of the basements (by October 2014), the disassembly and removal of the temporary North Lawn Building (January 2015) and final landscaping (April 2015). In response to the Board’s recommendations, the Administration was continuing to make progress on its project to assess the cost and benefits of a move towards flexible use of office space. The Board believed that initiative could realize significant benefits in working practices and cost efficiencies, not least the potential to reduce rented office accommodation in New York.
The Administration must learn many lessons, both positive and negative, on ways to deliver a major capital project, in particular how to project against cost and time overruns, he said. The Board welcomed the Administration’s articulation of lessons learned from the Plan in the Secretary-General’s last progress report and acknowledged the positive steps taken to incorporate those lessons in the planning of the Strategic Heritage Plan in Geneva. The Board was finalizing a “lessons learned” document, which might be useful in future major capital projects.
CARLOS G. RUIZ MASSIEU, Chairman of the Advisory Committee on Administrative and Budgetary Questions (ACABQ), introduced the Advisory Committee’s report on implementation of the Plan (document A/69/529), specifically on its schedule, final costs, and options for the Dag Hammarskjöld Library and the South Annex Buildings. He expressed concerns over the further delay in concluding the project, from late 2015 to late 2016, due to the completion of security-related work at the two main entrances of the building on First Avenue. The 18-month work was yet to start, dependent on the issuance of permits by the Host City.
Noting that the Secretary-General’s report indicated the demolition of the temporary North Lawn Building would be completed by the end of 2015, he recalled that the Advisory Committee was informed in March 2014 that it would be completed by June 2015. The space would be used by the Counter-Terrorism Committee Executive Directorate as a swing space during its relocation, which caused concern to the Committee as it could further delay the planned demolition, he said, reiterating that the building’s future was to be decided by the Assembly.
Turning to the estimated final cost of the Plan, he noted its amount of $2.21 million and that 99.2 per cent of the estimated costs to completion had been expended and/or committed. Noting that the responsibilities for the post-renovation construction and close-out activities would be transferred from the Plan’s Office to the Office of Central Support Service, he sought assurances that Plan-related costs would be borne by that Office under the regular budget. He reiterated the Advisory Committee’s recommendation that the Assembly decide to appropriate an amount to finance the cumulative associated costs and the cost of secondary data centre ($15 million).
On the renovations of the Dag Hammarskjöld Library and the South Annex Buildings, the Advisory Committee regretted that the Plan was unlikely to deliver the original scope within budget. Those renovations were suspended due to security concerns, as well as due to a $65 million budget. He expressed concern that the Secretary-General had not yet fulfilled the Assembly’s request for feasible alternatives independent of the Headquarters’ long-term accommodation need, saying that the interim options contained in paragraph 75 of the Secretary-General’s report were not an adequate response.
Therefore, the Advisory Committee was not in a position to recommend to the Assembly a preferable option related to the functions currently housed in the Dag Hammarskjold Library and the South Annex Buildings, he said, reiterating the Committee’s recommendation that the Assembly ask the Secretary-General to submit new proposals.
Statements
DAYANA ANGELA RIOS REQUENA (Bolivia), speaking on behalf of the “Group of 77” developing countries and China, said the Group had consistently maintained that the Plan be completed on time and within the approved budget, without affecting the project’s original scope or compromising its quality. The Group noted the need for the Assembly to decide on financing the cumulative associated costs and secondary data centre during this session. It supported the appropriation and assessment of those expenditures under the Plan, in order to immediately replenish the Working Capital Fund and the Special Account, which were to be used as a bridging mechanism, on an exceptional basis, according to resolution 68/247B. Despite the achievements, serious questions and issues had to be addressed before the Plan ended. The Group would seek additional clarification regarding the transfer of responsibilities from the Office of the Plan to the Office of Central Support Services.
Regarding the renovation of the South Annex and Library buildings, the Group was very concerned that the Secretariat did not present plans for the future of both buildings, which were an integral part of the Plan’s original scope, she said. The Group would not consider the Plan’s work completed until the South Annex and Library buildings were renovated. The Group questioned the rationale of using the temporary North Lawn Building for unrelated Plan activities. It agreed with the Advisory Committee that such use would delay the building’s planned dismantling.
The Group reaffirmed its long-standing position that the architectural integrity of the United Nations complex had to be preserved, she said. It was concerned with apparent delays in the planned demolition of the temporary North Lawn Building and recalled that in Assembly resolution 65/269, the Assembly approved the mandate for its timely demolishing and removal once the Headquarters renovation work was completed. The Group asked the Secretary-General to fully abide by the Assembly decision. The Group also was concerned by additional delays in the security-related work at forty-second and forty-eighth streets, caused by the late issuance of permits by the Host City. It would seek additional clarification during informal consultations.
CARMEL POWER, a representative of the European Union Delegation, expressed satisfaction with the renovation of the Assembly Hall in time for the United Nations ministerial week. Noting its achievements, she then called for the Plan to come to an end, applauding the Secretary-General’s decision to close the Office of the Plan in June 2015. On the financial situation of the project, she expressed concern over cost overruns and looked forward to exploring all options on how to close-out their funding. In light of other construction works ahead, she stressed the importance of documenting and applying the lessons learned from the Plan in future construction projects.
SHIGETOSHI NAGAO (Japan) said that his delegation was pleased to note the Secretary-General’s statement that the cost of all post-renovation construction and close-out activities would stay within the existing approved resources of the Plan. The major focus during the current session was the financing of the cumulative associated costs and the cost of the secondary data centre, for which the General Assembly decided in March this year to authorize the use of the Working Capital Fund and the Special Account as a cash-bridging mechanism. There was a need to be creative in making a decision on final appropriation, including that of the aforementioned costs, while closely monitoring cash balance changes resulting from the use of the cash-bridging mechanism. On the Library and South Annex Buildings, he voiced support for the Secretary-General’s view that the interests of the Organization would be best served by incorporating the library and cafeteria programmes into the future decision of the Assembly regarding long-term accommodation at Headquarters.
SERGEY V. KHALIZOV (Russian Federation) called for the effective handover of residual business from the Office of the Plan to the Office of Central Support Services. As for unforeseen associated costs, his delegation felt that those expenses should be financed through the regular assessed contributions rather than the bridging mechanism. On the demolition of the temporary North Lawn Building, his delegation was open to the idea of keeping the facility, but only for a limited time. That would require a reversal of the relevant Assembly decision and the Secretariat must provide cost projections and other details should it wish to use the facility for an extended time.
ROBERT NGEI MULE (Kenya), associating himself with the Group of 77 and China, proposed that the Assembly consider a possibility of relocating the North Lawn Building to the United Nations premises in Nairobi, arguing that construction materials from its dismantlement would be put to best use that way.