Transparency, Equal Opportunities for Vendors, Streamlined Processes Essential to Improve United Nations Procurement System, Speakers Tell Budget Committee
Speakers stressed the importance of transparency, equal opportunities for vendors, and streamlined processes, among other things, as the Fifth Committee (Administrative and Budgetary) examined the United Nations efforts to make its procurement activities more efficient.
Delegates welcomed the United Nations Procurement Division’s initiatives to bring the Organization’s processes in line with industry best practices, including changes in the transition to a new solicitation methodology for long-term air charter requirements, consolidated procurement through the Regional Procurement Office in Entebbe and the streamlining of vendor databases.
The United States’ representative said those moves had created a level playing field and business opportunities for new vendors. She said greater efforts were needed, however, to achieve economies of scale in the supply chain process and that her Government expected Umoja to eliminate duplication in the procurement process.
South Africa’s representative, speaking for the “Group of 77” developing countries and China, called for greater opportunities and non-discriminatory access for vendors from developing countries, as well as supported the use of business seminars to generate awareness about procedural requirements.
The representative of the European Union Delegation said the Organization’s procurement activities should integrate requirements, specifications and criteria that supported environmental protection and human rights. In addition, the United Nations Procurement Manual should be available in various languages.
Stephen Cutts, Assistant Secretary-General of the Department of Management’s Office of Central Support Services, noted procurement costs had risen from $3.1 billion in 2012 to an estimated $3.4 billion in 2014, as he introduced the Secretary-General’s report on procurement activities. Babou Sene, Vice-Chair of the Advisory Committee on Administrative and Budgetary Questions (ACABQ), presented that body’s related report.
Cirhan Terzi, Inspector of the Joint Inspection Unit (JIU), introducing the Unit’s review of long-term agreements in procurement in the United Nations system, said those agreements, which consolidated piecemeal procurement contracts into a single contract, had enabled United Nations organizations to reduce transaction costs and utilize volume leverage to reduce prices.
Kenneth Herman, Senior Adviser on Information Management Policy Coordination of the Secretariat of the United Nations System Chief Executives Board for Coordination, weighing in with the Board’s comments on the JIU report, said that the United Nations organizations agreed with the overall substance of the Unit’s recommendations to make procurement activities more efficient, but expressed some concerns with their implementation.
Also today, the Russian Federation’s representative took umbrage at the late publication of ACABQ’s report, noting that complaints had been made by many delegations to the Secretariat and the Advisory Committee on the lateness of reports.
The Fifth Committee will meet again at 10 a.m. on Thursday, 12 March, to discuss the strategic capital review and flexible workplace arrangements.
Review of Efficiency: Procurement
Introduction of Reports
STEPHEN CUTTS, Assistant Secretary-General, Office of Central Support Services, introducing the Secretary-General’s report on United Nations procurement activities (document A/69/710), said that the value of procurement had increased from close to $3.1 billion in 2012 to more than $3.2 billion in 2013 and an estimated value of $3.4 billion in 2014. The Umoja supply chain module was expected to rationalize acquisition processes and benefit the Organization through efficiency gains and enhanced visibility. The role of the Procurement Division’s communications and information technology would be crucial in implementing Umoja and other complex information and communications technology programmes of strategic importance. Changes by the Procurement Division and Department of Field Support in their solicitation methodology for long-term air charter requirements were expected to ensure greater operational flexibility, international competition and performance management and, thus, better value for the Organization. Those entities’ efforts in providing food rations and fuel to field missions, among other major expense areas, had improved service delivery, resulting in significant savings and new contractors, mostly from developing countries.
Both vendors and the Organization had benefitted from the feedback provided by the Independent Procurement Challenge Programme set up as a pilot project to enhance integrity and fairness through transparency in procurement, he said. The Secretary-General’s report called for the programme’s continued application and expansion to all Secretariat entities. The Secretariat had simplified the registration process for the High-Level Committee on Management (HLCM) Procurement Network to allow greater participation in procurement tenders of vendors from developing countries and economies in transition. The project was completed in November 2013. By year-end 2013, the percentage of procurement volume from such vendors stood at 55 per cent.
BABOU SENE, Vice-Chair of the Advisory Committee on Administrative and Budgetary Questions (ACABQ), presenting the views of that body in its related report (document A/69/809), said Umoja had created an opportunity to integrate interrelated business processes and to eliminate duplication. He looked forward to receiving information on its impact on procurement in future reports of the Secretary-General. He acknowledged progress made in the transition in solicitation methodology for the procurement of air charter services and welcomed the preliminary outcome of the pilot bidding requests for proposal, known as RFPs, for the United Nations Organization Stabilization Mission in the Democratic Republic of the Congo (MONUSCO), issued in 2014, which had attracted a significantly higher number of vendors from a wide geographical area. The Advisory Committee expected that the solicitation and contract award under the methodology used for those proposals would be competitive, fair, transparent and timely.
While welcoming the benefits realized by the Regional Procurement Office in Entebbe, he expressed concern over the low utilization rate of regional systems contracts administered by that Office. He took note of the report’s preliminary proposal to introduce the concept of environmentally friendly sustainable procurement, and cautioned that the concept had not been considered for approval by the General Assembly. More work was needed to define the concept and how it would apply to the United Nations in practical terms. No individual accountability had been assigned to cases of non-compliance with established procurement rules and guidelines, often cited by the Board of Auditors. He asked that proposals in the report be presented with greater clarity and prominence to facilitate the Assembly’s consideration of them.
CIRHAN TERZI, Inspector, Joint Inspection Unit (JIU), introduced the Secretary-General’s note (documents A/69/73), transmitting the JIU report titled Review of long-term agreements in procurement in the United Nations system. He said there had been a 137 per cent increase in procurement expenditures by United Nations organizations between 2004 and 2012. In its current report, the JIU had evaluated the relevance, efficiency and effectiveness of the use of long-term agreements in the United Nations system. The consolidation of piecemeal procurements and aggregation of demand into a single procurement had enabled organizations to reduce transaction costs and utilize volume leverage to reduce prices. Their use had also facilitated the application of quality and technical standards in the organizations.
However, the review found several deficiencies associated with organizations’ practices and policies, which could risk losing the potential benefits of long-term agreements, he continued. The lack of specific policies and analytical procurement data for those agreements in some organizations combined with inadequate corporate procurement strategy and planning, lack of spend analysis and weak contract management and implementation monitoring could reduce efficiency or potential efficiency gains. Long-term agreement contracts used by organizations to jointly procure commonly used goods and services in Geneva and Rome had rendered considerable cost savings. However, existing collaborations did not use the full potential of the system. He invited the Committee to endorse the report’s five recommendations, whose implementation would result in greater efficiency and effectiveness in procurement activities system-wide.
According to the report, the first four of those recommendations were addressed to the executive heads of the organizations and touched on: development of specific procurement policies and guidelines for the strategic use of long-term agreements by their organizations; implementation of a policy to ensure that for every long-term agreement a contract management plan would be developed clearly defining the contract work breakdown structure, roles and responsibilities of all parties involved, and control and accountability mechanisms; the active pursuit of collaborative long-term agreement opportunities; and support for the advancement of the work of the HLCM Procurement Network on harmonization of procurement documents, collaborative use of long-term agreements, and joint procurement of vehicles. The fifth recommendation called on the legislative/governing bodies of the organizations to use their oversight role to ensure that the procurement function adequately fulfilled its strategic aims and that long-term agreements and other procurement activities were based on sound plans and strategies.
KENNETH HERMAN, Senior Adviser on Information Management Policy Coordination, Secretariat, United Nations System Chief Executives Board for Coordination, weighing in with the Board’s comments on the JIU report, set forth in a note of the Secretary-General (document A/69/73/Add.1), said that organizations of the United Nations system agreed that moving to a more strategic footing for procurement rather than a transactional one would prove useful.
Organizations agreed with recommendation 1 regarding development of specific policies and guidelines for the strategic use of long-term agreements but, while agreeing overall with the substance of other recommendations, expressed concern about their implementation in some instances. Regarding recommendation 4, on contract management plans, for example, it was noted that implementation of all the suggested mechanisms might not always result in substantial benefit, particularly for smaller organizations. Furthermore, organizations agreed with the call for support to inter-agency mechanisms, such as procurement and legal networks. But they expressed concern over the harmonization of general terms and conditions, suggesting that, in some cases, the resources, time and effort needed to achieve such harmonization might not result in significant gain.
Statements
LYLE DAVIDSON (South Africa), speaking for the “Group of 77” developing countries and China, emphasized the importance of increasing procurement opportunities for vendors from developing countries. Equal, fair and non-discriminatory access must be given to companies from those countries. In particular, he supported the use of business seminars to generate awareness about procedural requirements for participating in United Nations procurement activities. The Group would seek more information on the Secretariat proposals regarding the future of the Regional Procurement Office in Entebbe in the context of the General Assembly’s upcoming consideration of a global service-delivery model. He voiced concern with the Secretariat’s intention to initiate a low-impact pilot project on sustainable procurement, as there was a lack of clarity around that concept and its possible impact on the diversification of the origin of venders.
FRANCESCO PRESUTTI, a representative of the European Union Delegation, commended the Secretariat’s outreach efforts to the widest possible audience by making the United Nations Global Marketplace online portal available in various languages. He encouraged similar efforts with regard to the United Nations Procurement Manual. He welcomed progress in various areas, such as in using Umoja to enable more strategic management of procurement; modernization of air charter procurement, and improved contracts critical to United Nations missions, resulting in greater efficiency and economy. United Nations procurement activities should integrate requirements, specifications and criteria that supported environmental protection and human rights, and were mindful of the international community’s commitment to fight forced labour and the worst forms of child labour.
AISHA SABAR (United States) welcomed that the Procurement Division had carried out various initiatives to bring the Organization’s processes in line with industry best practices, including changes in the transition to a new solicitation methodology for long-term air charter requirements, consolidated procurement through the Regional Procurement Office in Entebbe and the streamlining of vendor databases. Such efforts had created a level playing field and business opportunities for new vendors, including from developing countries and countries in transition. As transparency was of utmost importance, she encouraged the Secretary-General to continue strengthening internal controls through practices such as the independent procurement challenge system. More could be done to achieve economies of scale in the supply chain process. The United States expected Umoja to eliminate duplication in the procurement process and encouraged the Secretary-General to realize such benefits as soon as possible.
DMITRY PODLESNYKH (Russian Federation) expressed concern that there had not been enough time to consider the Advisory Committee’s report, which had only become available over the weekend. Yet, on Monday morning delegations were being asked to comment on it. Complaints had been made by many delegations to the Secretariat and the Advisory Committee on the lateness of reports. The lack of time for consideration of documents had been artificially created by the Secretariat’s failure to prepare the meeting in a timely way. Pointing out that the Committee would be looking at eight issues which had not yet been considered — five of which represented 70 per cent of the work before the Committee — he said that delaying the meeting by two or three days would not have had a negative impact on the Committee’s work. To the contrary, hasty consideration of the matter had not allowed his delegation to make a substantive statement. Furthermore, planning proposals had not yet been published on the upcoming meeting’s topics: capital assets; and a flexible workplace. Delegations should have at least one full working day to study such documents.