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INVESTING IN THE UNITED NATIONS
For a Stronger Organization Worldwide

Report of the Secretary-General

IV. Investing in new ways of delivering services

A. New sourcing options

Context and challenges

57. Recent advances in technology and management practices have enabled many public and private sector institutions to adopt entirely new ways of getting services. These have allowed employers to focus their resources on their core mission, improve their performance in achieving mandates and allocate resources optimally. Increasingly common practices include moving certain administrative functions to other locations (relocating or offshoring); contracting out to external providers a range of services previously performed internally (outsourcing); allowing some categories of staff to work from home (telecommuting); and making more effective use of facilities already established around the world.

58. Yet at the United Nations, progress in exploring these options has been piecemeal and slow. Most administrative and support services are performed inhouse, often in high-cost locations, such as New York or Geneva. The overall United Nations mindset has been one that discourages even exploring the options that exist. As a global organization, there is no reason why we should not carry out our business globally. However, in its resolution 55/232 of 23 December 2000, the General Assembly established a number of conditions for outsourcing that severely restrict the circumstances under which it can be contemplated. No comprehensive feasibility study or cost-benefit assessment has even been conducted of the possibility of relocating major services.

Vision

59. My vision is of a United Nations which has achieved gains on several fronts by introducing new practices, such as relocating activities to new work stations. By so doing, it will disperse the economic and employment benefits of those activities more equitably among its Member States, while at the same time making it more effective and efficient. In particular, it will redistribute some of the very large share of those benefits that currently flows to the richest Member State of the United Nations because it hosts a large United Nations presence. Redistributing and relocating the Headquarters workload to other parts of the world will benefit more countries and economies; allow the United Nations to widen and deepen the skills pool from which it recruits; and enable it to reduce the overall costs of its operations.

60. Relocating offers an unusually precise tool to fulfil Article 101 of the Charter of the United Nations: "The paramount consideration in the employment of the staff and in the determination of the conditions of service shall be the necessity of securing the highest standards of efficiency, competence, and integrity. Due regard shall be paid to the importance of recruiting the staff on as wide a geographical basis as possible"

61. The United Nations family has only just started experimenting with this practice, but examples are encouraging. The World Bank relocated some of its accounting functions to Chennai, India. Aside from dollar savings, relocation has brought other improvements, as observed by UNDP following the transfer to Copenhagen of its benefits, entitlements and payroll functions in the biennium 2003-2004. Transactions were found to be 25 per cent more efficient, and UNDP staff worldwide gave the quality and responsiveness of the services offered in Copenhagen a satisfaction mark of 92 out of 100 in 2005. UNDP is now considering relocating some knowledge and learning divisions, as well as regional human resource support units, to regional centres such as Johannesburg and Bangkok.

62. In the Secretariat, the Department of General Assembly Affairs and Conference Management, for instance, recently commissioned an external study to review options concerning the document production cycle. Preliminary estimates suggest that possible savings from relocating the full range of document production services could approach 25 per cent of existing personnel and location costs, representing a net saving in the range of up to $35 million per annum.

63. Outsourcing - that is, contracting out to external providers - is an option that should be considered only for those functions that do not fall within the core competencies of the United Nations. Printing functions, which still take place inhouse, may be a suitable candidate for outsourcing. Other steps of the document production cycle, such as translation, may be candidates for relocation to lower-cost duty stations - but not necessarily for outsourcing because of quality control and other issues.

64. Any decision to relocate or outsource a function depends on a broad range of factors, of which cost is only one. Reliability of service and guaranteed standards of quality are of primary importance. Consultations will need to be conducted with staff and their representatives, and then appropriate transitional support will need to be put in place to help any staff members whose jobs may ultimately be affected.

Proposals

Proposal 11

I ask the General Assembly to modify its previous guidance and allow the Secretariat to consider all options for alternative service delivery, including identifying the potential for relocating work to lower-cost duty stations and for outsourcing.

Proposal 12

I propose to undertake systematic and detailed cost-benefit analyses of relocation, outsourcing and telecommuting opportunities for select administrative services, as follows:

B. Strengthening procurement

Context and challenges

65. One of the most daunting challenges of the past decade for the United Nations has been the extraordinary expansion in the scale and scope of procurement. Driven largely by the huge growth in peacekeeping - which today accounts for 85 per cent of all procurement - but also encompassing growing support to other field operations and relief initiatives, the value of United Nations global procurement has increased steadily from about $400 million in 1997 to over $1.6 billion in 2005. The trend is still heavily upward: in 2006, it is expected to exceed $2 billion. During the same period, however, the number of dedicated procurement staff at Headquarters has in fact fallen. In peacekeeping missions, there is a 50 per cent vacancy rate for procurement officers in the field.

66. Inevitably, this has tested the robustness and effectiveness of both systems and controls - and both have been found lacking. On the one hand, it has become clear that our procurement rules and regulations are too complex and cumbersome for the kind of quick actions often required in field missions. To take one glaring example, otherwise sensible requirements on seeking bids from multiple vendors can prove a real obstacle to the effective and timely delivery of critical goods and services from food to fuel in inaccessible and isolated places, such as parts of the Sudan or the Democratic Republic of the Congo. On the other hand, it has also become clear that some of the limited steps we have taken to try to deal with this in recent years, such as providing more authority for field-based procurement, have not been accompanied by sufficient support and controls to prevent mismanagement and possible abuse. As a result, despite the hard work and dedication of the vast majority of our staff, often in extremely complex and difficult situations in the field, we have too often fallen short of the high standards that the United Nations needs to set itself.

Vision

67. While some of the procurement problems documented in the reports of the Independent Inquiry Committee into the United Nations Oil-for-Food Programme have already been corrected, significant problems remain. A separate review conducted late in 2005 by external experts found major weaknesses in culture, management oversight and controls, including outdated procurement processes, a failure to align and support the procurement needs of clients, an inconsistent execution of processes, a poor governance structure and lack of sufficient resources. Equally worrying, a recent audit by the Office of Internal Oversight Services into peacekeeping procurement has raised significant additional concerns with regard to both mismanagement and possible fraud.

68. Quite apart from correcting systems and implementing robust internal controls to prevent potential wrongdoing, there is also significant potential for the United Nations to purchase goods and services more cheaply and efficiently if systems and procedures are properly modernized. To take one example, although a contractor performance rating system exists the results are not yet easily accessible across the United Nations system, nor have such performance reports been routinely examined to provide a measure of the future worthiness of United Nations contractors. Indeed, from outdated master contracts to overstretched data systems, an overworked team lacks the tools it needs to provide the highest quality procurement services. And as in other areas of the United Nations, spending on training - just $20,000 annually for the 70 staff at United Nations Headquarters - is also well short of what is needed.

Proposals and actions

69. To respond to these problems, the following investigations are already under way:

(a) To ensure that the recent audit and review findings about possible irregularities are urgently addressed, the Office of Internal Oversight Services is currently undertaking, on my instruction, an accelerated review of these cases and additional allegations of possible procurement-related wrongdoing by staff.

(b) A more comprehensive, forensic audit is being carried out by external experts and the United Nations is, also on my instruction, fully cooperating with national law enforcement bodies in their own investigations.

Proposal 13

I propose that these investigations be concluded quickly and that swift action be taken against any United Nations staff members found to have acted inappropriately.

Proposal 14

More broadly, in order to address the underlying weaknesses that have been identified, I propose to continue a comprehensive review of procurement rules, regulations and policies that is also already under way, focused on six broad areas:

Proposal 15

Early elements of the strategy described above are already being implemented and I propose to produce by June 2006 a more comprehensive report, with more detailed corrective actions, incorporating the recommendations of the current review and reflecting the conclusions of the outstanding investigations and audit.


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