GA/AB/3394

PROCUREMENT PRACTICES HAVE IMPROVED, FIFTH COMMITTEE TOLD

As the Fifth Committee (Administrative and Budgetary) began its consideration of procurement reform and outsourcing practices of the United Nations this morning, speakers commended the Procurement Division for its efforts to improve efficiency, cost-effectiveness and transparency of procurement practices.

In that respect, the functioning of the Web site of the Division received special support, with speakers emphasizing that regular updating of the Web site would provide greater transparency in relations with countries and businesses. They also said that it would be useful to share the Division�s experience with the internet with other entities in the United Nations system. Also stressed in the debate were the need to ensure effective monitoring of activities, avoiding duplication and providing proper training of personnel involved in the procurement process.

Introducing the reports of the Secretary-General before the Committee, Assistant Secretary-General for Central Support Services, Toshiyuki Niwa, said that the introduction of internet and intranet sites did not mean that the Procurement Division had forsaken traditional means of communication that catered to those without access to the worldwide Web. In addition to a procurement briefing on video and in CD-ROM format, the Division had also recently produced brochures in the six official languages that were both simple to read and easy to reproduce.

He went on to say that the Procurement Division was on the road not only to achieving transparency but also to accepting full accountability for its performance. It had made good progress by establishing a transparent and visible accountability mechanism. In early September, a requisition tracking system had been introduced on the Division�s intranet site. Through that mechanism, each requisitioning office was able to monitor the progress of its purchase request from the time it was received until the completion of the acquisition process.

Regarding the Organization�s outsourcing practices, several speakers stressed the need to further study the four criteria for outsourcing activities which had been identified in the report of the Secretary-General.

The reports of the Advisory Committee on Administrative and Budgetary Questions (ACABQ) were introduced by the Chairman of that body, Conrad S.M. Mselle. Mr. Niwa also answered questions from the floor.

Fifth Committee - 1a - Press Release GA/AB/3394 13th Meeting (AM) 16 October 2000

At the conclusion of the meeting, there was a brief discussion of organizational matters, including the Committee�s programme of work for this week.

Addressing the Committee this morning on procurement reform and on the Committee�s work programme were the representatives of France (speaking on behalf of the European Union and associated States), Syria, South Africa, Cuba, Uruguay, Canada, Cameroon and Algeria.

The Fifth Committee will continue its debate on the review of the efficiency of the Organization at 10 a.m. tomorrow, 17 October. It will also hear a statement by the Under-Secretary-General for Management on improving the financial situation of the United Nations.

Fifth Committee - 3 - Press Release GA/AB/3394 13th Meeting (AM) 16 October 2000

Committee Work Programme

The Fifth Committee (Administrative and Budgetary) was scheduled to begin its review of the efficiency of the administrative and financial functioning of the United Nations this morning. The Committee had before it several documents on procurement reform and outsourcing practices of the Organization.

The Secretary-General's report on procurement reform (document A/55/127) details initiatives taken by the Secretariat in response to concerns expressed by the General Assembly. Most of the initiatives have already been implemented and have already produced the desired results, the report states. They were mainly targeted at increasing transparency and evaluating objectivity in the bidding process, encouraging greater participation by vendors from developing countries and countries with economies in transition and increasing the cost-effectiveness of the Secretariat's procurement activities.

Regarding the need to ensure that specifications are not deliberately tailored to predetermine the choice of supplier, the Secretary-General notes that only generic specifications are accepted from requisitioning offices. Strict enforcement of that requirement over the past year has led to a wider geographic distribution of vendors from whom the Secretariat makes purchases. To ensure transparency of procurement decisions, all relevant procurement information, including the names and addresses of vendors awarded contracts and the value of each contract, is posted on a daily basis on the Procurement Division's internet Web site. While the internet is used as one method of communicating with the public, the Procurement Division also makes information available through traditional means.

The Secretary-General also states that he is committed to taking proactive measures to increase procurement opportunities for vendors from developing countries and countries with economies in transition. Measures taken include organizing business seminars, scheduled to take place in 21 locations, distribution of procurement and vendor registration information in CD-ROM and video formats and more effective use of the internet home page.

On the subject of procurement-related arbitration, the Committee had before it a report of the Secretary-General (document A/54/458). It takes into account the recommendations of the Office of Internal Oversight Services (OIOS), contained in document A/53/843, and the views of Member States expressed during deliberations on the matter at the fifty-third session.

According to the report, the Secretary-General does not dispute the reasons for the arbitration cases identified by the Oversight Office in its report, including inadequate contract administration, lack of experience on the part of programme managers, unclear contractual terms and non-compliance with rules and procedures by mission staff. In large part, those cases resulted from the sudden growth in peacekeeping activities in the late 1980s and early 1990s and the switch from support services provided by Member States to the use of commercial vendors. Experience has shown that most disputes arose out of operational issues rather than out of questions of contractual interpretation or other strictly legal issues.

There are currently four pending arbitration cases. Since 1995, there have been a total of 12 such cases, of which 11 relate to peacekeeping activities and one to construction carried out by the United Nations Development Programme (UNDP). When compared to the total value of procurement contracts awarded by the Organization, the number and monetary value of arbitration cases has been very small. Thus far, disciplinary action has been taken against one staff member of UNDP in connection with an arbitration case.

Contractor claims or disputes have been handled in an ad hoc manner up to now, the Secretary-General states. First, the operational unit, such as the peacekeeping mission, which is responsible for contract administration, attempts to resolve the matter with the contractor. The Procurement Division and the Office of Legal Affairs are brought in for contractual or legal issues, respectively. Settlement discussions take place under the authority of the Under- Secretary-General for Management and the United Nations Controller. Every effort is made within the various offices of the Secretariat to reach an amicable settlement of claims and disputes, which can and do arise in normal commercial relationships.

Also according to the report, the amount of any award or settlement and the cost of arbitration are charged to the budget of the peacekeeping mission. As a matter of budgetary principle and practice, no provision is made in peacekeeping budgets (or the regular budget, for that matter) to cover the possible cost of arbitration cases that may occur, since such expenses represent contingent liabilities. At the same time, once it is known that a dispute may be proceeding to arbitration, where feasible, available obligated funds in approved peacekeeping mission budgets for non-governmental liabilities are extended to cover the potential liability.

As many of the arbitration cases to date have involved closed or completed peacekeeping missions, payments for legal fees incurred, settlements and awards have been charged on an ad hoc basis against available residual funds of such missions. In view of the provisions of paragraph 3 of General Assembly resolution 53/217, information on payments of that nature will be provided in future financial performance reports of individual peacekeeping missions, as applicable.

Also according to the report, outside legal counsel is selected through a transparent and competitive process. Contracts are awarded by the Chief, Procurement Division, or the Assistant Secretary-General for Central Support Services, according to standard rules and procedures. Legal litigation services are highly specialized and firms are invited from a roster maintained in the Office of Legal Affairs. Thus far, most arbitrations have taken place in the host city. For practical purposes, legal firms need to have offices in this location in order to properly represent the Organization. The Office of Legal Affairs closely supervises all law firms to ensure that the interests of the Organization are protected, including ensuring avoidance of conflict of interest.

The Secretary-General has taken a number of steps which are consistent with the recommendations in the Oversight Office report, the document says. The keys to avoiding arbitration are clear and sound contracts and timely and effective contract administration, which prevent disputes from arising in the first place. Procedures for the preparation of clear contracts have been implemented. The Secretary-General also supports the introduction of staff training in contract management and claims negotiation, and a system for contractor evaluation has been introduced. Contractors can now raise complaints on the Procurement Division Web page. Regular reviews of arbitration cases for lessons learned take place. Alternate methods of dispute resolution, such as conciliation, are being explored.

According to Secretary-General's report on measures taken to improve procurement activities in the field (document A/54/866), an investigation conducted by the Office of Internal Oversight Services on the audits of the United Nations Angola Verification Mission (UNAVEM) raised serious concerns about management deficiencies in the Mission's procurement process. The report responds to a 1999 General Assembly resolution on the financing of UNAVEM in which the Assembly asks the Secretary-General to report on measures taken to improve procurement activities in the field and to enhance control and accountability.

In an earlier report, the Secretary-General noted that although no evidence of fraud or financial loss had been detected in Angola, weaknesses in the procurement process had to be addressed. Of particular concern was the procurement of quartering area equipment by UNAVEM at a cost of $6.9 million. In a separate investigation of that case, the Oversight Office found no evidence of fraud or financial loss.

Also according to the report, the sharp increase in the number and complexity of peacekeeping operations, coupled with an outdated procurement system, contributed to the problems experienced in Angola. The Secretariat recognized that the procurement system should be more responsive to the requirements of peacekeeping operations, with transparency and accountability in all stages of the process.

An in-depth review of the procurement system was initiated in 1994, the report states. Measures implemented since then include procurement planning on the basis of the annual budget cycle, initiation of preparatory processes in advance of commitment authority, enhanced delegation of authority and new arrangements governing contingent-owned equipment and self-sustainment that reduce the amount of direct support by the United Nations.

According to the report, particularly effective was the recent introduction of start-up kits for new missions, as a first-line procurement support mechanism. Under this arrangement, the most frequently used items are kept in reserve at the United Nations Logistics Base at Brindisi, Italy, and are shipped as a package to missions during their inception or expansion. The Secretariat is also increasing the practice of sharing systems contracts with other United Nations agencies and programmes as part of the Secretary-General's initiative for implementation of common services. As part of efforts to strengthen human resources, the Secretariat is currently designing a comprehensive procurement training programme. Classes were scheduled to commence in May.

In a related report of the Advisory Committee on Administrative and Budgetary Questions (ACABQ), the Advisory Committee commends the Secretary-General for the measures taken to reform and improve the procurement functions at Headquarters and encourages him to include information on such initiatives in a subsequent report, indicating areas where further improvements could be achieved.

Noting key changes in the Procurement Division�s internet/intranet Web site, the Advisory Committee expresses its opinion that experience with the internet site should be shared with other entities of the United Nations system, and encourages regular updating of information contained in the Web site. In view of the considerable decentralization in peacekeeping procurement and the fourfold increase in delegated authority (from $50,000 to $200,000), the Advisory Committee says that the Secretary-General must ensure capacity exists to perform procurement functions properly. Also needed is a mechanism at the central level to monitor those capacities. Headquarters should have an effective and efficient mechanism for monitoring procurement in the field. It is also necessary to assess the workload and functions of all relevant units to guarantee that each is performing with optimum efficiency. Proper training of personnel involved in the procurement process must be ensured.

According to the report, the ACABQ believes that the Procurement Division should ensure that its human and financial resources are adequate. In that connection, the ACABQ was informed that for the biennium 1998-1999, the travel budget for the Division amounted to $8,000, and, for the biennium 2000-2001, it amounts to $71,000. The Procurement Division intends to seek some increase in its travel budget to enable staff members to accompany their more senior colleagues for �on-the-job training�, and that would help to ensure the limited management capacity in the Division is not overly taxed. The ACABQ was also informed that additional staffing requests would be considered only if the increase in workload is expected to continue over a longer period of time.

Regarding preferential treatment of vendors from developing countries, the Advisory Committee notes that the General Assembly may wish to consider issuing further policy guidelines if the matter is to be pursued. It further notes that the revisions of the financial regulations relating to procurement have been completed in draft form, and are currently under review by the Department of Management. The Secretariat expects to issue the revisions before the end of 2000. The second anticipated step of that process relates to an entirely new set of procurement-related regulations proposed by the Common Services Working Group on Procurement. They involve the appointment of a Chief Procurement Officer responsible for all procurement policies and practices and the inclusion of the �best value� concept in the procurement process. The Advisory Committee requests clarification and greater detail on that initiative.

Also before the Committee was a report of the Secretary-General on outsourcing practices (document A/55/301), which contains guidelines for programme managers on activities that may be considered for outsourcing. The criteria include cost-effectiveness and efficiency, safety and security, maintaining the international character of the Organization, and the integrity of procedures and process. Cost-effectiveness is considered to be the most basic of those criteria, and the Secretary-General states that outsourcing may not be considered, unless it can be adequately demonstrated that an external party can perform an activity significantly more economically and at least equally efficiently. Activities should not compromise safety and security of the Organization, given the frequent presence of dignitaries at premises. The Secretary-General concludes that an activity may be outsourced only if all four criteria are met, and if the practice is in the overall interest of the Organization.

Also before the Committee was a related report from the ACABQ (document A/55/479), which notes that the four criteria for programme managers must be considered when evaluating whether an activity is suitable for outsourcing. For an activity to be fully or partially outsourced, it must be demonstrated that it can be more economically and at least equally efficiently performed by an external source; that outsourcing would not compromise the safety and security of delegations, staff or visitors and would not result in a breach of established procedures and process. The Advisory Committee requested clarification on the scope of application covered by the report of the Secretary-General, but did not receive an adequate reply. That clarification should be provided to the Fifth Committee.

Statements

CONRAD S.M. MSELLE, Chairman of the ACABQ, introduced that body�s reports on procurement reform and measures taken to improvement procurement activities in the field.

TOSHIYUKI NIWA, Assistant Secretary-General for Central Support Services, then introduced the reports of the Secretary-General. The Committee had deliberated on the issue of procurement reform for nearly six years, he said. At the close of the session last year, many delegates had acknowledged that good progress had been made under the new management of the Procurement Division. The Procurement Division was also encouraged by comments in the ACABQ�s report on procurement reform. The Secretary-General�s report provided details of many additional initiatives designed to continue to enhance transparency, improve procurement activities by eliminating duplication and also to be more customer- oriented and more accountable. The internet and intranet sites were a useful platform for achieving many of those objectives. That did not mean, however, that the Division had forsaken the traditional means of communication that catered to those who did not have access to the worldwide Web. In addition to a procurement briefing on video and in CD-ROM format, the Division had also recently produced brochures in the six official languages that were both simple to read and easy to reproduce.

This year, the Procurement Division had also been active in promoting the conduct of business seminars in developing countries and in countries with economies in transition, he said. Of the 26 locations where the Division was scheduled to participate in seminars this year, 22 were in developing countries and countries with economies in transition. To date, the Division had addressed over 1,400 vendors in all locations. Invitations to seminars in industrialized countries were accepted only if all travel and accommodation costs were reimbursed by the host country.

Member States, the Secretariat, and other agencies, funds and programmes had discussed the issue of accountability in procurement for many years, he continued. The Division had made good progress by establishing a transparent and visible accountability mechanism. In early September, the Procurement Division introduced a requisition tracking system on its intranet site. Through that mechanism, each requisitioning office was able to monitor the progress of its purchase request from the time that the Procurement Division received the requisition until the completion of the acquisition process. The Procurement Division was on the road not only to achieving transparency but also to accepting full accountability for its performance. It had gone beyond the original recommendations of the expert group to the Committee. The Procurement Division today was clearly different from the one of the past. It had heeded the advice of the Committee and had acted accordingly. With continued encouragement from the Committee, it would continue the positive trend.

On the issue of outsourcing, the Secretary-General�s report identified four criteria to be considered when outsourcing was proposed, he said. It should be borne in mind, however, that the application of the criteria required subjective decisions, as the need for outsourcing was sometimes dictated by situations outside the control of the manager. Frequently, outsourcing was the most effective way to cover temporary peaks in activities. The criteria contained in the document would provide managers with guidelines to ensure that outsourcing was employed judiciously within the overall interest of the Organization. As to the scope of application of the criteria, they applied not only to Headquarters but also to regional commissions, offices away from Headquarters and Tribunals.

GUILLAUME GAUBERT (France), speaking on behalf of the European Union and associated States, said that he accorded great importance to the matter under consideration. He welcomed the positive developments in the reform of procurement procedures in recent months, stressing that procurement must be cost-effective, rapid, transparent and efficient. Mechanisms should be put in place to monitor procurement capacities in general, and procurement in the field. The action taken this year was in the right direction. The objectives must be shared by all the departments involved, although the Procurement Division had a special responsibility in that regard. Maximum speed of delivery of goods, while ensuring the reasonable prices, must be achieved.

Respect for competition in tender rules was important, he said, and efforts in that regard were noteworthy. He also noted the effective functioning of the Web site of the Procurement Division. The need for training all staff involved in procurement should be stressed, but he had some questions regarding the training programme initiated in May this year. He would also like to have a better idea of when additions to the procurement manual and rules would be available.

Supplementary information on the new rules on procurement would be welcome, he continued. The Secretariat should also provide a detailed plan of measures to improve procurement in the field. It was necessary to ensure greater transparency in procurement, and publication of bids and procedures should be ensured. Maximum communication with vendors was a priority. A lasting solution must be found to late payments to some vendors.

ABDOU AL-MOULA NAKKARI(Syria) said that his comments would be brief, because there had truly been an improvement in the work of the Procurement Division with respect to transparency and efficiency. He would like to draw attention to the request of the Advisory Committee for detailed information on the initiative with regard to procurement. He also believed that it was appropriate to announce prices when bidding was held.

Regarding outsourcing, he said that the question should be considered in greater detail. Turning to the criteria to be used by the Secretariat for outsourcing, he wanted to know why outsourcing occurred when the Organization was capable of carrying out necessary activities and services. Also, to preserve the international character of the Organization and ensure safety and security of dignitaries visiting the premises, it was best not to resort to outsourcing.

Confidence in the permanent staff and their commitment to the United Nations had been emphasized in last year�s report on the matter, he continued. The Secretary-General was proposing the possibility of having recourse to personnel of many nationalities to ensure equitable geographic representation. Often a candidate was proposed by his country. For that reason, if resources were available from many nationalities, it was a fine solution.

Based on the proposed criteria, a much clearer and more transparent mechanism of outsourcing could be achieved, he said. Still, additional details were needed, and his delegation believed that it was important for those criteria to become guidelines for managers in the field. The General Assembly should adopt the criteria before they were put in to practice, however.

THEODORE ALBRECHT (South Africa) expressed his gratitude for the cooperation of the Procurement Division. He appreciated its excellent work. The Division had gone out of its way, and was going to extreme lengths to accommodate the needs of different Member States.

Mr. NIWA, responding to delegates� questions, said that it must be borne in mind that field procurement was done by the Department of Peacekeeping Operations. Procurement activities were undertaken not only at Headquarters but also in the field. On the revised procurement manual, that was a working document which was updated periodically as and when needed. Without prejudice to those updates, he was hoping to finish version two of the manual by the end of the year. It would take into account the many initiatives, and the experience gained by the Division.

While speedy delivery was important, two other guiding principles must also be kept in mind, he said. Those principles were transparency and cost- effectiveness. It was true that speedy delivery was quite often a crucial factor in field operations. The planning process must be started at an early stage so that planning activities could be undertaken without compromising speedy delivery, transparency and cost effectiveness. On training, he said that more remained to be done in that area. Part of the problem was that the Division had so many challenges to deal with in its day-to-day activities. The Division, however, had not lost sight of the fact that more needed to be done in terms of training.

Concerning the question of performance indicators, he said that the Division had engaged outside consultants to define performance indicators not only in procurement but also in other areas. Coming up with performance indicators was not an easy task. The Division had applied a prototype, but it was still struggling with how to tailor performance indicators for procurement work. The requisition tracking system had been introduced in September. Requisition monitoring would be a good vehicle to measure service and evaluate the nature and quality of Division�s work.

Regarding the announcement of prices, price was not the only criterion, he said. Other factors were also taken into consideration when making decisions. The practice used by the Secretariat was also followed by other United Nations agencies, funds and programmes. There had been a number of points made on the issue of outsourcing. That issue could be dealt with in a more in-depth manner in informal consultations. The decision to outsource was quite often a subjective one. The Division had sought to extrapolate a set of common guidelines for outsourcing. He welcomed the Committee�s suggestions in that regard. The Division also needed the Committee�s guidance on the issue of equitable geographical distribution. The question was how to reconcile competing demands. Cost efficiency should be kept in mind.

Ms. SANCHEZ LORENZO (Cuba) said that although she had planned to speak mainly in the informal consultations, she wanted to draw attention to document A/55/127 on preferential treatment. Only in the United Nations Educational, Scientific and Cultural Organization (UNESCO) and the Office of the United Nations High Commissioner for Refugees (UNHCR) were arrangements made for preferential treatment. Taking into account the importance of preferential treatment, she wondered if the subject should be dealt with. Regarding the issuance of detailed financial rules relating to procurement, it had been agreed that a revision of those rules would be submitted to the Assembly. She wanted to know the status of the revision.

Mr. NAKKARI (Syria) thanked Mr. Niwa for his answers. There was a need to follow up on the questions in informal consultations, as he was looking for some additional information.

SANTIAGO WINS (Uruguay) expressed support for briefings and seminars on procurement in developing countries, as they helped expand the list of vendors from those countries.

Organization of Work

GERT ROSENTHAL (Guatemala), Chairman of the Fifth Committee, informed the delegates about the programme of work for the coming week. No meeting was scheduled for Tuesday afternoon to allow delegations to study the material before the Committee this week, particularly relating to the two scales of assessment.

Ms. SANCHEZ LORENZO (Cuba) said that the programme of work for this week contained two sets of consultations on the peacekeeping scale. She wondered whether they were necessary, taking into account informal consultations on that matter. Instead, two meetings could be held on the regular scale of assessments.

THEODORE ALBRECHT (South Africa) supported the request made by the representative of Cuba.

The Chairman, Mr. ROSENTHAL, said that the schedule of Friday�s informal meetings would be changed accordingly.

Mr. GAUBERT (France) said that much work remained to be done on both scales. He appreciated the fact that last week progress had been made on the peacekeeping scale. However, further discussion of both scales would be useful.

JOHN ORR (Canada) said that it might be best for the Bureau to discuss the proposals on the programme of work for Friday. Also, a while back his delegation had received an electronic version of the programme of work, which it had been able to distribute without using any paper. He found such a method of distribution very useful and would appreciate it if it were used in the future.

PAUL EKORONG A DONG (Cameroon) supported the proposal by the last speaker, provided the decision made by the Bureau was communicated to all delegations. However, he would not go along with the dispatch of the programme of work electronically. Both traditional and the electronic versions should be used.

The Chairman, Mr. ROSENTHAL, said that the Bureau would hold consultations with coordinators on both items and bring a concrete proposal to the delegations, based on what had been suggested by the representative of Cuba.

Ms. SANCHEZ LORENZO (Cuba) said that a statement by the Under-Secretary- General for Management was scheduled for tomorrow, and she wondered if any documents would be distributed in that connection.

The Chairman, Mr. ROSENTHAL, said that no informal consultations would be held on that subject. The Under-Secretary-General would make an oral statement,

and he would provide copies immediately afterwards. If necessary, informal consultations would be held on the matter.

ABDELMALEK BOUHEDDOU (Algeria) said that the Secretariat should at least distribute the information to be provided by the Under-Secretary-General, so that the delegations could prepare for the presentation.

The Chairman, Mr. ROSENTHAL, said that this request would be transmitted to the Secretariat. One solution could be to have another meeting with the Under- Secretary-General to discuss the information.

Ms. SANCHEZ LORENZO (Cuba) insisted on the need to provide the document on the financial situation of the Organization, and said that she would appreciate holding consultations on that item as well.

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