GAO-07-414R UN Capital Master Plan 

February 15, 2007 

The Honorable Richard G. Lugar 

Ranking Minority Member 

Committee on Foreign Relations 

United States Senate 

Subject: Update on the United Nations’ Capital Master Plan

Dear Senator Lugar: 

Since 2000, the United Nations (UN) has been developing a Capital Master Plan (CMP) to 

renovate its headquarters complex in New York City to bring it into compliance with current life 

safety and building codes. The planned renovation will also enable the UN to address technology 

and security needs. Since 2001, we have reported on the UN’s efforts to develop the CMP. 1 As 

we finalized our most recent report in November 2006, the UN Secretary-General released the 

latest progress report on the CMP and recommended that the UN General Assembly approve a 

scope, schedule, budget, and funding mechanism for the CMP. The Secretary-General’s report 

also included an updated cost estimate of $1.88 billion for the project.2

 This estimate for the 

CMP is about $128 million higher than the previous estimate, which was released in 2005. 

As the host country and largest contributor to the UN, the United States continues to have a 

significant interest in the success of the renovation. In this report, we (1) analyze the changes in 

the latest cost estimate and (2) describe the latest decisions the UN General Assembly made in 

regard to the CMP and the resulting cost to the United States to fund the project. 

To analyze the changes in the latest cost estimate, we reviewed pertinent UN documents, 

including the Secretary-General’s third and fourth annual progress reports for the CMP.3

 We also 

examined construction cost inflation projections from the Department of Defense, Global 

Insight, and Means Construction Cost Indexes to assess the inflation assumptions used in the

 

1

GAO, United Nations: Planning for Headquarters Renovation Is Reasonable: United States Needs to Decide 

whether to Support Work, GAO-01-788 (Washington, D.C.: June 15, 2001); United Nations: Early Renovation 

Planning Reasonable, but Additional Management Controls and Oversight Will Be Needed, GAO-03-566 (Washington, 

D.C.: May 30, 2003); United Nations: Weaknesses in Internal Oversight and Procurement Could Affect the Effective 

Implementation of the Planned Renovation, GAO-06-877T (Washington, D.C.: June 20, 2006); and United Nations: 

Renovation Planning Follows Industry Practices, but Procurement and Oversight Could Present Challenges, GAO07-31 (Washington, D.C.: Nov. 16, 2006). 

2

The Secretary-General reported the estimated total project cost for the CMP to be $1,876.7 million. For this report, we 

have rounded the estimate to $1.88 billion. 

3

United Nations Secretary-General, Third Annual Progress Report on the Implementation of the Capital Master Plan, 

A/60/550 (New York, 2005), and Fourth Annual Progress Report on the Implementation of the Capital Master Plan, 

A/61/549 (New York, 2006). 

United States Government Accountability Office

Washington, DC 20548 
2 GAO-07-414R UN Capital Master Plan 

CMP cost estimate and interviewed UN officials and the CMP office’s program management 

consultant, who developed the estimate. To report on the latest General Assembly decisions 

regarding the CMP and the resulting cost to the United States, we interviewed Department of 

State (State) and UN officials and reviewed pertinent UN documents, including General 

Assembly resolutions, U.S. budget submission documents, and applicable laws.4

 We conducted 

our work at the UN in New York City and at the Department of State in Washington, D.C., from 

December 2006 to January 2007 in accordance with generally accepted government auditing 

standards. 

Results in Brief 

A total of $214 million in cost increases and $86 million in cost decreases were identified in the 

latest cost estimate, for a net cost increase of $128 million. Most of the cost categories in the 

2006 CMP cost estimate increased, but others decreased from the previous estimate. The 

increase in the cost categories largely resulted from higher rates of projected future inflation, 

further definition of the scope of work to be done, and a delay in the start of the project. 

Reductions were made to some cost categories because the design had progressed (reducing the 

uncertainty in the project), and areas were identified where the construction costs could be cut 

without affecting the quality or functionality of the project. 

In December 2006, the General Assembly approved a budget for the CMP of $1.88 billion, the 

final project scope, and a project schedule with a completion date of 2014. To fund the CMP, the 

General Assembly decided to allow member states the option of either making a onetime 

payment or equal payments over 5 years. Assessments are based upon each member state’s 

regular budget rate of assessment. In addition, the General Assembly approved a $45 million 

working capital reserve to cover temporary project cash flow deficits that might occur. Payment 

for the single or first assessment and the working capital reserve is due around May 1, 2007. 

According to a State official, the United States is expected to pay its assessment of $377.7 million 

over 5 years, for a total of $75.5 million per year. Also, the United States has been assessed about 

$9.9 million for its share of the working capital reserve. The President’s Fiscal Year 2008 Budget 

request includes about $85 million to pay the U.S. assessments. 

Background 

Although the original UN headquarters complex in New York City was considered among the 

most modern facilities when construction was completed in 1952, it does not conform to current 

life safety and building codes and does not meet UN technology or security requirements. The 

UN Secretary-General first proposed a comprehensive renovation of the complex, known as the 

CMP, in June 2000. Under the CMP, the UN intends to renovate the complex to make it conform 

to current codes and meet technology and security requirements. This process will involve 

upgrading or replacing all major building systems, including the electrical, plumbing, fire 

suppression, and heating and air conditioning systems, as well as reinforcing the complex’s 

structural integrity and removing all asbestos. 

With approval from the General Assembly, the CMP office has worked on planning and designing 

the renovation, including work considered to be optional. The CMP has continued to evolve and 

the Secretary-General has reported on its progress—including updating the estimated cost of the 

project—in 2002, 2005, and 2006. In 2005, the CMP office’s cost estimate for the project was 

 

4

United Nations General Assembly, Resolution Adopted by the General Assembly, A/RES/61/251 (New York, Dec. 22, 

2006). 
3 GAO-07-414R UN Capital Master Plan 

approximately $1.75 billion, including the optional work. Between 2000 and 2006, the UN 

appropriated $160 million to plan and design the CMP and to obtain space to temporarily relocate 

UN staff and activities during the renovation. 

 

We have previously reviewed UN efforts to develop the CMP and prepare cost estimates. In June 

2001 and May 2003, we reported that UN renovation planning efforts had been reasonable and 

conformed to leading industry practices. In our most recent report, in November 2006, we noted 

that UN officials continued to use leading industry practices to develop the UN headquarters 

renovation project, but since the CMP office relies on existing UN procurement practices, 

implementation of the renovation in the future could become vulnerable to the numerous UN 

procurement weaknesses that GAO has previously reported.5

 In our reports, we also noted that 

the cost estimates have been preliminary and should be expected to change and that without 

decisions from the UN General Assembly on the budget and funding for the CMP, costs could 

increase as a result of delays in the project schedule. 

Some Elements of CMP Cost Estimate Increased, while Others Decreased, Resulting in 

a $128 Million Increase in Total Project Cost 

Some of the cost categories in the 2006 CMP cost estimate increased, while others decreased, 

resulting in an increase of $128 million for a total project cost of $1.88 billion. Most of the cost 

categories in the estimate increased, largely as a result of higher rates of projected future 

inflation and changes in the definition of the work to be done. Reductions were made to some 

cost categories because the design had progressed (reducing the uncertainty in the project), and 

areas were identified where the construction costs could be cut without affecting the quality or 

functionality of the project. A total of $214 million in cost increases and $86 million in cost 

decreases were identified for a net cost increase of $128 million (see fig. 1). The CMP is still 

being designed and the CMP office will update the project cost estimate annually. While the cost 

estimate can be expected to change, the UN General Assembly has clearly set the expectation for 

the Secretary-General to make every effort to maintain the current overall estimate of $1.88 

billion. 

 

5

GAO-07-31.
4 GAO-07-414R UN Capital Master Plan 

Figure 1: Cost Increases and Decreases in the CMP Estimate from 2005 to 2006 

Note: The CMP cost estimates are reported in dollars as of January in the year the estimate was released and thus do 

not include the effect of inflation for the year. 

a

Professional fees and management—costs for CMP office staff and overhead, including leasing of office space; all UN 

staff support including procurement and legal services; project management consultant services that enhance the CMP 

office capabilities; planning and design services; and project management fees. 

b

Swing space—cost of relocating staff and operational functions displaced by the renovation into temporary space, 

including the cost of leases and construction of a temporary building. This line item includes contingencies, 

professional fees, management costs, and escalation specific to the swing space. 

c

Scope options—cost of work originally considered to be optional by the UN for inclusion in the renovation. This line 

item includes contingencies, professional fees, management costs, and escalation specific to the scope options. Scope 

options contain recommended work in three areas: (1) security, (2) redundancy to improve the reliability of building 

systems, and (3) sustainability to mitigate the environmental impact of the buildings. 

d

Escalation—reserve to account for the effect of inflation over the remaining life of the project on the price of 

materials and labor. Escalation in the 2006 estimate covers the period 2006 to 2014 for the construction, some 

professional fees and management, and contingency line items. 

e

Contingency—reserve to account for unforeseen conditions and other changes that might arise during the renovation 

project. 

f

Construction—cost of the labor and materials for the specific renovation work.

• Escalation increased by $71.5 million. Escalation increased because the assumptions for 

inflation changed and the start of the project was delayed. The CMP office’s cost estimator 

revised the assumptions for inflation used in the 2006 estimate upward by 1 percent in 2006 

and 0.5 percent in 2007 to reflect changes in the New York City construction market. Many 

factors affect future inflation rates so they are difficult to estimate. Our review of projected 

inflation rates for the construction industry showed the rates used in the CMP estimate to be 

in line with these projections. The increase in escalation also reflects the effect of inflation 

on the project because of a later starting date. The start of the project was delayed by about a 
5 GAO-07-414R UN Capital Master Plan 

year when the General Assembly did not provide final approval for the project and its 

financing in 2005. 

Escalation may increase in future estimates if the assumptions for inflation prove to be too 

low or the project schedule is delayed. 

• Scope options cost increased by $69.4 million. The initial concept for the scope options 

was developed in 2002 and contained recommended work in three areas: (1) security, (2) 

redundancy to improve the reliability of systems, and (3) sustainability to mitigate the 

environmental impact of the buildings. The 2006 cost estimate includes the same areas of 

work for the scope options, but the work recommended under each area is different than the 

work previously anticipated and resulted in cost increases. In the 2006 estimate, the costs for 

enhancing security increased over the cost in the 2005 estimate by $132.5 million, while the 

cost for both redundancy and sustainability decreased by $47.5 million and $15.6 million, 

respectively. The enhanced security work would provide additional blast protection for the 

structures in the UN complex. The estimate for scope options also increased because of 

higher projected rates of inflation and delays in the project schedule. 

• Swing space costs increased by $50.2 million. Swing space includes three components: 

(1) temporary lease of office space for displaced staff, (2) temporary lease of library space, 

and (3) a temporary conference building to be constructed on the north lawn of the UN 

complex. The cost for each of these components increased in the 2006 estimate. The CMP 

office has been working with a real estate broker to identify suitable office space in midtown 

Manhattan. The midtown Manhattan office building vacancy rate has decreased over the last 

year, and the rental rates and estimated costs for preparing the space to meet the UN’s needs 

have increased. Costs have also increased for the space available to relocate much of the 

library during the renovation, and all of the sites identified would require the UN to install a 

new ventilation and cooling system to protect the library materials. The cost for the 

temporary building increased as a result of concerns identified with subsurface water that 

may affect the cost of constructing the building. The cost of the temporary building also 

increased because of higher projected rates of inflation and delays in the project schedule. 

While the estimate for swing space is based on identified sites for office and library space, 

the UN is vulnerable to further changes in the market until it signs contracts for the leases. 

• Professional fees and management costs increased by $22.4 million. The estimated 

cost of professional fees and management increased for several reasons. First, the CMP 

program manager determined that the cost for a construction manager would likely be higher 

because of changes in market conditions. Second, the CMP budget now includes costs for 

temporarily relocating some UN staff within the UN complex that had previously been 

expected to be paid from the UN’s regular budget. Last, the estimate was increased to cover 

potential additional expert consultant services, testing costs, and legal and other project 

expenses. 

• Contingency reserve decreased by $31.3 million. During the design and implementation 

of a project, it is expected that conditions or issues will arise that could not be anticipated. It 

is industry practice to add contingency, as a percentage of the design and construction costs, 

to a project to account for these unforeseen conditions. As the project moves through the 

design process, there are fewer opportunities for unforeseen conditions to arise and, thus, 

the contingency may be reduced. Given the progression of the project design, the 
6 GAO-07-414R UN Capital Master Plan 

contingency was reduced because there is now less uncertainty about conditions that may 

affect the design. 

The CMP office plans to develop a risk assessment for the CMP starting in February 2007. 

This process should help it better identify risks to the project and develop plans to minimize 

these risks. It may also help the CMP office determine if the project’s contingency reserve 

needs further adjustments. 

• Construction costs decreased by $54.3 million. The current construction estimate is 

based on revised design development documents and has undergone a detailed scope review 

and value engineering to identify opportunities for reducing the construction cost.6 Changes 

made as a result of value engineering are intended to save money without changing the 

functionality of the space. Some of the larger dollar saving changes that were made include: 

• deleting a large number of private offices and moving to a more open floor plan ($11.5 

million), 

• using a wireless local area network (LAN) in conference rooms instead of hard-wiring 

them ($2.9 million), 

• reducing the audiovisual allowance for the Secretariat building because some of the 

equipment already exists and is reusable ($2.8 million), 

• reducing the scope of the basement renovation ($2.3 million), and 

• eliminating the dedicated electrical receptacles from each delegate’s desk and 

providing power strips instead ($1.9 million). 

If it is later determined that these changes cannot be made without changing the functionality of 

the space, we would expect the cost to be added back into the estimate. CMP officials noted that 

value engineering is an ongoing process and they will continue to look for opportunities to 

reduce project costs. 

In addition to being updated to reflect changes in the specific cost categories as discussed above, 

the 2006 estimate reflects the impact of inflation on the cost categories through 2005. Since 

escalation is a reserve used to account for inflation over the life of the project, each year the cost 

estimate will be updated and the cost of inflation over the year will be moved from escalation to 

the appropriate cost categories. Transfers from escalation will not have a net effect on the 

overall cost estimate, but they will result in changes to individual cost categories, as shown in 

table 1. 

 

6

Value engineering is the process of identifying opportunities to reduce costs while ensuring the quality, reliability, and 

performance of the project. 
7 GAO-07-414R UN Capital Master Plan 

Table 1: Comparison of 2005 and 2006 Estimated Total CMP Cost by Cost Category 

Dollars in millions 

 Transfers/changes to 2005 estimate 

Cost category 2005 

estimate 

Transfers from 

escalationa 

Changes Net 

changes 

2006 

estimate 

Construction $ 734.6 $ 58.8 

2005 inflation 

-$ 54.3 

Value engineering -32.2 

Design refinement -22.1 

$ 4.5 $ 739.1 

Professional 

fees and 

management 

144.3 40.2 

2005 inflation 11.5 

Future inflation 28.7 

22.4 

Additional money for construction 

manager 6.4 

Additional experts/studies 9.0 

Additional cost for on-site relocation 7.0 

62.6 206.9 

Contingency 184.4 14.8 

2005 inflation 

-31.3 

Reduced risk as design has progressed 

-16.5 167.9 

Escalation 360.2 -113.8 

2005 inflation 

71.5 

Changes in projected inflation/schedule 

-42.3 317.9 

Swing space 164.3 50.2 

Office space rental rates 23.5 

Office space fit-out 9.1 

Library space rental rates 2.5 

Library space fit-out 3.7 

Temporary building fit-out and water 

issues 11.4 

50.2 214.5 

Scope options 

 Security 

 Redundancy 

 Sustainability 

161.0 

33.5 

84.0 

43.5 

....................... 

....................... 

....................... 

69.4 

...................................................

................................................... 

................................................... 

Project escalation 24.5 

Scope development 44.9 

69.4 

............ 

............ 

............ 

230.4 

... 166.0 

.... 36.5 

..... 27.9 

Total $1,748.8 0 $127.9 $1,876.7 

Source: GAO analysis of UN documents. 

a

Amounts were moved from the escalation line item to account for actual inflation experienced in 2005 and for future 

inflation rates written into contracts awarded for professional fees and management. 

General Assembly Approves Project Scope, Budget, Schedule, and Funding 

In December 2006, the UN General Assembly approved the scope, schedule, and budget for the 

renovation. In addition, the General Assembly decided to fund the project through either a single 

or 5-year assessment on member states and to establish a working capital reserve and a letter of 

credit for the CMP. In approving the project, the General Assembly also agreed to the 

recommended scope options, which were previously discussed, and a total revised budget for the 

renovation at a cost not to exceed $1.88 billion. The General Assembly approved the renovation 

schedule as shown in table 2 with a projected completion date of 2014. 
8 GAO-07-414R UN Capital Master Plan 

Table 2: Anticipated Schedule for the CMP 

Activity Start date Completion date 

Swing space Early 2007 Late 2008 

• Prepare leased office space for occupancy Early 2007a

 Late 2007 

• Prepare leased library space for occupancy Mid-2007a

 Late 2007 

• Early-action work (renovate existing North Lawn building, add 

centralized technology center) 

Early 2008b

 Late 2008 

• Construction of temporary conference building Mid-2007 Mid-2008 

Renovation of United Nations headquarters Early 2008 Mid-2014 

• Basements/infrastructure Mid-2008 Early 2011 

• General Assembly building Mid-2008c

 Early 2011 

• Conference building Early 2011 Late 2013 

• Secretariat building Early 2008d

 Late 2013 

• South Annex building Late 2013 Early 2014 

• Library building Late 2012 Late 2013 

• Site/landscaping Late 2012 Early 2014 

• Disassembly of temporary conference building Late 2013 Late 2013 Source: UN. 

a

Depends on lease negotiation. 

b

If authorized as early work. 

c

Depends on completion of temporary conference building. 

d

Depends on completion of preparation of leased office space. 

In January 2007, the UN assessed each member state, on the basis of each member state’s regular 

budget rate of assessment, the remaining cost of the renovation, which totaled about $1.72 

billion. 7 To fund the CMP, the General Assembly resolved that each member state has the option 

of making either a onetime payment in 2007 or equal multiyear payments over 5 years from 2007 

through 2011.8

 In December 2006, the General Assembly approved the scale of assessments for 

the regular budget for all member states for 2007 through 2009, and the United States’ 

assessment remained at 22 percent. According to a State official, the United States plans to 

exercise the option to pay its assessment of $377.7 million in five payments of $75.5 million per 

year (see table 2). 

The General Assembly also approved a $45 million working capital reserve to cover temporary 

cash flow deficits. Accordingly, each member state is expected to make advances to the working 

capital reserve based on its regular budget rate of assessment. The United States has been 

assessed $9.9 million (22 percent) for its share of the working capital reserve.9

 The President’s 

 

7

In 2000, the General Assembly appropriated $8 million for the CMP, which was funded through an allotment from the 

regular UN budget. In 2003 to 2006, the General Assembly appropriated another $152 million for the CMP, which was 

funded through cash assessments on member states. The remaining cost of the CMP is $1.716 billion. For this report, 

we round this to $1.72 billion. 

8

The General Assembly also decided that in the unlikely event of cost escalations beyond the approved budget of 

$1.8767 billion, all member states will be subject to further assessment to meet the revised financial requirements 

approved by the General Assembly. 

9

According to the Secretary-General’s fourth annual report on the CMP, the working capital reserve would be phased 

out at the end of construction and the related contributions credited back to member states.
9 GAO-07-414R UN Capital Master Plan 

fiscal year 2008 budget request includes $85 million to pay the U.S. CMP and working capital 

reserve assessments.10

Table 3: Annual Assessments to the United States Related to the CMP 

Dollars in millions

U.S. assessment 2007 2008 2009 2010 2011 Total 

CMP $75.5 $75.5 $75.5 $75.5 $75.5 $377.7 

Working capital reserve $9.9 $9.9 

Total $85.4 $75.5 $75.5 $75.5 $75.5 $387.6 

Source: UN. 

Note: Numbers may not add to total because of rounding. 

Payments for the single or first multiyear assessment and working capital reserve are due 120 

days from the first week in January, or around May 1, 2007. With the mix of single and multiyear 

assessments, the UN may not have the financial resources by May 1, 2007, to demonstrate that it 

has the full capability to fund the project. As a result, the General Assembly has approved the 

establishment of a letter of credit for this purpose.11

 

Agency Comments 

We provided a draft of this report to the Department of State and the United Nations for their 

review and comment. Both State and the UN provided oral comments stating that they agreed 

with the information as presented in the report. Both also provided technical suggestions and 

clarifications, which have been incorporated into the draft as appropriate. 

- - - - - 

As agreed with your office, we are making copies of this report to available to interested 

members of Congress, the Secretary of State, and the U.S. Permanent Representative to the 

United Nations. We will also make copies available to others on request. In addition, the report 

will be available at no charge on GAO’s Web site at http://www.gao.gov. 

 

10The UN resolution also provides that member states that pay their assessments late and cause the project to 

experience cash flow shortfalls are subject to charges of interest to cover short-term borrowing expenses incurred by 

the UN to cover the shortage. Under U.S. law, none of the funds appropriated to the Department of State are available 

to the UN to pay the U.S. share of interest costs arising from external borrowings by the United Nations. However, the 

President’s fiscal year 2008 budget includes a provision that requests Congress to exempt the CMP from U.S. law that 

prohibits the United States from paying such interest charges to the UN. 11The total cost of the fee for the letter of credit could range between $3 million and $21 million. The letter of credit 

facility would be for the total amount of construction less paid assessments and the working capital reserve. The fee 

for this letter of credit has not yet been determined, but member states will be assessed their pro rata shares. 
If you or your staff have any questions about this report, please contact Terrell Dorn at (202) 512-

6923 or dornt@gao.gov or Thomas Melito at (202) 512-9601 or melitot@gao.gov. Contact points 

for our Offices of Congressional Relations and Public Affairs may be found on the last page of

this report. GAO staff who made major contributions to this report are Phyllis Anderson, Maria 

Edelstein, and Bruce Kutnick. 

Sincerely yours, 

Terrell Dorn 

Director, Physical Infrastructure Issues 

Thomas Melito 

Director, International Affairs and Trade 

(545052)

10 GAO-07-414R UN Capital Master Plan 
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