United Nations Renovations: Original Scope Reduced and Project Over Budget, but Lessons Learned Could Improve Future Projects
Published: 2015-05-14T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: In December 2006, the UN approved a $1.88 billion plan to modernize its headquarters by 2014 (the CMP project), including renovating five buildings. In a separate effort, the UN is considering options to address its future needs for office space. As the UN's largest financial contributor, the United States has a significant interest in these projects.
GAO was asked to review progress on these efforts. GAO examined (1) the extent to which the CMP is on schedule and achieving its originally planned scope of work within budget, (2) the UN's application of lessons learned from the CMP to other UN capital projects, and (3) how the UN determines and plans to address future office space needs at its headquarters. To perform this work, GAO reviewed CMP schedule, planning, budget, and cost documents; examined relevant UN General Assembly resolutions; and met with officials from the Department of State and relevant UN offices.
section_title: What GAO Found
paragraphs: The Capital Master Plan (CMP) intended to modernize, secure, and restore the United Nations (UN) Headquarters Complex, is substantially complete. However, the project is 3 years behind schedule primarily due to unplanned security upgrades and is projected to be over budget, while the UN has removed two buildings from its scope due to lack of a feasible solution to security concerns. As of February 2015, the UN estimated that the CMP will cost about $379 million more than originally planned. In resolutions passed in December 2013 and April 2015, the UN General Assembly authorized financing of the CMP cost overrun through various means, including an additional member state assessment.
UN internal and external auditors have identified lessons learned from the CMP that could be applied to future capital projects, such as including all foreseeable costs at a project's outset. The UN is applying some of these lessons to a new capital improvement project in Geneva. However, the UN has not made these lessons standard practice as called for by federal and UN standards for internal control. As a result, the UN could miss the opportunity to apply its experience to help achieve long-term savings and efficiencies in future capital improvement efforts.
The UN has identified as viable three options to address its future office space needs in New York, including a new building within the UN Headquarters Complex, a new building south of the UN Complex, and the status quo—relying on leased space. However, GAO found the assumptions upon which the UN bases these options—including UN workforce projections and the potential impact of flexible workplace policies such as teleworking or desk sharing—are not well supported and documented. Without an understanding of the methodology and calculations underlying the assumptions, UN decision makers may have difficulties deciding which options will achieve the most efficient and effective allocation of resources in the coming years.
section_title: What GAO Recommends
paragraphs: The Secretary of State and the U.S. Permanent Representative to the United Nations should work with other member states to (1) ensure that lessons learned during the CMP are used to develop documented guidance for future capital projects and (2) clearly justify assumptions used to estimate future office space needs, for example, by documenting the underlying factors, data, and analyses.
The Department of State concurred with GAO's recommendations.

section_title: Letter
paragraphs: In December 2006, the United Nations (UN) approved a $1.88 billion  Capital Master Plan (CMP) to renovate and modernize its Headquarters  Complex in New York City by 2014. To support the CMP, the United  States has provided approximately $488 million to the UN. Renovations to  the UN Headquarters Complex began in 2008. We have periodically  reviewed UN efforts to develop and implement the CMP and reported on  the progress of the project. In our most recent review in 2012, we found  that the CMP faced risks related to meeting its completion schedule and  delivering its agreed upon scope. We also found that the CMP was about  $430 million over budget, as of February 2012.
Separate from the CMP, the UN General Assembly has stressed the  need for a long-term strategy to meet the office space needs at the UN  headquarters in New York. In 2012, we found that the UN estimated that  its future office space needs would exceed the capacity of its real estate  portfolio in New York by 2023, primarily due to expiring leases. We  reported that, as a potential solution, the city and state of New York  proposed the construction of a new UN Consolidation Building known as  DC-5. We found that, as of July 2012, the UN had not developed a cost  estimate for the building and recommended that the Department of State  (State) direct the UN to ensure the development of such an estimate  using GAO’s best practices for cost estimation. Recently, in addition to  DC-5, the UN General Assembly has been considering other options for  its long-term office space needs, such as constructing a new building on  the north lawn of the UN campus, an idea first considered in 2006.
You asked us to provide updated information on the CMP’s progress and  on the UN’s efforts to address its future office space needs. In this report,  we examine (1) the extent to which the CMP is on schedule and  achieving its originally planned scope of work within budget, (2) the UN’s  application of lessons learned from the CMP to other UN capital projects,  and (3) how the UN determines and plans to address future office space  needs at its headquarters.
To evaluate the extent to which the CMP is on schedule and achieving its  originally planned scope of work within budget, we analyzed CMP  schedule and planning documents to compare current completion dates  and planned scope with initial schedule and scope projections approved  in 2006, as well as CMP budget documents to compare current cost  estimates to initial budget projections approved in 2006. As criteria, we  used a UN General Assembly resolution adopted in December 2006 that  approves the CMP’s original scope and states that the CMP is to be  completed within a specific timetable and at a cost not to exceed the  approved budgeted amount of $1.88 million. We also examined other  relevant CMP documentation, including monthly reports and procurement  information. Although we did not audit the CMP cost data and are not  expressing an opinion on them, based on our examination of the  documents received and our discussions with cognizant officials, we  concluded that the data were sufficiently reliable for the purposes of this  report. Additionally, we interviewed officials from State and relevant UN  offices, including the CMP office, UN Office of Central Support Services.  We also interviewed officials from the UN Board of Auditors, and visited  the CMP project site. To assess the UN’s application of lessons learned  from the CMP to other UN capital projects, we reviewed relevant UN  documents. We also assessed the UN’s collection of lessons learned  from the CMP against UN and federal standards for internal control  related to designing control activities. We also interviewed UN officials  from the Strategic Heritage Plan, a UN capital project underway in  Geneva, Switzerland, to determine which of the lessons learned identified  in UN studies they planned to apply to their project. Finally, to evaluate  how the UN determines and plans to address future office space needs at  its headquarters, we reviewed UN documents such as the Secretary- General’s Study on the Long-Term Accommodation Needs at United  Nations Headquarters 2014–2034 and a related report by the Advisory  Committee on Administrative and Budgetary Questions to understand the  UN’s long-term office space needs and identify UN recommendations to  address them, the assumptions upon which the recommendations were  based, and the justifications for those assumptions. We also interviewed  officials from State, the U.S. Mission to the UN, the UN Office of Central  Support Services, the UN Board of Auditors, and the UN Development  Corporation regarding UN deliberations and plans and cost estimations  for various options proposed by the UN to address future office space  needs. We also reviewed UN General Assembly resolutions and GAO  practices related to the analysis of alternatives. See appendix I for further  information on our scope and methodology.
We conducted this performance audit from July 2014 to May 2015 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: In 2001, we reported that the UN Headquarters Complex in New York  City—built largely between 1949 and 1952—no longer conformed to  current safety, fire, and building codes or to UN technology and security  requirements. The UN General Assembly noted that conditions in the  UN Headquarters Complex posed serious risks to the health and safety of  staff, visitors, and tourists. In December 2006, after several years of  design and planning, the UN General Assembly unanimously approved  the CMP to renovate the UN Headquarters Complex, at a budget not to  exceed $1.88 billion.
The CMP was initially intended to be implemented between 2006 and  2014. The UN member states authorized the creation of an office and  hired a team to oversee the day-to-day project activity. The scope  included the renovation of five buildings in the UN Headquarters  Complex—the General Assembly Building, the Conference Building, the  Secretariat Building, the Library, and the South Annex (see fig.1). The  renovation also included the replacement of electrical and other building  system components in basements connecting several of the buildings and  the construction of a temporary conference building on the north lawn of  the complex.
To house UN staff during the renovation, the CMP included plans to lease  space in nearby buildings, as well as house staff within the temporary  north lawn building. Additionally, the CMP included landscaping,  demolition of the temporary north building, security upgrades, measures  to promote environmental sustainability, and improvements to the  reliability and redundancy of headquarters systems such as emergency  power.
To finance the CMP, the UN General Assembly approved a plan to  assess member states for the cost of the CMP, under which they could  choose to pay their assessment in either a lump sum or over a 5-year  period, from 2007 to 2011. CMP assessments, whether collected as  lump-sum or multiyear payments, were invested to earn interest. The UN  General Assembly also approved a $45 million working capital reserve for  the CMP to cover any temporary cash flow deficits. According to CMP  office documents, member states would receive this reserve back in the  form of a credit at the end of the project’s construction phase. In the  resolution approving the CMP, the UN General Assembly decided that, in  the event of cost escalations over the approved budget of $1.88 billion,  member states would be subject to a further assessment to meet the  revised requirements of the CMP. The United States has contributed  approximately $488 million to the CMP, broken down as follows: $378 million in assessed contributions, paid in five annual payments  of $75.5 million from 2007 to 2011; $9.9 million in assessed contributions in 2007 to support the CMP’s  working capital reserve; and $100 million in UN Tax Equalization Fund credits attributable to the  United States in 2011 to fund additional security enhancements,  including adjustments to the Conference Building and installing  protective structures, including bollards and gates along the perimeter  of the UN complex.
In several resolutions, the UN General Assembly has noted that it has the  sole prerogative to decide on any changes to the CMP’s scope, budget,  and implementation strategy. The UN General Assembly has exercised  this prerogative to make changes to the CMP or authorize changes  proposed by the Secretary-General. These changes include:  In December 2007, the UN General Assembly approved an expedited  strategy for the CMP known as accelerated strategy IV. The strategy  expedited the schedule for the Secretariat Building’s renovation by  reducing construction time from 6 to 3 years. The expedited schedule  required the UN to vacate most of the Secretariat Building during the  renovation—which required the CMP office to increase the amount of  leased space. Under the accelerated strategy, all CMP activity was  projected to be completed in mid-2013. According to an August 2014  Secretary-General report, the CMP Office will be disbanded in June  2015 and post renovation and close-out activities will continue under  the management of the UN’s Office of Central Support Services  (Central Support Services).
In April 2009, the UN General Assembly decided that certain costs  related to the CMP—known as associated costs—would be financed  from within the $1.88 billion CMP budget. Associated costs cover a  wide range of requirements, such as broadcast equipment, new  furniture, and additional staffing requirements to manage information  technology and security. Other associated costs requirements include  moving supplies and services, archive space, and storage facilities.  According to CMP officials, the CMP office originally expected  associated costs to be borne by the UN program offices through the  UN’s regular budget process.
In April 2009, the UN General Assembly requested that the CMP  absorb some of the costs associated with setting up and operating a  secondary data center, which is intended to enable the UN to continue  critical elements of its operations during emergencies that impair its  regular information and communication technology infrastructure.
section_title: CMP Is Substantially Complete but Is Behind Schedule, Has Been Authorized to Reduce Its Scope, and Is Projected to Be Over Budget
paragraphs: The CMP is nearing completion but is 3 years behind schedule, has been  granted permission to reduce its scope, and is estimated—by the CMP  office—to be approximately $379 million over its original budget as of  February 2015. According to the CMP office, schedule delays are due  primarily to changes in security requirements. In addition, while three of  the five buildings in the original scope of the project are substantially  complete, the UN General Assembly removed from the project the  renovation of two of the five buildings due to issues in meeting security  requirements. The cost overrun is due in part to scope additions  authorized by the UN General Assembly without a corresponding  increase in budget; however, a majority of the cost overrun is attributable  to growth in direct project costs caused primarily by a greater than  anticipated need for asbestos abatement, unforeseen conditions in the  Conference Building, and renovation complexities in the basements. In  resolutions passed in December 2013 and April 2015, the UN General  Assembly approved a strategy to fund the cost overrun.
subsections: section_title: Renovation of Three of Five Buildings Is Substantially Complete
paragraphs: Major renovation work on three of the structures in the CMP project  scope—the Secretariat Building, Conference Building, and General  Assembly Building—is substantially complete. Work on the Secretariat  and Conference Buildings began in 2010, and both were fully occupied by  May 2013. During the renovation of those two buildings, staff was  transferred to leased space off campus and a temporary North Lawn  Building. Renovation of the Secretariat Building included demolition,  asbestos abatement, and replacement of the glass curtain wall, shown in  figure 2. The Secretariat renovation also included a modernization of the  office space within the structure, increasing both energy efficiency and  the amount of open space available to UN employees.
Renovation of the Conference Building included work on conference  space, updating the basement infrastructure for electrical and mechanical  systems, layout and equipping of work spaces, and preparation of the  building for occupancy. Other project activity aimed to increase energy  efficiency and enhance building security. A central piece of the  Conference Building renovation was the restoration of the UN Security  Council Chamber. This included a full cleaning of the tapestries and  artwork, as well as reupholstering the seats with the same kind and color  of fabric used when the room was built in 1952 (see fig. 3).
Work on the General Assembly Building began in June 2013 and was  substantially completed by October 2014. The temporary North Lawn  Building served as an interim space for the UN General Assembly  meetings during that building’s renovation. Work on the General  Assembly Building included, among other things, the installation of new  mechanical, electrical, and plumbing systems and the reconstruction of  interiors, including ceilings, wall coverings, and flooring.
Within the General Assembly Building, the General Assembly Hall  underwent some of the most extensive work of the UN renovation, as  shown in figure 4. Leather chairs, desks, and carpets were fully restored  or replaced; the hall was outfitted with updated electronics; and the space  was rearranged to increase the number of member states that the  chamber could accommodate. Most of the work on the General Assembly  Hall was completed in time for the general debate of the 69th session of  the UN General Assembly on September 16, 2014.
In addition to substantially completing work on the three main buildings of  the UN Headquarters Complex, the CMP office completed security  enhancements, including placing a line of bollards adjacent to the western  perimeter of the complex. The CMP office also constructed two  pedestrian screening buildings at the staff entrances to the complex on  First Avenue between 42nd and 43rd Streets and on First Avenue,  between 46th and 47th streets. The bollards and the screening buildings,  along with other features, were added to the UN Headquarters complex to  help the structures withstand a potential attack.
section_title: CMP Is Approximately 3 Years Behind Schedule
paragraphs: While renovation work on three of the five buildings in the UN  Headquarters Complex is substantially complete, the CMP project is  behind schedule. As shown in table 1, the CMP office is currently  reporting a completion date of late 2016; that is approximately 3 years  behind the schedule the CMP projected in October 2008, which reflected  the Accelerated Strategy IV approved by the UN General Assembly in  December 2007.
CMP officials attributed most of the schedule delays to enhanced security  requirements, which were added to the project in 2011 to implement a  resolution passed by the UN General Assembly. While some security  upgrades were featured in the original CMP project plan, due to  increasing threats the UN faced globally, the UN Department of Safety  and Security, in coordination with the U.S. government and the city of  New York, identified additional security enhancements not envisaged in  the original CMP to mitigate various vulnerabilities at the Headquarters  Complex. We reported in 2009 that security upgrades to the CMP  represented a key risk to the project’s timely progress. According to the  CMP office, implementing enhanced security upgrades to address  security issues resulted in delays up to 1 year in completing building  renovations.
Various other factors contributed to delays in project completion. For  example, because of damage to the complex caused by Hurricane Sandy  in 2012, staff members were unable to return from temporary space to the  Conference Building on schedule. This relocation was delayed from  January 2013 to May 2013. This, in turn, led to postponing construction  on the General Assembly Building because the temporary North Lawn  Building was not available to house staff that would be displaced during  construction, as it was in use by Conference Building staff.
Although most of the CMP’s major renovation work was completed as of  February 2015, the CMP office has yet to complete a number of tasks. As  shown in table 2, these unfinished tasks include reconfiguring the 42nd  Street and 48th Street vehicle entrances and service drives, demolition of  the temporary North Lawn Building, and site landscaping. The work on  the vehicle entrances was delayed due to the CMP office lacking the  necessary permits to begin construction. The demolition of the temporary  North Lawn Building has been delayed until the structure is no longer in  use as interim office space, and site landscaping can only be completed  once the temporary North Lawn Building has been removed. The CMP  office will close in June 2015 and at that time, Central Support Services  will assume responsibility for completing these remaining project tasks.  According to CMP officials, the two offices are preparing for project  handover with weekly meetings to review the current status of  documentation and handover responsibility, including the administrative  tasks associated with the closure of the office, such as the appropriate  disposition of files and records, the transfer to Central Support Services of  remaining assets (computers, furniture, etc.), and the preparation for  onward employment or assignment of CMP staff. All CMP project  activities are projected to be completed in late 2016 when work on the  vehicle entrances and service drives comes to an end (see table 2).
section_title: The UN General Assembly Has Removed Two of Five Buildings from the CMP and Approved Relocation of Their Functions to Mitigate Security Concerns
paragraphs: In an April 2015 resolution, the UN General Assembly decided to remove  the renovation of two of the five buildings in the original plan of the  CMP. The CMP office originally suspended planned renovations for  these two buildings—the Library and the South Annex—because UN  security studies had found these buildings to be vulnerable to vehicle  blast threats. CMP officials stated that it would not be possible to  renovate these buildings to fully address security concerns. To upgrade  the Library and South Annex to required security standards, CMP officials  told us they would have to demolish and replace the buildings, which  would not be cost effective. In 2013, CMP office documents proposed  permanently suspending renovation of the Library and South Annex. In  April 2015 the UN General Assembly removed the renovation of the  buildings from the CMP project, and requested that the Secretary-General  present future proposals for renovating the Library and South Annex  outside the scope of the CMP.
While the CMP will not renovate the Library and South Annex as originally  planned, the CMP office will be responsible for taking steps to mitigate  the security risks of the buildings and relocate the buildings’ functions to  other parts of the UN Headquarters Complex. For example, the South  Annex contains, among other things, the cafeteria for the UN  Headquarters Complex. As of April 2015, the CMP has commenced the  planning process to remove staff from the South Annex building and  reduce the number of people working in the Library. Functions currently  contained within the South Annex building will be moved to other parts of  the UN Headquarters campus. In order for some staff to remain in the  Library, a blast resistant wall will be constructed separating the north and  south sides of the library to shield employees in case of an emergency.  This will allow occupancy to continue on the north side of the structure,  with the south side (adjacent to the compound perimeter) being used for  storage. The CMP Office has stated that the estimated cost to complete  this work will be approximately $14 million. This amount will be funded  from the CMP budget using cost savings from value engineering achieved  by contractors and efficiencies to be built into remaining project tasks  such as the demolition of the temporary North Lawn Building, according  to the CMP office.
As the renovation of the Library and South Annex will not be completed  by the CMP Office, the General Assembly has requested that the  Secretary-General present future proposals relating to the renovation of  these two buildings. This additional renovation work would be separate  from the CMP project and require an additional funding source to  complete.
section_title: CMP Is Estimated to Be Approximately $379 Million Over Its Original Budget
paragraphs: As shown in table 3, as of February 2015, the CMP office has projected  that the completed CMP will cost approximately $2.37 billion, for a cost  overrun of $379.2 million. The total estimated cost for the CMP includes  about $2.11 billion in direct project costs that cover the renovation work,  swing space (temporary space for relocated UN employees), professional  fees, and management costs; $139.8 million in associated costs covering  a wide range of requirements, such as broadcast equipment, new  furniture, and additional staffing; $19.3 million for a secondary data  center; and $100 million in enhanced security upgrades.
According to the CMP office, the estimated cost overruns result from a  number of factors, including $224.4 million in unplanned direct project  costs, $139.8 million in associated costs, and $15 million for the  secondary data center, as shown in table 4. Both the associated costs  and secondary data center were added to the CMP budget without a  corresponding increase in funding; however, a majority of the overrun, 59  percent, is attributable to growth in direct project costs. In explaining the  reasons for the direct project cost overruns, the CMP office cited several  factors, including additional work to address a greater than anticipated  need for asbestos abatement, unforeseen conditions in the conference  building, and unforeseen complexities in the basements concerning the  electrical and telecommunication wiring.
section_title: The UN General Assembly Has Authorized Financing for the CMP Cost Overrun
paragraphs: In resolutions passed in December 2013 and April 2015, the UN General  Assembly approved a strategy to pay for the CMP’s projected $379.2  million cost overrun. Funding sources approved by the General Assembly  include interest income from the project, the CMP’s working capital  reserve, funds that would have gone toward the Library and South Annex,  the UN Special Account, and contributions by member states such as a  new member state assessment of $45 million of which the United States  pays approximately $10 million. Details on this financing are shown below  in table 5.
section_title: UN Is Applying Some Lessons Learned from the CMP but Has Not Made Them Standard Practice for All Capital Improvements
paragraphs: Throughout the renovation of the UN Headquarters Complex, the UN  General Assembly has requested that lessons learned from the CMP  inform the planning and implementation of all future UN capital projects.  We found that a number of lessons learned have been identified from the  CMP. While the UN is applying some of these lessons to its capital  improvement efforts, it is doing so on a project-by-project basis without  incorporating them into formal policies and procedures to ensure they  become standard practice.
subsections: section_title: Various UN Entities Have Identified Lessons Learned from the CMP
paragraphs: The UN General Assembly requested that the Secretary General work to  identify lessons learned from the implementation of the CMP. In various  reports issued from 2012 to 2014, the UN’s internal and external  auditors—including the UN Board of Auditors, the UN Office of Internal  Oversight Services, and the UN Joint Inspection Unit— identified a  number of lessons learned from the CMP. We found the following four  lessons to be the most commonly cited.
subsections: section_title: Identify and Include All Foreseeable Costs at the Outset
paragraphs: Background: At the start of the CMP, associated costs were not included  in the project budget. Associated costs were necessary project-related  purchases, such as furniture, that were not included in the project cost  estimates. Once the project had begun, the UN General Assembly  urged the Secretary-General to make every effort to absorb the  associated costs within the budget approved for the CMP. According to  CMP officials, this ultimately contributed, in part, to the project’s cost  overrun.
Lesson learned: UN auditing units recommend that these types of routine  costs be included in the initial budgets of all future UN capital projects to  avoid project shortfalls.
section_title: Develop a Risk Management Strategy That Guides the Use of Contingency Funds
paragraphs: Background: According to the UN Board of Auditors, although the CMP  applied the good budgeting practice of including a contingency fund in its  initial budget, it did not base the amount of the fund on an assessment of  risk. Instead, the CMP office opted to use a blanket 10 percent  contingency allowance based on each contract awarded for completion of  major project components.
Lesson learned: According to UN auditing units, project teams should  make every effort during the conceptual phase of the project to identify  risks that may increase project costs. Once the risks are identified, they  should be assessed and quantified in terms of their potential cost  implications and then incorporated within the project’s contingency fund.
section_title: Establish a Formal Project Steering Committee
paragraphs: Background: Under the current management structure of the CMP, the  Under-Secretary-General for Management and the director of the CMP  are responsible for managing the project. According to the Board of  Auditors, it is unusual for a complex project like the CMP to have no high- level steering committee to provide input into decision making and help  oversee the performance of the project team.
Lesson learned: UN audit units recommend that formal, independent  steering committees be established on future capital projects. Steering  committees should be responsible for regularly overseeing the project  team and approving critical project decisions. The steering committee  should comprise pertinent officials representing key stakeholders and  appropriate areas of expertise.
section_title: Develop a Global Strategy for UN Asset Management
paragraphs: Background: The UN Joint Inspection Unit and the UN Board of Auditors  found that the periodic need for the UN to undertake large-scale  construction projects could have been mitigated had the UN possessed a  global strategy and prioritization system of capital improvements.  According to the UN Board of Auditors, the UN has taken a “reactive  approach” with regard to maintenance and repairs and this has led to the  need for major refurbishment projects, such as the CMP, which result in  large, one-time expenses.
Lesson learned: UN auditing units have observed that a central UN office  should track and document all UN property in order to develop a global  strategy for UN asset management. This inventory would include  assessments of all UN structures to identify potential capital improvement  projects. This would allow UN stakeholders to better understand the  condition of assets in its portfolio and make well-informed decisions  concerning the preservation of each asset.
section_title: UN Has Applied Lessons Learned from the CMP to Some Capital Improvement Efforts but Has Yet to Incorporate These Lessons into Its Policies and Procedures
paragraphs: The UN is applying the first three lessons learned described above to its  new capital improvement project, the Strategic Heritage Plan (SHP), the  UN’s plan for renovating and expanding the Palais des Nations to  consolidate staff in Geneva (see sidebar). The UN is applying the fourth  lesson learned above, regarding asset management, toward an effort to  become more strategic in managing its overall capital improvement  portfolio.
The UN General Assembly has requested that lessons learned from the  CMP be used to guide the implementation of the SHP. According to UN  documents, The SHP will be implemented in four construction phases,  which will commence in 2017, after the completion of the CMP. Members  of the SHP team told us that they have been in contact with officials within  the CMP office to identify strategies that would assure problems faced  during the CMP could be avoided on the SHP. It appears that at least  three of the lessons learned have been used to guide the initial design  phases of the SHP (see table 6).
Separate from the SHP, UN officials are using lessons learned from the  CMP to develop a plan to manage the organization’s portfolio of owned or  leased space. The UN is currently developing a Strategic Capital Review  intended, among other things, to rectify the lack of data on UN property  by creating a facilities database that identifies and prioritizes structural  issues that will require attention. According to the UN, access to this  database would help UN stakeholders develop strategies and budgets to  address maintenance issues. Ultimately, it is expected that this initiative  will enable the UN to track all its real property assets and infrastructure  and design a comprehensive strategy for future UN capital projects. The  findings of the Strategic Capital Review have been presented and are  currently being reviewed and discussed by the UN General Assembly.
While the UN has applied lessons learned from the CMP to individual  capital projects, to date, it has not designed policies and procedures to  ensure that these lessons are used to guide the implementation of future  UN capital projects. UN and GAO standards for internal control state that  organizations should design control activities to achieve objectives and  respond to risks. A control activity is a rule, regulation, policy, or  procedure designed to ensure that the organizations achieve their  objectives. Control activities allow an organization to set parameters to  guide the implementation of a strategy in order to ensure that the strategy  is carried out appropriately. The UN may benefit from the development of  control activities designed to guide the implementation of large capital  projects. The UN Board of Auditors reported that the CMP was delivered  largely without a framework intended to guide the implementation of this  large capital project, which led to complications during project’s delivery.  The Board of Auditors has observed that this could be mitigated by the  creation of an internal office or UN entity designed to provide unified  guidance concerning future capital projects.
While lessons learned from the CMP are being used in the SHP and  Strategic Capital Review, they will not necessarily be considered in future  UN endeavors. For example, the UN General Assembly asked the SHP  team to review and apply lessons learned from the CMP to its renovation  work but may not provide similar guidance to other UN initiatives. Without  control activities that incorporate the lessons learned from the CMP into  UN policies and procedures, future project teams may be unaware of  these lessons and the UN may miss the opportunity to enhance the  management of its capital projects.
section_title: UN Has Identified as Viable Three Options to Address Future Office Space Needs, but Some Key Assumptions Could Be Better Documented
paragraphs: To address its future office space needs, the UN Secretariat evaluated  eight options, three of which it deemed viable. Two of the options deemed  viable involve constructing a new building, while the third option is the  status quo—continuing to rely on leased space. To date, all eight options  remain under consideration by the UN General Assembly. The UN  Secretariat based its estimates of future office space needs on several  assumptions, including UN workforce requirements, the potential impact  of flexible workplace, and other factors, but in some cases did not clearly  document the justification for its assumptions.
subsections: section_title: UN Has Proposed Three Options for UN General Assembly Consideration and Approval
paragraphs: In February 2014, the UN Secretary-General issued his Study on the  Long-Term Accommodation Needs at United Nations Headquarters for  the Period from 2014 to 2034 in which eight options to address its future  office space needs were evaluated. The three options the Secretary- General deemed viable by that study include a new building on the north  lawn of the UN campus, a new building south of the campus known as  the UN Consolidation Building (DC-5), and maintaining the status quo— relying on leased space. Four options were deemed not viable for various  reasons, including cost, lack of commercial financing, and design and  security issues; and the viability of a fifth was not specified (see table 7).  According to the Secretary-General’s February 2014 report, the status  quo is the most expensive of the three options the Secretary-General  deemed viable, with the North Lawn Building being the least costly, and  DC-5 falling in the middle (for more information on cost estimates of the  three options, see app. II).
Figure 5 shows a rendering of the UN campus with the proposed North  Lawn Building, shown in pink, at the far north end of the UN campus  (options 1 and 4 in table 7).
As mentioned in table 7, construction of the North Lawn Building may not  begin until 2023 and matters related to the architectural integrity of the  proposed building need to be taken into account. According to the  Secretary-General’s February 2014 report, the UN complex is considered  “an iconic masterpiece of mid-century modernism of worldwide historical  significance.” The size of the proposed new building is larger than  anything previously envisioned historically, and the scale of the proposed  North Lawn Building would not meet the UN’s criteria for historic  preservation. According to UN officials, should the building need to be  downsized, the cost of this option could increase because downsizing the  building would require the UN to lease more office space.
subsections: section_title: Option 2: Construction of the United Nations Consolidation Building (DC-5)
paragraphs: Figure 6 shows a rendering of the UN Consolidation Building, as shown in  pink, sometimes referred to as DC-5—located just south of the UN  campus, which the United Nations Development Corporation (UNDC) is  to develop, finance, and construct (option 2 in table 7).
The DC-5 project is subject to the terms of an October 2011  memorandum of understanding (MOU) agreed to by New York City and  State elected representatives. While not parties to the agreement, the use  of the site for construction of DC-5 requires that UNDC and the UN fulfill  certain requirements. For example, UNDC and the UN would have to  agree on a lease by the UN of DC-5 from UNDC, potentially in a lease-to- own or similar arrangement.
To date, the UN has not entered into any agreements with UNDC  regarding the DC-5 project. UN officials informed us the UN wants a more  precise cost estimate, which will not be possible until a later date. In  December 2014, the UN General Assembly approved a resolution asking  the Secretary-General to provide a preliminary UN credit rating, proposed  lease terms and accurate cost projections. The UN credit rating would  affect the interest rate on the bonds financing the DC-5 project. According  to UNDC officials, UNDC can only rent space in DC-5 to UN entities, and  before the issuance of bonds to finance the project could occur, UNDC  would have to make a major investment in the project. As of late March  2015, UNDC reported that it had already incurred design and planning  costs of approximately $14 million for the project and foresaw additional  costs of approximately $25 million for development of a full design  package to be recouped in the future financing arrangement.
UNDC expects that extending the MOU’s December 31, 2015 expiration  date may be possible as the city of New York has a strong commitment to  the project. According to the MOU, the financing for the DC-5 project is  required to provide a $70 million payment to the city of New York to fund  a greenbelt or parkland along the East River that would benefit the larger  New York community. In October 2014, UNDC officials told us that if a  UN agreement on DC-5 were to happen soon, the new building could be  ready for occupancy in 2021. However, a U.S. Mission to the UN official  told us that a UN General Assembly decision on DC-5 was not likely until  the 70th special session of the UN General Assembly in December 2015  or the first resumed session in March 2016.
section_title: Option 3: Maintaining the Status Quo
paragraphs: Under the status quo option, the UN would rely on commercial leases for  its office space needs. The UN maintains that its rental costs will increase  sharply in 2023 when its leases with below-market rental rates expire in  two buildings, known as DC-1 and DC-2. According to the UN Secretariat,  renegotiating these leases beyond 2023 would likely result in lease rates  set at projected commercial rates of $65 per square foot per month,  rather than the favorable below-market rates the UN now pays. The UN  estimates that by 2018, its total off-campus space requirement will be  approximately 1.1 million square feet in the no-growth scenario described  in the Secretary-General’s February 2014 report. That estimate includes  office space as well as shared amenities and building support spaces,  and it takes into account flexible workplace strategies (telecommuting and  various desk- and office-sharing arrangements), which the UN anticipates  will reduce the overall space requirement by 20 percent.
section_title: To Date, All Eight Options Remain under Consideration by the UN General Assembly
paragraphs: To date, the UN General Assembly has made no decision on whether to  proceed with any of the Secretary-General’s proposed eight options. In  December 2014, the UN General Assembly issued a resolution asking for  more information about options one through four. A U.S. Mission to the  UN official stated that the UN General Assembly may not make a decision  regarding the eight options until the 70th special session of the UN  General Assembly in the fall of 2015.
section_title: UN Assumptions Justifying Determinations on Future Office Space Needs Could Be Better Documented
paragraphs: In April 2013, the UN General Assembly issued a resolution requesting  that the Secretary-General submit a report on its future office space  needs at the UN Headquarters Complex, which it stressed should include  details on several factors, including total UN workforce requirements and  the impact of implementing flexible workplace policies on the capacity of  the buildings in the UN Headquarters Complex. The resolution noted that  previous information provided to the UN General Assembly was not  precise or comprehensive enough to facilitate its decision making.
In prior work, we have also supported precise and comprehensive  analyses to justify executive decision making on alternative actions facing  an organization. For example, we have found that the process for  analyzing alternatives can be enhanced by using generally accepted  practices, including documenting all steps taken to identify, analyze, and  select alternatives in a single document; documenting and justifying all  assumptions and constraints used in the analysis; identifying and  considering a diverse range of alternatives to meet the mission need; and  including one alternative representing the status quo to provide a basis of  comparison among alternatives.
The Secretary-General’s February 2014 report, Study on the Long-Term  Accommodation Needs at United Nations Headquarters for the Period  from 2014 to 2034, analyzes UN workforce requirements and the  potential impact of flexible workplace policies as called for by the UN  General Assembly, but the report does not clearly document the  justification for assumptions underlying its analysis of these and other  factors. For example:
Workforce requirements: The report states that it based a projected  1.1 percent workforce growth rate on historical trends of the past 20  years but does not provide a similar justification for its no-growth  scenario, citing only future program increases and decreases.  Similarly, the report states that a projected 0.5 percent workforce  decrease is based on program increases and decreases, partially  offset by changes in work practices, without specifying what work  practices or other factors underlie this assumption. In addition, while  the report assumes a time frame of 2014 through 2034 for its  workforce growth-rate scenarios, its cost estimate projections for the  three options the Secretary-General deemed viable are through 2064.  According to the Secretariat, the UN did not extrapolate workforce  figures after 2034 because it considered that period to be too far into  the future to make assumptions useful for planning purposes.
Flexible workplace policies: The report on long-term accommodation  needs assumes that the UN plans to implement flexible workplace  policies, such as telecommuting and desk-sharing that will reduce its  office space needs. For example, the report states that a flexible  workplace will reduce gross square feet per workspace needed by 20  percent, assuming a no-growth workforce. However, the report does  not provide any methodology or calculations to support this reduction  in needed workspace, nor does it provide any workspace reduction  predictions for the other two workforce scenarios—1.1 percent growth  and 0.5 percent decrease. In a March 2014 report, the UN Advisory  Committee on Administrative and Budgetary Questions (ACABQ)  called the estimated 20 percent reduction in workspace “indicative at  best” and recommended that the Secretary-General conduct further  analysis.
Lease rates: The report also does not fully document how it derived  the total projected costs for the status quo option. As mentioned  earlier, the UN Secretary-General based the total cost estimate for the  status quo on the assumption that rental rates for currently leased  space (DC-1 and DC-2) will rise to market rates in 2023. According to  the Secretary-General’s February 2014 report, the total estimated cost  (2014-2064) for the status quo option is $10.73 billion. In March  2014, the Secretary-General provided additional information on its  methodology for calculating this total. That is, the Secretary-General  showed that this amount was derived by totaling the annual rents the  UN would pay for UN leased space from January 1, 2014, through  December 31, 2063. However, this information did not clarify whether  these rents per year included those only for DC-1 and DC-2 or for all  of the UN’s leased space. For example, according to the Secretariat,  the UN’s total annual rent for DC-1 and DC-2 in 2014 was $21.85  million. Yet, the Secretary-General used $56 million in its cost  estimate for the status quo, a dollar amount that is closer to the total  rent the UN paid for all of its leased property in 2014 ($54,402,628).  Including all of the UN leases might make sense, but the UN  Secretary-General did not document how or whether it factored in the  different lease expiration dates into its estimates. According to the  Secretary-General, most UN leases expire before 2023, which could  affect the total lease costs. For example, according to the Secretary- General, the UN’s lease with the Albano Building, where it rents  187,060 square feet of space, expires in July 2017 with no option for  renewal. In addition, the Secretary-General has reported on the  difficulty of predicting market fluctuations as rents go up and down in  response to many factors, including conversions from commercial to  residential use or rezoning. For example, the Wall Street Journal  reported in February 2015 that the ALCOA building, where the UN  leases 30,385 square feet of office space, is to be converted to  condominiums. (See app. III for more information on UN rented  property.)
Size of proposed North Lawn Building: In addition, the February 2014  report assumes the size of the North Lawn Building (option 1) to be  816,337 square feet. However, according to UN officials we spoke  with, the actual size of a new North Lawn Building will likely be smaller  (500,000 square feet). The reduction in the planned size of the  building can be attributed to physical limits on building footprint and  height to preserve the architectural integrity of the UN campus, as  desired by member states. As a result, according to these officials, the  cost estimate in the February 2014 report is likely to be understated  because it does not include the cost of the additional rental space  needed to compensate for a smaller building.
UN credit rating: Furthermore, the February 2014 report notes that,  because DC-5 is to be financed by proceeds from a bond issuance, its  projected cost will be affected by the UN’s credit rating (yet to be  determined) because the credit rating determines interest rates for  financing the project which, in turn, affect the cost of repaying the  bond. The report presents indicative 30-year taxable fixed interest  rates and their respective credit ratings, ranging from 5.75 percent for  the highest credit rating to 6.95 percent for the lowest. In costing out  the DC-5 project, the report used a mid-range credit rating with a 6.2  percent interest rate. However, while the report estimates that the  lowest credit rating considered would increase overall project costs by  $200 million, it does not estimate the potential cost savings from the  highest credit rating.
In seeking solutions to its future office space needs, the UN has made  important assumptions, including future UN workforce levels in New York  City, the extent to which that workforce will use telecommuting or other  nontraditional work environments, the future cost of UN rental space, the  size and scale of proposed new construction, and the estimated interest  rates for financing new construction. However, without additional details  on the analyses used to justify these assumptions, it will be difficult for UN  decision makers to make effective comparisons and trade-offs among  alternatives and to ensure that resources are allocated efficiently and  effectively.
section_title: Conclusions
paragraphs: The UN’s multiyear renovation of its headquarters in New York City has  been a complex endeavor that has resulted in major security and  communications upgrades and restoration of classic and historic interior  design features. However, cost overruns of the project will result in  additional cost to the U.S. government through a member assessment.  With an eye toward improving future capital projects, the UN has provided  member states with analyses on what may have led to cost overruns and  delays during the CMP project. The UN Strategic Heritage Plan in  Geneva has adopted some of these lessons learned, but if they are not  incorporated into UN policies and procedures, UN member states will  have little assurance the lessons will continue to be applied to future  capital projects. The UN is also grappling with how to meet its future  office space needs and has identified several options that it considers  viable, including new construction, relying on leased space, or a  combination thereof. The UN is basing its assessment of options on  various assumptions about its workforce and long-term office rental costs,  but without a clear understanding of the methodology and calculations  underlying the assumptions, UN decision makers may have difficulties  deciding which options will achieve the most efficient and effective  allocation of resources in the coming years.
section_title: Recommendations for Executive Action
paragraphs: To allow UN member states to make informed decisions about completing  the CMP and addressing future UN office space needs, we recommend  that the Secretary of State and U.S. Permanent Representative to the  United Nations work with other member states to take the following two  actions:  1.  Ensure that lessons learned during implementation of the CMP are  used to develop documented guidance for future capital projects  funded by UN member states.  2.  Clearly justify assumptions used to estimate future office space  needs, for example, by documenting the underlying factors, data, and  analyses.
section_title: Agency Comments
paragraphs: We provided a draft of this report to State and the UN for review and  comment. State provided written comments, which are reproduced in  appendix IV. State, the UN, and the UN Board of Auditors also provided  technical comments, which we have incorporated as appropriate.
State concurred with our recommendations. As State explains in its  written comments, to address the recommendations, it plans to work with  the UN to reform the UN’s facility management and construction  processes through the UN’s Strategic Capital Review, which is now  ongoing.
We are sending copies of this report to interested congressional  committees, the Secretary of State, the U.S. Mission to the United  Nations, and the UN. In addition, the report is available at no charge on  the GAO website at http://www.gao.gov.
If you or your staff have any questions about this report, please contact  Thomas Melito at (202) 512-9601 or melitot@gao.gov, or David Wise,  (202) 512-2834 or wised@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 key contributions to this report are  listed in appendix V.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: This report provides updated information on the Capital Master Plan’s  (CMP) progress and on the efforts of the United Nations (UN) to address  its future office space needs. Specifically, we examine (1) the extent to  which the CMP is on schedule and achieving its originally planned scope  of work within budget, (2) the UN’s application of lessons learned from the  CMP to other UN capital projects, and (3) how the UN determines and  plans to address future office space needs at its headquarters.
To address our objectives, we reviewed and analyzed relevant planning,  schedule, and budget documents related to the CMP, as well as relevant  planning and legal documents related to the UN’s efforts to address its  future office space needs. Additionally, we discussed the progress, plans,  risks, and costs of the CMP and the UN’s efforts to address its future  office space needs with officials from Department of State’s (State)  Bureau of International Organizations, the U.S. Mission to the UN, and  UN offices, including the CMP office and Central Support Services. We  also discussed the UN’s efforts to address its future office space needs  with the United Nations Development Corporation (UNDC), a public  benefit corporation created to develop and operate office space for the  benefit of the UN. We focused on these organizations because they are  involved in the efforts of the CMP and the UN’s efforts to address its  future office space needs.
To examine the extent to which the CMP is on schedule and achieving its  originally planned scope of work within budget, we analyzed documents  such as CMP annual reports, UN Board of Auditor reports on the CMP,  and UN General Assembly resolutions. We compared current planned  renovation scope, projected completion dates, and cost estimates with  previously reported scope, schedule, and budget projections. For our  baseline comparison, we referred to UN General Assembly resolutions  that approved the planned renovation scope and schedule from  Accelerated Strategy IV in 2007 and the $1.88 billion budget for the CMP  in 2006. Further, we examined other relevant CMP documentation,  including monthly reports and procurement information. To understand  the project’s cost estimates, we examined materials provided by the CMP  office to the UN General Assembly’s Fifth Committee documenting the  project’s financial condition as of June 2014, and analyzed reports on  CMP progress. We also traveled to New York City, New York, to tour the  renovation sites and observe the progress of the CMP. During these  visits, we met with officials from the CMP office, the UN Board of  Auditors, various UN departments, such as the Office of Program  Planning, Budget, and Accounts and the Office of Central Support  Services, and the U.S. Mission to the UN to discuss the ways in which the  CMP is meeting its planned renovation scope, schedule, and budget. We  also obtained written answers to our questions from the UN Office of  Internal Oversight Services. To understand options for funding projected  CMP cost overruns, we reviewed UN General Assembly resolutions, UN  Financial Rules and Regulations, the UN Financial Report, and Audited  Financial Statements. Further, we held discussions with officials from the  CMP office, Office of Program Planning, Budget, and Accounts, UN  Board of Auditors, and State’s Bureau of International Organizations to  understand the various options. For criteria we used a UN General  Assembly resolution issued in March 2007 that approves the CMP’s  original scope and states that the CMP is to be completed within a  specific time table and at a cost not to exceed the approved budgeted  amount of $1.88 billion. To understand options for resolving the security  issues with the Library and South Annex, we reviewed UN policy and  audit reports on safety and security, and spoke to officials from the CMP  Office, the UN Office of Central Support Services, and the UN Office of  Safety and Security to identify the options proposed to mitigate the  security risk. Although we did not audit the CMP cost data and are not  expressing an opinion on them, based on our examination of the  documents received and our discussions with cognizant officials, we  concluded that the data were sufficiently reliable for the purposes of this  engagement.
To examine the UN’s application of lessons learned from the CMP to  other UN capital projects, we first identified lessons learned described in  various UN documents, including CMP annual reports, UN Board of  Auditor reports on the CMP, and a report from the UN Office of Internal  Oversight Services. We then identified the lessons learned most  frequently recommended by these UN entities for implementation on  future UN capital projects. Next, to determine whether the UN was  implementing its lessons learned, we reviewed planning documents for  the UN’s next capital project, the Strategic Heritage Plan in Geneva. We  also spoke with officials who were implementing the Strategic Heritage  Plan about the extent to which they were currently applying and planned  to apply these lessons to their project. We compared the UN’s collection  of lessons learned from the CMP to UN and federal standards for  internal control related to designing control activities.
To evaluate how the UN determines and plans to address future office  space needs at its headquarters, we reviewed UN documents such as the  Secretary-General’s Study on the Long-Term Accommodation Needs at  United Nations Headquarters 2014–2034 and a related report by the  Advisory Committee on Administrative and Budgetary Questions to  understand the UN’s long-term office space needs and identify UN  recommendations to address them, the assumptions upon which the  recommendations were based and the justifications for those  assumptions. We also interviewed officials from State, the U.S. Mission to  the UN, the UN Office of Central Support Services, the UN Board of  Auditors, and the UN Development Corporation regarding UN  deliberations and plans and cost estimations for various options proposed  by the UN to address future office space needs. We also reviewed UN  resolutions and GAO practices related to the analysis of alternatives.
We conducted this performance audit from July 2014 to May 2015 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
section_title: Appendix II: United Nations Cost Estimates for Three Options the UN Secretary-General Deemed Viable to Address UN Future Office Space Needs
paragraphs: The United Nations (UN) Secretary-General’s February 2014 report on  options for long-term accommodation for UN staff at its headquarters  contained cost estimates for each of the three options it deemed viable.  According to the report, the status quo is the most expensive of the three  options deemed viable, with the North Lawn Building being the least  costly, and DC-5 falling in the middle. The UN made two types of cost  estimates in evaluating the three options: total project costs through 2064  and total project costs in 2014 dollars using net present value. It  estimated these two costs for each of three UN headquarters workforce  growth-rate scenarios: 1.1 percent growth, no growth, and 0.5 percent  decrease (see tables 8 and 9).
section_title: Appendix III: United Nations Leased Office Space
paragraphs: As shown in table 10, as of March 2014, United Nations (UN) off-campus  leases for office space totaled more than 1.2 million square feet with a  current total annual rent of over $53 million, with an average rent per  square foot of about $46.
section_title: Appendix IV: Comments from the Department of State
section_title: Appendix V: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contacts
section_title: Staff Acknowledgments
paragraphs: In addition to the contacts named above, Elizabeth Repko (Assistant  Director), Michael Armes (Assistant Director), Anthony Costulas, and  Nina Pfeiffer made key contributions to this report. Tina Cheng, David  Dayton, Mark Dowling, Maria Edelstein, Justin Fisher, Jason Lee,  Jennifer Leotta, and Adam Yu provided technical assistance.
section_title: Related GAO Reports
paragraphs: United Nations Renovations: Best Practices Could Enhance Future Cost  Estimates. GAO-12-795. Washington, D.C.: July 25, 2012.
United Nations: Renovation Still Scheduled for Completion in 2013, but  Risks to Its Schedule and Cost Remain. GAO-09-870R. Washington,  D.C.: July 30, 2009.
United Nations: Renovation Schedule Accelerated after Delays, but Risks  Remain in Key Areas. GAO-08-513R. Washington, D.C.: April 9, 2008.
Update on the United Nations’ Capital Master Plan. GAO-07-414R.  Washington, D.C.: February 15, 2007.
United Nations: Renovation Planning Follows Industry Practices, but  Procurement and Oversight Could Present Challenges. GAO-07-31.  Washington, D.C.: November 16, 2006.
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: Planning for Headquarters Renovation is Reasonable;  United States Needs to Decide Whether to Support Work. GAO-01-788.  Washington, D.C.: June 15, 2001.