The UN audits itself. Verdict? Can do better!

The UN has audited its own CHF 837 million renovation plan in Geneva. The investigators discovered some serious problems with the management of contracts and the processing of invoices.


January 29, 2019


By Jamil Chade and Philippe Mottaz - The Geneva Observer and Stéphane Bussard - Contribution from Le Temps



News


It is by all measures the most ambitious and transformative projects of the « Quartier des Nations,» the Geneva neighborhood around the UN European Headquarters since the establishment a hundred years ago of the League of Nations in the city. At CHF 836.5 million ($ 878 million), about half financed by Switzerland as host-nation via two interest-free loans, the Strategic Heritage Plan (SHP) will once completed, contribute to the unprecedented ongoing transformation of what the late Kofi Annan called a city that « punches above its weight » on the world scene thanks to the presence of the UN, its specialized agencies and a myriad of NGO’s.



Photo @Mark Henley

Year after year since 2014, almost as a ritual, the UN progress reports on the SHP keep coming every fall during the annual meeting of the UN General Assembly. They are thorough. The latest one, dated September 25, 209, is number 6. This time, however, its publication was followed by the release of a completely different kind of document, bearing the name of the UN Office of Internal Services (OIOS). The SHP had been audited. The short report goes straight to the point: it points to some glaring weaknesses in the management of contracts and the processing of vendor invoices. The SHP's project management team employs a dedicated staff of 21 that can count between 11 and 12 additional contractors at any given time over the last two years. Yet, the size of SHP's management team did not ensure the project's sound management. 


OIOS has uncovered instances of invoices unsupported by proper documentation, repeated delays in handling claims, ambiguities in contracts, all resulting in executed or possible future additional costs to the project. UNOG has accepted all recommendations and issued a timeline for their implementation.


It is not the first time that UNOG’s administration of contracts has been criticized. In March of 2014, an investigation by the UN auditing body about procurements unrelated directly to the SHP project found UNOG’s response to one of its audits to be « partially satisfactory. » While financially insignificant in relation to the total budget of the SHP project, those instances are not inconsequential. According to an independent audit expert contacted by The Geneva Observer and Swiss daily Le Temps, « the controls that should have existed for a project of this magnitude were insufficient from the outset and have been only belatedly introduced. » For this expert, the « ambiguities in contract provisions » singled out by the audit and OIOS’s insistence that they be « thoroughly assessed during contracts amendments » is the most pressing issue to be corrected because they have a direct impact on the timeline of a project and may entail significant monetary costs. » For an illustrative case, see our investigation on a serious contractual dispute between Swiss builder Implenia and UNOG in Geneva.

In total, the audit reviewed nine of the ten contracts in force as of December 2018. The auditors were confronted with three unsatisfactory contracts, which « indicated the need to strengthen the review process to ensure that the amounts invoiced were accurate and supported with the required deliverables. »


The auditors looked at a sample of 70 approved invoices. Among them, they discovered that an invoice from the London-based MACE company for £ 126’000 had been paid even though it was not « adequately supported » by documents and with the « required deliverables ». Lax monitoring of the deliverables resulted in some meetings being paid although they were never held. Inconsistencies were also found in payments of CHF 35’000 to MACE related to meetings over three months, which, in fact, « were combined and held in a single sitting.» The audit requested the officials to « ensure that adequate documentation is provided to show whether the meetings took place.»



In another case, approximately CHF 2.1 million of additional costs were incurred in order to accommodate some of the plans not initially established. e new permanent building. However, the contract provisions did not specify the minimum standards and practices expected to be followed in performing the works ». In another case, approximately CHF 2.1 million of additional costs were incurred in order to accommodate some of the plans not initially established.


Another result of the three-year-long auditing was the recommendation to implement measures to « promptly address ambiguities in contract provisions and issues relating to contractor performance.»


Out of the nine contracts evaluated by OIOS, almost half were problematic. According to the report, some of the contracts were entered into during the early stages of the works, when the contractors « did not have adequate capacity to perform these tasks.»


Issues were found about professional requirements during the early hiring process. The OIOS review reveals that the « experience criteria were not specified in 19 of the 36 positions » advertised by SHP. In one instance, in 2016, a Senior Architect position with a requirement of 7 years of experience went to a candidate with only three years of experience. Further up the hierarchy, the auditors found that « the Project Principal had nine years of experience in 2017 as against the 15 years required for that position ».

They also discovered that initial contracts did not clearly specify whether leave days taken by personnel were included in the price to be paid. In 2018, an amendment was established to the contracts, requiring future contractors to provide leave plans and to allow the contract price to be proportionately reduced if key personnel were not available for a given period.

If those changes were to be retroactively implemented, CHF 132,000 related to leaves of absences would have to be deducted from the contract price. Yet, this money was never recovered by UNOG.


Delays and additional costs


The analysis concentrated part of its work on the « repeated incidents » concerning quality and delays, which affected the timeliness of the renovation.

«In 2017, there were delays by the contractor in providing the technical designs and tender documents, which resulted in a delay of up to 2 months in the issuance of the Request for Proposal for the construction of the new building », the report says.


«Again, in 2018, there were similar delays which resulted in the Request for Proposal and tender for the renovation phase being delayed by up to 8 months », the auditors state. «There was also a backlog in the contractor’s issuance of instructions to the construction contractor, which resulted in delays in more than 40 percent of technical documents ».

In 2019, the construction contractor presented several further claims in relation to the delays, but the costs were yet to be quantified.


In fact, the issue of additional costs came up in several parts of the auditor’s report. In one case, «additional expenditure of approximately CHF 2 million had to be incurred to adapt the foundation to the actual soil conditions found on-site during the works ». and found out that there were « divergent views as to whether the contract clauses were adequate to help enforce compliance with quality and timeliness standards.» « This shows that the issue should have been examined in greater detail before signing the contract,» the report says.

In order to deal with the delays, officials responsible for the works would withhold payments « to penalize the vendor for delays in submitting deliverables.» «But in the absence of penalty clauses in the contract, the full contract amounts were eventually paid despite evidence that the delays had some financial impact,» they concluded.

In fact, the issue of additional costs came up in several parts of the auditor’s report. In one case, «additional expenditure of approximately CHF 2 million had to be incurred to adapt the foundation to the actual soil conditions found on-site during the works ».

In that specific case, the plan was that the contractor would perform a comprehensive structural survey to assess any deficiency of the existing structure of the Palais des Nations and recommend appropriate remedial actions.

In another case, approximately CHF 2.1 million of additional costs were incurred in order to accommodate some of the plans not initially established. e new permanent building. However, the contract provisions did not specify the minimum standards and practices expected to be followed in performing the works ». In another case, approximately CHF 2.1 million of additional costs were incurred in order to accommodate some of the plans not initially established.



Recommendations


UNOG officials will have until June 2020 to correct the flaws identified. Amongst its tasks, one of the main targets will be to « ensure that emergent shortcomings and ambiguities in contract provisions are promptly and thoroughly addressed during contract amendments ».

It further requires that SHP « strengthens its invoice review process to assure that the amounts invoiced are supported by evidence of work done and are accurately computed in accordance with the contract and supporting documents.»

UNOG accepted all recommendations and presented a schedule to fulfill the shortcomings by June 2020. Its response stated: « UNOG accepted the recommendations and has initiated action to implement them.»

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