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UN Procurement Under Fire, Ignored by CEB, Rot Starts From Within

Byline: Matthew Russell Lee of Inner City Press at the UN: News Analysis

UNITED NATIONS, April 6 -- Scandals in the UN system's procurement operations arose last month and this on Capitol Hill but not, apparently, in the system's Chief Executives Board meeting convened yesterday in Paris by Secretary General Ban Ki-moon. This despite a Joint Inspection Unit report that the UN purported to take seriously, which called for CEB action.

   Flaws in UN Peacekeeping's procurement, including the $250 million no-bid contract to Lockheed Martin's PAE in Darfur, came up in a negative vote cast on the nomination as deputy Homeland Security chief of Jane Holl Lute, that contract's main promoter in the UN.

   In a March 11 meeting behind closed doors with the House Foreign Affairs Committee, Mr. Ban was asked about the UN's transparency and accountability, including in procurement. Recent scandals include not only systemic flaws on contracting, but specific instances of continued payments to the so-called Indian Enron Satyam and erasure of a $3 million entry in the UN Procurement database, and contracting with firms like Petrocelli Electric, whose principal has just been indicted for bribery, and National Mobile Television, which is going bankrupt, as Inner City Press reported over the weekend and confirmed at Monday's noon briefing.

   Just before Ban's DC trip, when Inner City Press asked Ban's Deputy Spokesperson Marie Okabe about a damning Joint Inspection Unit report on UN procurement which had just become public, Ms. Okabe responded by reading aloud a statement that, among other things, the report

"does not always provide a clear indication as to which UN organization the findings pertain to.  Nevertheless, of the 22 recommendations issued by the JIU, the following applied to the UN Secretariat.  Eight were already in place in the UN Secretariat prior to the Note.  Three would require an Enterprise Resource Planning system.  Three would require coordination with the high-level Committee of Management.  Five are accepted, and three would require additional clarification from the Inspectors as their recommendation is too vague. It should also be noted that the amounts in question relating to the corporate consultancies are a highly specialized element of procurement.  This represents an average of $15 million expenditure, as indicated on page 5 of the Note... Don’t ask me any more questions, because this is all I have."

  Inner City Press asked, "Is it possible to know which of the five recommendations the UN is actually going to act on?"

  The UN's Marie Okabe answered, "I have just said I have nothing further on this."

  Later, while Inner City Press was in Washington covering Ban Ki-moon's trip there and subsequently controversy, including admonition by President Barack Obama's spokesman Robert Gibbs, Ms. Okabe's office e-mailed Inner City Press a more detailed answer.

Subj: Further information re: your questions on the JIU report
From: unspokesperson-donotreply [at] un.org
To: Inner City Press
Sent: 3/11/2009 12:25:13 P.M. Eastern Daylight Time

The recommendations indicated below have been accepted by the United Nations Secretariat. As indicated yesterday, it should be noted that the UN Secretariat disagrees with several findings contained in the Note. Due to the lack of clarity in the Note, it was not possible to ascertain which findings related to which UN Organization. Nevertheless, it should be noted that the UN Secretariat agrees with the spirit of the recommendations reflected below and will take steps to implement.

Recommendations (as numbered in the Note):

The executive heads of the United Nations system organizations should:

 #(2) establish procedures to record, monitor, follow up, and evaluate the outcome of consultancy reports.

#(3) The executive heads of the United Nations system organizations should ensure that there are clear policies and procedures in place to guide staff under what circumstances to resort to corporate consultancy services.

#(4) develop an effective monitoring and reporting mechanism for waivers of competition.

#(8) provide clear guidelines and sensitize personnel for the proper documentation of the procurement process, and monitor its implementation.

# (17) ensure that the proper application of performance evaluations are enforced and monitored.

  An Inner City Press procurement expert finds this Secretariat's response to the JIU report on procurement misleading, a rapid response intended to cover up the report.  In the actual JIU report, the 22 recommendations are addressed equally to "The executive heads of the United Nations system organizations."  It was done that way because, in the view of the JIU, all UN organizations have similar procurement problems. 

CEB meeting on April 5: "something smells in this temple," procurement ignored?

The note never singles out any individual organizations, except where it collected statistics. And only 15 Organizations responded to their questionnaire.
Page 2 of the report (in the introduction) states that in creating the report, the JIU inspectors examined 72 case files, including 26 -- or 36% -- from U.N. Secretariat procurement.

When they say the Secretariat had 8 recommendations in place before the note, that is a common UN way of obscuring things, since they don’t tell you which 8. Or when they had systems put in place. Or whether the JIU agreed that they had done things effectively. Or whether their remedies were more than nominal. One indication that they are covering up is the number of Secretariat case files that the JIU examined. U.N. compliance with reports like this is always done in this fashion, so no outsider can judge whether they did anything or not. But the report, as mentioned above, never singles out the Secretariat.

To say that three of the JIU recommendations would require coordination by the High Level Committee on Management means that it would require action by all the United Nations system organizations, as a whole. The HLCM is a network of all the Under Secretaries General for Management, right under the executive heads, etc. In other words, the Secretariat is admitting that it is party to at least three problems that require system-wide resolution.

The Secretariat says that three recommendations involve Enterprise Resource Planning systems. That is a very strong indicator that what the JIU says about record keeping, lack of evaluations, horrible contract management, etc., applies to the Secretariat. Because that is what the ERPs are for. We do note in the story that several organizations are putting in place Enterprise Resource Planning systems, which are supposed to be a help. Since the ERPs are being managed through consultancies, not only are there sins in record keeping, but the very sins that the report says also belong to the procurement system as a whole are very likely being perpetrated in these acquisitions.

What the Secretariat means by corporate consultancies being only $15 million per year on average is not clear. There is no mention of $15 million on page 5 of the note, and the average of consultancy expenditures across the responding institutions is $21.2 million. But the report also says, at the top of page 5, that 89% of the total outlay went to three organizations, which would total $283 million. For the Secretariat, the total is $76,037,769. If you average that out over 5 years, you get about $15 million annually. But there is no need to average it out, because a table on page 5 lays out the exact numbers for each reporting organization. The Secretariat just doesn’t want you to look at it.

The reason they don’t  want you to look at it is that the bulk of Secretariat consultancy procurement consists of two big numbers, $26 million and $33.3 million, done in 2003 and 2005 respectively. These are big expenditures for SOMETHING, possibly the budgeting for IT or something similar. The secretariat wants you to think this is a drop in the bucket. But it is precisely spending for consultancies involved with information management, restructuring, etc. that are supposedly the improvement of the organization. And they are also the kind of procurements that the first 13 pages of this report criticize severely.

   The report called for CEB action. On March 20, when Inner City Press asked about what some call the Secretariat's JIU coup in choose a new head of the unit, Ban's Deputy spokesperson tried to say it was the March 10 question about the JIU's criticism, including recommendation for CEB action. On April 6, Inner City Press asked

Inner City Press:  At the CEB meeting, was the procurement report by the Joint Inspection Unit that came out, was that discussed?

Spokesperson Michele Montas:  I don’t have any details on what was discussed; I was not there, so I cannot tell you whether there were specifics.  I think they actually focused a lot more on the G-20 meeting that had taken place.  I don’t know how far they went in specific issues like the one you are mentioning.

Question:  I have a procurement question.  It’s become clear that, number one, the electrical contractor for the UN, Petrocelli Electric, the founder has been indicted in the Southern District of New York for bribery.  At the same time, the operator of UN Television, National Mobile Television Venue Services Group, is basically going bankrupt.  Everything is being sold and they’re trying to move their people into the basement area as a final refuge.  How can it be that these contracts were entered into with companies in one case being indicted, and in the other case going bankrupt?

Spokesperson:  Well, in specific cases, when the contracts were entered, of course, there was no indictment and there were no suspicion that there were any wrongdoings.  In terms of the second contract, of course, we can look into this.  There are several companies going under and we cannot predict in advance which company will go under.  I can try to get more information for you from the Procurement Office, but, at this point, as I said, we cannot predict what will happen when we sign contracts. 

  Later in the briefing

Spokesperson:  Matthew, I just got your answer.  It was just brought to me. The contract with the Petrocelli Electric Company covers overall electrical installations, operations, maintenance, alterations and major projects, and remains in place even though the UN has suspended the vendor from participating in any further procurement activity.  That’s what I have for you.  And we’re also aware of the financial difficulties faced by VSG’s parent company, NMT.  The Organization is dealing with the situation in consultation with the VSG management.  So I got your answer pretty fast for you. 

   Fast but is anything fixed? And so it goes at the UN.

  Click here for a new YouTube video, mostly UN Headquarters footage, about civilian deaths in Sri Lanka.

Click here for Inner City Press' March 27 UN debate

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Click here for Inner City Press' review-of-2008 UN Top Ten debate

Click here from Inner City Press' December 12 debate on UN double standards

and this October 17 debate, on Security Council and Obama and the UN.

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Click here for a Reuters AlertNet piece by this correspondent about Uganda's Lord's Resistance Army. Click here for an earlier Reuters AlertNet piece about the Somali National Reconciliation Congress, and the UN's $200,000 contribution from an undefined trust fund.  Video Analysis here

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