This is the accessible text file for GAO report number GAO-12-795 
entitled 'United Nations Renovations: Best Practices Could Enhance 
Future Cost Estimates' which was released on July 25, 2012. 

This text file was formatted by the U.S. Government Accountability 
Office (GAO) to be accessible to users with visual impairments, as 
part of a longer term project to improve GAO products' accessibility. 
Every attempt has been made to maintain the structural and data 
integrity of the original printed product. Accessibility features, 
such as text descriptions of tables, consecutively numbered footnotes 
placed at the end of the file, and the text of agency comment letters, 
are provided but may not exactly duplicate the presentation or format 
of the printed version. The portable document format (PDF) file is an 
exact electronic replica of the printed version. We welcome your 
feedback. Please E-mail your comments regarding the contents or 
accessibility features of this document to Webmaster@gao.gov. 

This is a work of the U.S. government and is not subject to copyright 
protection in the United States. It may be reproduced and distributed 
in its entirety without further permission from GAO. Because this work 
may contain copyrighted images or other material, permission from the 
copyright holder may be necessary if you wish to reproduce this 
material separately. 

United States Government Accountability Office: 
GAO: 

Report to Congressional Requesters: 

July 2012: 

United Nations Renovations: 

Best Practices Could Enhance Future Cost Estimates: 

GAO-12-795: 

GAO Highlights: 

Highlights of GAO-12-795, a report to congressional requesters. 

Why GAO Did This Study: 

In December 2006, the UN approved a $1.88 billion CMP to modernize its 
headquarters in New York City by 2014, with a scope to include the 
renovation of five buildings. Separately from the CMP, the UN is also 
considering the option of a new office building, known as the 
consolidation building, to be located across the street from UN 
headquarters. As the UN’s largest contributor, the United States has a 
significant interest in these projects. GAO was asked to report on (1) 
the extent to which the CMP is meeting its planned renovation scope, 
schedule, and budget; (2) the UN General Assembly’s evaluation of CMP 
cost estimates; and (3) the status of the consolidation building 
project. 

To perform this work, GAO reviewed cost and schedule documents for the 
CMP, as well as planning and legal documents for the consolidation 
building; examined relevant UN financial documents and UN General 
Assembly resolutions, as well as GAO’s best practices for cost 
estimation; and met with officials from the Department of State 
(State), the UN CMP office and other relevant UN departments, and New 
York City. 

What GAO Found: 

The Capital Master Plan (CMP) has made progress, but may not deliver 
the project’s original scope, faces risks meeting its scheduled 
completion date, and is projected to be about $430 million over budget 
as of February 2012. Regarding the project’s scope, the CMP office may 
not renovate the Library and South Annex—two of the five buildings in 
its original scope—due to the lack of a workable design solution to 
address security concerns. Related to schedule, the CMP office expects 
to complete the CMP in 2014, but reports that previous schedule delays 
have reduced its ability to respond to unforeseen events without 
affecting the project’s end date. According to the CMP office, the 
project’s approximately $430 million in projected cost overruns are 
due to a number of factors, including about $266 million in direct 
project costs and over $164 million from scope additions authorized 
without a corresponding increase in budget by the United Nations (UN) 
General Assembly. The CMP office has proposed financing options that 
could address a portion of these cost overruns. However, even if 
approved, an additional member assessment may be needed. One option 
for funding the U.S. portion of an additional member assessment is the 
use of credits attributable to the United States in the UN Tax 
Equalization Fund (TEF)—a fund used to reimburse U.S. nationals 
working at the UN for taxes paid on their UN salaries. According to 
the UN, as of May 2012, the balance of TEF credits attributable to the 
United States stood at $120.9 million. 

After evaluating the CMP’s cost estimates, the UN General Assembly 
issued a resolution in April 2012 stating that the estimates lacked 
transparency, timeliness, and clarity. For example, the UN General 
Assembly expressed concern about the lack of clarity regarding the 
renovation of the Library and South Annex buildings. Specifically, 
member states inquired about the schedule for the two buildings and 
why renovations to the buildings were delayed. To address these 
concerns, the UN General Assembly requested that the CMP office 
improve reporting on projected CMP cost increases. While the UN 
General Assembly resolution did not specifically identify how the CMP 
office should report its future cost estimates, GAO has identified 
best practices for high-quality and reliable cost estimates. For 
instance, a well-documented cost estimate should describe in detail 
how the estimate was developed and the methodology used. Applying 
these best practices, as appropriate, could address the concerns 
raised by the UN General Assembly regarding the CMP’s cost estimates. 

To address its future office space needs, the UN is considering the 
option of a new building that would be separate from the CMP, but it 
does not have an estimate of the project’s costs. The UN estimates 
that by 2023 its office space needs will have exceeded the capacity of 
its current real estate portfolio, primarily due to expiring leases. 
As a potential solution, the City and State of New York have proposed 
the construction of a new building known as the consolidation 
building. The UN has indicated its willingness to consider this 
proposal, but has not entered into any formal agreements. The current 
lack of a cost estimate for the consolidation building makes its cost 
implications for the UN and its member states unclear. GAO has 
previously reported that cost estimates are critical to program 
success, such as informed resource investments. 

What GAO Recommends: 

The Secretary of State and the U.S. Permanent Representative to the 
United Nations should work with other member states to direct the CMP 
office and the UN to utilize best practices identified by GAO when 
developing cost estimates for the CMP and the consolidation building. 
State and the UN concurred with GAO’s recommendations. 

View [hyperlink, http://www.gao.gov/products/GAO-12-795]. For more 
information, contact Thomas Melito at (202) 512-9601 or 
melitot@gao.gov, or David Wise at (202) 512-2834 or wised@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

Progress Made on CMP, but Two Building Renovations May Not Be 
Completed and Project Is Projected to Be Approximately $430 Million 
over Budget: 

Use of Best Practices May Address UN General Assembly Concerns 
Regarding CMP Cost Estimates: 

UN Considering Consolidation Building to Address UN Office Space 
Needs, but a Cost Estimate Has Not Been Completed: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: UN Tax Equalization Fund: 

Appendix III: Comments from the Department of State: 

Appendix IV: Comments from the United Nations: 

Appendix V: GAO Contacts and Staff Acknowledgments: 

Related GAO Products: 

Tables: 

Table 1: Projected Completion Dates for Key CMP Activities: 

Table 2: Factors Contributing to CMP's Projected Cost Overruns of 
Approximately $430 Million, as of February 2012: 

Table 3: CMP Cost Estimates: 

Table 4: Estimated CMP Cost Overruns after Utilizing Financing Options 
and Proposed Reductions in Project Scope, as of February 2012: 

Table 5: UN General Assembly Concerns, Specific Issues Raised, and 
Additional Information Related to the CMP February 2012 Cost Updates: 

Table 6: UN General Assembly Concerns Regarding the CMP's Cost 
Estimates as Related to Best Practices: 

Table 7: Best Practices for a High-Quality and Reliable Cost Estimate: 

Table 8: Credits in the UN Tax Equalization Fund Attributable to the 
United States, 2001-2009, as Reported by the UN: 

Figures: 

Figure 1: UN Headquarters Complex in New York City: 

Figure 2: Glass Curtain Wall of the Secretariat Building, as of May 
2012: 

Figure 3: Ceiling Conditions in the Basement of a UN Building before 
and after Renovation: 

Abbreviations: 

CMP: Capital Master Plan: 

State: Department of State: 

TEF: Tax Equalization Fund: 

UN: United Nations: 

UNDC: United Nations Development Corporation: 

USUN: U.S. Mission to the United Nations: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

July 25, 2012: 

The Honorable Richard G. Lugar: 
Ranking Member: 
Committee on Foreign Relations: 
United States Senate: 

The Honorable Susan M. Collins: 
Ranking Member: 
Committee on Homeland Security and Governmental Affairs: 
United States Senate: 

The Honorable Ileana Ros-Lehtinen: 
Chairman: 
Committee on Foreign Affairs: 
House of Representatives: 

In December 2006, the United Nations (UN) approved a $1.88 billion 
Capital Master Plan (CMP) to renovate and modernize its headquarters 
complex by 2014.[Footnote 1] To support the CMP, the United States has 
provided approximately $388 million in assessed contributions to the 
UN. In addition to the $388 million, $100 million in UN credits 
attributable to the United States were also used to support the 
project. 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.[Footnote 2] In our most 
recent report in 2009, we reported that the CMP was on schedule, but 
$97.5 million over budget, and that the UN was considering adding 
$206.6 million in related costs to the CMP without a corresponding 
increase in budget.[Footnote 3] Since 2009, the UN has reported 
continued cost overruns associated with the CMP. 

Separately from the CMP, the UN General Assembly[Footnote 4] has 
stressed the need for a long-term strategy to meet the office space 
needs of the UN.[Footnote 5] The UN leases over 2 million square feet 
of office space in multiple locations in New York City. In 2011, the 
City and State of New York authorized the construction of a new office 
building for UN personnel to be located across the street from the UN 
headquarters complex. This building, known as the consolidation 
building, would allow the UN to consolidate a portion of its personnel 
from leased space in various locations in New York City into one 
office building. While the project is still in its early stages, the 
United States, as the largest contributor to the UN, has significant 
financial interest in whether this project proceeds. 

This report provides information on the progress of the CMP and the 
status of the UN consolidation building. Specifically, we examine (1) 
the extent to which the CMP is meeting its planned renovation scope, 
schedule, and budget; (2) the UN General Assembly's evaluation of CMP 
cost estimates; and (3) the status of the consolidation building 
project. 

To evaluate the extent to which the CMP is meeting its planned 
renovation scope, schedule, and budget, we analyzed CMP planning, 
schedule, and budget documents to compare current planned scope, 
completion dates, and cost estimates to initial scope, schedule, and 
budget projections. Further, we examined other relevant CMP 
documentation, including information on risk assessments, monthly 
reports, and procurement information. We also reviewed financing 
proposals reported by the CMP office, the Financial Rules and 
Regulations of the UN, and UN Financial Reports and Audited Financial 
Statements. To examine the UN General Assembly's evaluation of CMP 
cost estimates, we reviewed and analyzed CMP documents describing the 
project's financial condition as of February 2012 presented to the 
UN's Fifth Committee, which covers budget and administrative issues, 
as well as UN General Assembly resolutions pertaining to the CMP. We 
also analyzed how best practices for cost estimating from our Cost 
Estimating and Assessment Guide could potentially address issues 
raised by the UN General Assembly regarding CMP cost information. 
[Footnote 6] For these objectives, we also interviewed officials from 
the Department of State (State) and relevant UN offices, including the 
CMP office, Program Planning and Budget Division, Board of Auditors, 
and Office of Internal Oversight Services, as well as toured the CMP 
project site. To assess the status of the consolidation building 
project we reviewed planning and legal documents. We also interviewed 
officials from State, relevant UN offices, the UN Development 
Corporation, and the City of New York regarding plans for and the 
estimated cost of the consolidation building. Additional information 
about our scope and methodology is provided in appendix I. 

We conducted our work from January 2012 to July 2012 in accordance 
with generally accepted government auditing standards. Those standards 
require that we plan and perform our work to obtain sufficient, 
appropriate evidence to provide a reasonable basis for our findings 
and conclusions based on our objectives. We believe that the evidence 
obtained provides a reasonable basis for our findings and conclusions 
based on our objectives. 

Background: 

Original Budget, Financing, Schedule, and Scope of the CMP: 

In 2001, we reported that the UN headquarters complex in New York City-
-built largely between 1949 to 1952[Footnote 7]--no longer conformed 
to current safety, fire, and building codes or to UN technology and 
security requirements.[Footnote 8] 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. Thus, 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. 

To finance the CMP, the UN General Assembly approved a strategy 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 multi-year payments, were invested to earn interest income. The 
UN General Assembly also approved a $45 million working capital 
reserve to cover any temporary cash flow deficits. According to the 
CMP office, member states would receive this reserve back in the form 
of a credit at the end of the project's construction phase. The United 
States chose to pay its assessment for the CMP in five equal payments 
of $75.5 million per year starting in 2007, for a total of 
approximately $378 million. The United States also paid a separate 
assessment to the project's working capital reserve of about $9.9 
million in 2007. 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 UN General Assembly approved the completion of the CMP's scope 
during the scheduled period of 2006 to 2014. This scope included the 
renovation of five buildings on the UN headquarters complex--the 
General Assembly Building, the Conference Building, the Secretariat 
Building, the Library, and the South Annex--as well as renovation of 
the basements connecting several of those buildings and the 
construction of a temporary conference building on the North Lawn of 
the complex. Figure 1 shows the existing buildings of the UN 
headquarters complex, along with the temporary conference building. 

Figure 1: UN Headquarters Complex in New York City: 

[Refer to PDF for image: illustration] 

Depicted in the illustration: 
Secretariat Building; 
General Assembly Building; 
Library; 
South Annex; 
Conference Building; 
Temporary Conference Building. 

Source: GAO and United Nations. 

[End of figure] 

To house UN staff during the renovation, the CMP included plans to 
lease swing space in nearby buildings. Additionally, the CMP included 
landscaping, demolition of the temporary conference building, 
additional blast protection, measures to promote environmental 
sustainability, and improvements to the reliability and redundancy of 
headquarters systems such as emergency power. 

Changes to the CMP Authorized by the UN General Assembly: 2006-2009: 

In several resolutions, the UN General Assembly noted that it has the 
sole prerogative to decide on any changes to the CMP's scope, budget, 
and implementation strategy. Since December 2006, 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: 

* Accelerated Strategy IV: In December 2007, the UN General Assembly 
approved an expedited strategy for the CMP known as accelerated 
strategy IV. This approach approved the renovation to proceed in two 
concurrent phases: one to renovate the Secretariat Building and one to 
renovate the Conference Building, General Assembly Building, and other 
buildings. Under the previous approach, the UN had planned on 
renovating buildings in multiple phases, including renovating the 
Secretariat Building while it was 75 percent occupied. The accelerated 
strategy called for the temporary relocation of most of the staff of 
the Secretariat Building during the renovation--which required the CMP 
office to increase the amount of leased swing space--and expedited the 
schedule for the Secretariat Building's renovation by reducing 
construction time from 6 to 3 years. The strategy also affected the 
schedules for the construction of the temporary conference building, 
as well as the renovation of the Conference Building and General 
Assembly Building. The CMP office reported that such an implementation 
strategy would reduce risks associated with the CMP. The CMP office 
also estimated that the strategy would produce an estimated cost 
overrun of $190 million, which it would seek to reduce through the 
process of value engineering.[Footnote 9] 

* Associated Costs: 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.[Footnote 
10] Associated costs cover a wide range of requirements, such as 
broadcast equipment, new furniture, and additional staffing 
requirements to manage information technology and security.[Footnote 
11] According to CMP officials, these costs were originally expected 
to be funded by UN program offices through the regular UN budget 
process. Therefore, the CMP office's original cost estimates for the 
CMP did not include new furniture or equipment except where the 
equipment was part of the permanent infrastructure of the UN. For 
instance, according to the CMP office, the original CMP scope only 
provided for furniture for three new mid-sized conference rooms and 
supplemental office furniture associated with swing spaces. While 
associated costs are funded from within the CMP budget, UN departments 
other than the CMP office manage these costs. For example, the UN 
Department of Safety and Security manages costs related to security. 
Prior to the UN General Assembly's decision on associated costs, the 
CMP office reported that the CMP budget could not absorb associated 
costs without exceeding $1.88 billion. However, the UN General 
Assembly argued that the CMP office could realize further cost 
reductions that would enable the CMP to absorb associated costs. 

* Secondary Data Center: In April 2009, the UN General Assembly 
requested that the CMP partially absorb costs associated with a 
secondary data center, including leasing a commercial facility and 
establishing a service delivery agreement to provide equipment and 
services. The secondary data center serves as a backup system to 
enable the UN to respond to emergency situations that may impair 
operations of critical elements of its information and communications 
technology infrastructure and facilities. In resolutions in April 2009 
and December 2009, the UN General Assembly requested that the CMP 
budget absorb $16.7 million to fund the secondary data center. 
[Footnote 12] 

Progress Made on CMP, but Two Building Renovations May Not Be 
Completed and Project Is Projected to Be Approximately $430 Million 
over Budget: 

While the CMP nears completion of the renovation of two of the five 
buildings, the project has suspended the originally planned renovation 
of two buildings, faces risks meeting its 2014 completion date, and is 
projected to be approximately $430 million over budget. The CMP office 
may not renovate two buildings that were originally part of the scope 
of the project, due to the lack of a workable design solution to 
address security requirements. In addition, the CMP office predicts 
that it will complete the CMP by the end of 2014, but risks, such as a 
compressed schedule with work yet to be contracted, exist. Moreover, 
as of February 2012, the CMP office estimates that the project will be 
about $430 million over its approved budget of $1.88 billion--an 
increase of approximately 53 percent (approximately $149 million) from 
its last reported estimate. According to the CMP office, a number of 
factors, such as unforeseen conditions and complexities in the 
basements and Conference Building, contributed to the increase in 
projected cost overruns. The CMP office has proposed options to 
address a portion of these cost overruns; however, even if approved, 
additional funding will be needed to address the remainder. The United 
States could potentially use credits it has with the UN to fund an 
assessment related to the CMP. 

Progress Made on CMP Renovations: 

The CMP office has nearly completed the first two building renovations 
of the CMP--the Secretariat and Conference Buildings--which began in 
2010. By February 2013, both buildings are scheduled to be completely 
renovated and back in use. Specifically, the CMP office plans for the 
Secretariat Building to be primarily reoccupied and in use by November 
2012. The CMP office predicts completion of the renovation of the 
Conference Building by the end of 2012, with the building reoccupied 
and in use in February 2013. The CMP office has reported a number of 
other achievements of the CMP, such as: 

* Modernizing 1 million square feet in the basements, including 
installation of chilled water piping, electrical conduit and wire, 
telecommunication conduit and copper cable. 

* Redesigning the Conference Building to take into account enhanced 
security upgrades.[Footnote 13] According to the CMP office, the 
enhanced security upgrades include two major activities: structurally 
enhancing the Conference Building and associated basements to 
withstand blast threats and installing protective structures, 
including bollards and gates, along the perimeter of the UN complex. 
The CMP office anticipates that the enhanced security upgrades will be 
completed by 2014. 

* Substantially completing the removal and replacement of the glass 
curtain wall in the Secretariat Building, shown in figure 2. 

Figure 2: Glass Curtain Wall of the Secretariat Building, as of May 
2012: 

[Refer to PDF for image: photograph] 

Source: CMP office. 

[End of figure] 

The UN General Assembly has requested that the CMP office provide 
information on contracts awarded for the CMP. The CMP office posts 
information on contract awards on the UN Procurement Division and CMP 
websites. According to the CMP office, 85 percent of the value of CMP 
contracts has gone to U.S. firms. 

Renovations for Two Buildings May Not Be Completed: 

Security requirements and concerns have led the CMP office to suspend 
originally planned renovations for two buildings--the Library and the 
South Annex. In 2010, UN security studies found these buildings to be 
vulnerable to vehicle blast threats. As of April 2012, CMP officials 
stated that they lacked a workable design solution to address these 
security concerns. Specifically, according to CMP officials, the only 
solution to the risk of blast threats would be to close a nearby 
highway exit ramp.[Footnote 14] However, based on discussions between 
the UN and the United States, the CMP office does not view this 
outcome as likely. To renovate the Library and South Annex to the 
required security standards, CMP officials told us that they would 
have to demolish the buildings and begin new construction. CMP 
officials also told us that since they do not have a viable renovation 
option for these buildings, they have not updated their initial design 
and cost estimates. Absent a solution to the security vulnerabilities 
of the Library and South Annex, CMP officials told us that only 
limited use of the buildings would be possible. In May 2012, the CMP 
office reported that it plans to consult with UN departments affected 
by the suspension to determine where to relocate functions impacted by 
potentially not renovating the buildings. 

CMP Office Projects 2014 Completion, but Risks to Schedule Exist: 

The CMP office expects to complete the CMP by 2014, but its schedule 
faces risks, such as a compressed schedule with some work yet to be 
contracted. As of February 2012, the CMP office estimates completing 
renovations by mid-2014, about 1 year behind the schedule it reported 
in October 2008. As shown in table 1, while the completion date for 
the project is still estimated to be mid-2014, the projected 
completion dates for key CMP activities have experienced delays for 
various reasons. 

Table 1: Projected Completion Dates for Key CMP Activities: 

Activity: Basements; 
Date as of October 2008 (Accelerated Strategy IV): Early 2011[A]; 
Date as of February 2012: Mid-2014; 
Approximate delay of: 39 months; 
Reasons for delays: Delayed due to unexpected complexities in basement 
conditions. 

Activity: Conference Building; 
Date as of October 2008 (Accelerated Strategy IV): Mid-2011; 
Date as of February 2012: Late 2012; 
Approximate delay of: 15 months; 
Reasons for delays: Delayed due to enhanced security upgrades. 
Activity: Secretariat Building; 
Date as of October 2008 (Accelerated Strategy IV): Early 2012; 
Date as of February 2012: Mid-2012; 
Approximate delay of: 3 months; 
Reasons for delays: Delayed due to the delay in the construction of 
the temporary conference building. 

Activity: Library; 
Date as of October 2008 (Accelerated Strategy IV): Early 2013; 
Date as of February 2012: [Empty]; 
Approximate delay of: [Empty]; 
Reasons for delays: Suspended pending resolution of the security issue. 

Activity: General Assembly Building; 
Date as of October 2008 (Accelerated Strategy IV): Mid-2013; 
Date as of February 2012: Mid-2014; 
Approximate delay of: 12 months; 
Reasons for delays: Delayed due to enhanced security upgrades to the 
Conference Building.[B]. 

Activity: South Annex; 
Date as of October 2008 (Accelerated Strategy IV): Early 2012; 
Date as of February 2012: [Empty]; 
Approximate delay of: [Empty]; 
Reasons for delays: Suspended pending resolution of the security issue. 

Activity: Completion of CMP Activities; 
Date as of October 2008 (Accelerated Strategy IV): Mid-2013; 
Date as of February 2012: Mid-2014; 
Approximate delay of: 12 months; 
Reasons for delays: [Empty]. 

Source: GAO analysis of CMP data. 

[A] The CMP office did not report a completion date for the basements 
as of October 2008. We have included the completion date reported in 
the original schedule as of October 2006. 

[B] According to the CMP office, it cannot begin renovations to the 
General Assembly Building until it completes renovations to the 
Conference Building. 

[End of table] 

CMP officials attribute schedule delays mostly to enhanced security 
upgrades added to the CMP in 2011. We reported in 2009 that security 
upgrades to the CMP represented a key risk to the project's 
progress.[Footnote 15] According to the CMP office, implementing 
enhanced security upgrades to address security issues resulted in a 
delay of about 1 year in the schedule of the Conference Building. 
Although it reported a mid-2011 completion date as of October 2008, 
the CMP office now estimates that the Conference Building renovation 
will be completed in late 2012. 

According to the CMP office, despite delayed start dates for a number 
of activities, the CMP office has maintained a 2014 project completion 
date. However, the CMP office faces two key risks related to meeting 
this date: 

* Compressed schedule. CMP officials noted that maintaining the 2014 
project completion date while experiencing delays to the start dates 
for several projects has created a compressed schedule, which reduces 
the ability to develop workaround solutions if problems arise. For 
example, CMP officials identified the completion of the Conference 
Building renovation as a "critical path" of the project's schedule, 
because renovations to the General Assembly Building cannot begin 
until those to the Conference Building are completed. Once the CMP 
office moves conference functions back into the Conference Building, 
it will reconfigure the temporary conference building to house the 
functions of the General Assembly Building while the General Assembly 
Building undergoes renovation. Previously, as a result of delays in 
the Conference Building's schedule, the CMP office delayed the 
completion date of the General Assembly Building from mid-2013 to mid-
2014. CMP officials said that the amount of time that the Conference 
Building renovation can be delayed without impacting the overall 
project's completion date is minimal. 

* Work yet to be contracted. The CMP office has yet to contract work 
for various remaining parts of the project and thus does not have 
agreed upon completion dates with the contractors that will be doing 
the work. For instance, as of March 2012, the CMP office reported that 
it had not committed any funds for the renovation of the General 
Assembly Building. CMP officials told us that conditions in the 
General Assembly Building--such as the potential for asbestos and 
weaknesses in the building's concrete slab--also constitute potential 
risks. Additionally, the CMP has not fully contracted for renovation 
work in the basements. CMP officials have noted that renovation in the 
basements is linked to the overall renovations, as the basements house 
the infrastructure for the UN complex. CMP officials have described 
the work in this area as highly complex and have noted that to date it 
has taken longer than expected. 

Projected Total CMP Cost Overruns Approximately $430 Million: 

As of February 2012, the CMP office projected total cost overruns of 
about $430 million over the CMP's approved budget of $1.88 billion. 
[Footnote 16] According to the CMP office, the estimated cost overruns 
result from a number of factors, including about $266 million in 
direct project costs and about $164 million in scope additions 
authorized by the UN General Assembly to be financed from within the 
project's approved budget, as shown in table 2. 

Table 2: Factors Contributing to CMP's Projected Cost Overruns of 
Approximately $430 Million, as of February 2012: 

Category: Direct costs of the CMP; 
Description: 
* Includes renovation costs, swing space estimates, contingency, and 
price escalation. Renovation costs include construction, professional 
fees, and management costs; 
Estimate: $265.7 million; 
Percent of total: 62.0%. 

Category: Associated costs; 
Description: 
* In April 2009, the UN General Assembly decided that associated costs 
would be financed from within the $1.88 billion CMP budget; 
* The estimate for associated costs covers the period of 2008 to 2013. 
The majority of the associated costs relate to the renovation of the 
Secretariat Building and the Conference Building, with the main cost 
drivers pertaining to the purchase of furniture and the permanent 
broadcast facility and media asset management system; 
Estimate: $146.8 million; 
Percent of total: 34.0%. 

Category: Secondary data center; 
Description: 
* In April 2009, the UN General Assembly requested that the CMP 
partially absorb costs associated with a secondary data center; 
* The costs of the secondary data center are shared between the 
regular budget and the peacekeeping support account--80 percent to 20 
percent, respectively--on the basis of the proportion of capacity 
used. The CMP office finances the 80 percent share; 
Estimate: $17.4 million[A]; 
Percent of total: 4.0%. 

Source: GAO analysis of CMP office data and UN General Assembly 
resolutions. 

[A] The total estimated cost for the secondary data center is $20.7 
million, with costs shared between the CMP budget and peacekeeping 
support account. The total cost funded by the CMP budget, as of 
February 2012, is $17.4 million. The UN General Assembly requested 
that the support account for peacekeeping operations absorb 
approximately $4.2 million in costs associated with the secondary data 
center. The CMP office has received about $3.3 million and expects to 
receive another $0.9 million from the peacekeeping support account to 
fund the secondary data center. 

[End of table] 

Projected CMP cost overruns increased significantly between May 2011 
and February 2012.[Footnote 17] The UN General Assembly described the 
increase as "sudden and unexplained." In October 2011, the CMP office 
reported that it had committed 84.5 percent of the CMP funding against 
the original $1.88 billion budget, which significantly reduced the 
risk of unexpected, adverse events during the remainder of the 
project.[Footnote 18] As shown in table 3, estimated cost overruns 
increased by approximately 53 percent (roughly $149 million) between 
May 2011 and February 2012, driven primarily by direct costs to the 
CMP. 

Table 3: CMP Cost Estimates: 

Category: Direct costs to the CMP[A]; 
As of May 2011: $2.0045 billion; 
As of February 2012: $2.1535 billion; 
Change: $149.1 million. 

Category: Associated costs; 
As of May 2011: $146.8 million; 
As of February 2012: $146.8 million; 
Change: 0. 

Category: Enhanced security upgrades[B]; 
As of May 2011: $99.6 million; 
As of February 2012: $99.6 million; 
Change: 0. 

Category: Secondary data center; 
As of May 2011: $20.7 million; 
As of February 2012: $20.7 million; 
Change: 0. 

Category: Total costs; 
As of May 2011: $2.2715 million; 
As of February 2012: $2.4206 million; 
Change: $149.1 million. 

Less: 

Category: UN General Assembly approved budget and other funding[C]; 
As of May 2011: $1.9905 billion; 
As of February 2012: $1.9907 billion; 
Change: $0.2 million. 

Total projected cost overruns: 
As of May 2011: $281.0 million; 
As of February 2012: $429.9 million; 
Change: $148.9 million. 

Source: GAO analysis of CMP office data. 

[A] Direct costs to the CMP include costs for CMP swing space rent 
after October 2012. 

[B] The CMP received "up to" $100 million to fund the enhanced 
security upgrades. While the CMP reports $99.6 million in costs for 
these updates, it applies the entire $100 million as part of its 
available funding. As a result, the total projected cost overruns are 
understated by $0.4 million. 

[C] Other funding includes voluntary contributions, $100 million to 
fund enhanced security upgrades, and $3.3 million in funding from the 
peacekeeping support account to support the secondary data center. A 
$0.2 million increase in voluntary contributions accounts for the 
difference between the amount of funds in May 2011 and February 2012. 

[End of table] 

Although the increase in estimated cost overruns reported in February 
2012 are attributable to the direct costs of the CMP, a portion 
consists of costs added to the CMP over time by the UN General 
Assembly without a corresponding increase in the CMP budget--such as 
associated costs and the secondary data center. CMP officials told us 
that they assume responsibility for direct costs of the CMP--which 
include renovation, swing space, contingency, and escalation--but have 
no control over additional related costs added to the CMP. In 
explaining the reasons for the estimated cost overruns directly 
attributable to the project, the CMP office cited several factors, 
including the following: 

* Asbestos abatement. According to the CMP office, when the 
renovations began, the volume of asbestos found far exceeded its 
expectations. Moreover, new regulations enacted by New York City in 
2010 made the abatement of that asbestos even more complicated and 
expensive. 

* Unforeseen conditions in the Conference Building. The CMP office 
reported that the actual construction of the concrete floor slabs in 
the Conference Building differed from the original design drawings. 
The construction of the concrete floor slabs required the CMP office 
to amend the design of the Conference Building. As of March 2012, the 
CMP office reported that it expected to find similar conditions in the 
General Assembly Building. 

* Complexities in the basements. The CMP office noted that work in the 
basements was more complex than expected due, in part, to limited 
documentation of the basement infrastructure and relocation of 
essential mechanical systems. For instance, the CMP office reported 
that UN documentation did not account for the large quantity of 
existing telephone, electrical, and security cables in the ceilings of 
the basements. According to the CMP office, each of these cables had 
to be individually tested to ensure that the CMP office did not remove 
active infrastructure, which was a labor-intensive process. Figure 3 
shows examples of ceiling conditions in the basements before and after 
CMP renovations. 

Figure 3: Ceiling Conditions in the Basement of a UN Building before 
and after Renovation: 

[Refer to PDF for image: 2 photographs] 

Source: CMP office. 

[End of figure] 

Proposals to Address Cost Overruns Exist, but New Member Assessment 
May Be Needed: 

To address cost overruns of the CMP, the CMP office recommended that 
the UN General Assembly endorse two financing proposals. Specifically, 
the CMP office proposed utilizing the working capital reserve fund and 
the interest income on CMP funds. As of February 2012, $45 million was 
available in the working capital reserve fund and the interest income 
amounted to $107.2 million. As of May 2012, the UN General Assembly 
had not made a decision to approve the use of these funds, but the 
Advisory Committee on Administrative and Budgetary Questions had 
reviewed and supported the proposals.[Footnote 19] If the UN General 
Assembly approves the utilization of the working capital reserve fund 
and the interest income, these funds will cover about a third of the 
projected cost overruns, but cost overruns in the amount of 
approximately $277.7 million will still not be addressed. 

The CMP office is also exploring options to further address estimated 
cost overruns by not fully renovating two buildings included in the 
original CMP renovation scope. With no solution to the security issues 
related to the Library and South Annex, CMP officials told us that 
they would propose limiting the scope of the renovations to these 
buildings. Rather than renovating as originally planned, the 
renovations to the Library and South Annex would only include 
connecting them to new building systems, such as heating and air 
conditioning. Based on the original cost estimate for these buildings, 
the CMP office estimates that not fully renovating the two buildings 
would eliminate $65 million in planned work, which could be applied to 
address projected cost overruns of the CMP. CMP officials also told us 
that they plan to explore additional opportunities to reduce work and 
achieve savings related to site landscaping and the General Assembly 
Building, but have not estimated the potential savings of these 
options. As shown in table 4, combining the proposed financing options 
with reductions in the project's planned scope would still leave the 
project with a shortfall of $212.7 million. 

Table 4: Estimated CMP Cost Overruns after Utilizing Financing Options 
and Proposed Reductions in Project Scope, as of February 2012: 

Category: Projected cost overruns of the CMP; 
Estimate: $429.9 million. 

Category: Working capital reserve; 
Estimate: ($45.0 million). 

Category: Interest income from CMP funds; 
Estimate: ($107.2 million). 

Category: Reduction in renovation scope of Library and South Annex; 
Estimate: ($65.0 million). 

Category: Total estimated CMP cost overruns; 
Estimate: $212.7 million. 

Source: GAO analysis of CMP office data. 

[End of table] 

Another potential financing option is an additional member assessment. 
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 actual amount of such 
an assessment would depend on the decisions of the UN General Assembly 
regarding proposed financing and reduced scope options. The U.S. share 
of any future assessment would be 22 percent. 

One potential option for funding all or part of an additional U.S. 
member assessment for the CMP would be using credits in the UN Tax 
Equalization Fund (TEF) account--a UN fund used to reimburse U.S. 
nationals working at the UN for U.S. taxes paid on their UN salaries. 
(For more information on the UN TEF, see appendix II.) According to 
the UN, as of December 31, 2011, there was a balance of $134 million 
in TEF credits attributable to the United States. This balance 
remained after the UN applied $100 million in TEF credits attributable 
to the United States to fund the enhanced security upgrades to the CMP 
in 2011. Congress has since passed legislation related to the use of 
TEF credits. The Consolidated Appropriations Act of 2012, passed in 
December 2011, required that TEF credits shall only be available for 
the United States' assessed contributions to the UN and shall be 
subject to the regular notification procedures of the Committees on 
Appropriations.[Footnote 20] State told us that it is complying with 
these provisions.[Footnote 21] For instance, in January 2012, the U.S. 
Mission to the UN requested that the UN apply $13.1 million of TEF 
credits attributable to the United States toward the United States' 
regular UN budget assessment for calendar year 2011. After the 
application of these credits, the balance of TEF credits attributable 
to the United States stood at $120.9 million, as of May 2012. However, 
under this policy, TEF credits could be used to fund cost overruns of 
the CMP if the cost overruns are funded through a member assessment as 
called for by the resolution approving the CMP. 

Use of Best Practices May Address UN General Assembly Concerns 
Regarding CMP Cost Estimates: 

In April 2012, the UN General Assembly issued a resolution expressing 
concerns regarding the transparency, timeliness, and clarity of the 
CMP's February 2012 cost estimates. To address these concerns, the UN 
General Assembly requested that the CMP office improve reporting on 
the underlying causes of the projected CMP cost increases. While the 
UN General Assembly resolution did not specifically identify how the 
CMP office should report its future cost estimates, we have identified 
best practices associated with high-quality and reliable cost 
estimates. Applying these best practices, as appropriate, may address 
the UN General Assembly's concerns regarding CMP cost estimates. 

UN General Assembly Has Expressed Concerns Regarding CMP Cost 
Estimates: 

After evaluating the CMP office's February 2012 cost information, the 
UN General Assembly reported a number of concerns with these 
estimates, such as a lack of transparency, timeliness, and clarity. 
For example, with regard to transparency, member states inquired why 
the CMP office did not include $38 million in increased swing space 
leasing costs in earlier CMP cost estimates. The CMP office noted that 
it negotiated swing space leases for a period longer than necessary to 
mitigate the risk of CMP schedule delays. The CMP office did not 
include these costs in its earlier estimates because it assumed these 
leases could be terminated early or used by other UN departments in 
the event the CMP project no longer needed the swing space. According 
to the CMP office, in a healthy rental market, early termination or 
subleasing is common; however, the economic downturn prevented it from 
taking such actions. In addition, member states inquired about the 
main factors that led to the projected increase in cost overruns. 
According to the CMP office, a key factor of the projected cost 
overruns was increased asbestos abatement costs related to asbestos 
found in the basements and Conference Building in late 2011. However, 
the CMP office had previously reported that all asbestos was abated 
from Conference Rooms 1-3 of the Conference Building in February 2011. 
Further, the 2011 CMP annual report considered the abatement of 
asbestos and the removal of obsolete materials from the Secretariat 
and Conference Buildings a significant achievement. For additional 
information regarding the concerns of the UN General Assembly and 
issues raised by member states, see table 5. 

Table 5: UN General Assembly Concerns, Specific Issues Raised, and 
Additional Information Related to the CMP February 2012 Cost Updates: 

Concern expressed by the UN General Assembly: Lack of transparency and 
timely information on budget, forecasts, and projected cost overruns; 
Specific issues raised: 
* The factors that led to the increase in cost overruns of the CMP; 
Additional information: 
* The CMP office provided qualitative explanations of the differences 
between planned and actual costs for major renovation activities, such 
as buildings and swing space. However, it did not quantify individual 
cost drivers for major renovation activities, nor did it clearly 
identify what parts of its estimates were based on actual versus 
projected costs. 

Concern expressed by the UN General Assembly: Lack of transparency and 
timely information on budget, forecasts, and projected cost overruns; 
Specific issues raised: 
* The original budget for swing space rent; 
Additional information: 
* The CMP office reported a budgeted swing space estimate of $464 
million, as of February 2012. However, this estimate is $74 million 
higher than what the CMP office reported when it proposed accelerated 
strategy IV in 2007. 

Concern expressed by the UN General Assembly: Lack of transparency and 
timely information on risks; 
Specific issues raised: 
* The volume, value, and reasons for change orders within the CMP; 
Additional information: 
* The CMP office presented information on the reasons for change 
orders, such as field conditions. Member states expressed interest in 
more details, such as which UN departments requested changes. 
Moreover, the UN Board of Auditors reported that the CMP office cost 
estimate did not include a robustly calculated estimate for the cost 
of all change orders. 

Concern expressed by the UN General Assembly: Lack of transparency and 
timely information on risks; 
Specific issues raised: 
* The potential for costs of the enhanced security upgrades to exceed 
the budgeted projection; 
Additional information: 
* The CMP office reported that it does not expect any cost overruns 
for the enhanced security upgrades. However, the CMP office reports 
that it is developing a total cost estimate and awaiting approval for 
portions of the upgrades. The UN Board of Auditors reported that the 
cost of enhanced security upgrades is high-risk, given third party 
approvals. 

Concern expressed by the UN General Assembly: Lack of clarity 
regarding the renovation of the Library and South Annex; 
Specific issues raised: 
* The cost estimates, delayed schedules, and prospective plans for the 
Library and South Annex; 
Additional information: 
* The CMP office reported that reducing the scope of the renovations 
to the Library and South Annex would result in an estimated $65 
million savings. However, the UN Board of Auditors has reported that 
the original budgets for the CMP do not clearly identify the costs for 
these buildings. 

Source: GAO analysis based on information provided by the CMP office 
and UN General Assembly resolution A/RES/66/258. 

[End of table] 

Officials from the U.S. Mission to the UN (USUN) also raised concerns 
with the explanation of the projected CMP cost overruns, both during 
and at the conclusion of the March 2012 session. For example, a U.S. 
representative at the March 2012 session asked about the amount and 
utilization of the remaining contingency fund for the CMP. While the 
CMP office reported that $89.1 million remained in funds for 
contingency and price escalation, this amount was as of May 2011, 
before the increase in estimated cost overruns reported in March 2012. 
[Footnote 22] Moreover, USUN officials told us that despite the 
briefings and information provided by the CMP office, there was still 
insufficient information as to why and when the projected cost 
overruns occurred.[Footnote 23] 

While CMP officials told us that they could not currently quantify the 
individual cost drivers of the $149 million increase in projected cost 
overruns that occurred between May 2011 and February 2012, they stated 
that the February 2012 estimates were the best available. Further, 
they noted that it is difficult to attribute the causes for cost 
overruns to specific buildings. For example, asbestos abatement is a 
campus-wide activity that affects the cost of all building renovations. 

After evaluating CMP cost estimates, the UN General Assembly issued a 
resolution in April 2012 requesting that the CMP office produce 
additional reporting related to CMP costs. Specifically, the UN 
General Assembly requested more information on the underlying causes 
of the projected cost increases and practical options to address them. 

Use of Best Practices in Future CMP Cost Reporting May Address UN 
General Assembly Concerns: 

While the UN General Assembly resolution did not explicitly identify 
how the CMP office should report future cost information, we have 
found that a high-quality and reliable cost estimate should exhibit 
certain best practices, including being comprehensive, well-
documented, accurate, and credible.[Footnote 24] These best practices 
include elements for documenting and reporting cost estimates. For 
example, a cost estimate that is well-documented and accurate should 
allow for the cost estimate to be traced back to and verified against 
its sources and explain the variances between planned and actual costs. 

These best practices may also help address some of the concerns raised 
by the UN General Assembly regarding the CMP's cost estimates. For 
example, using the best practices associated with a well-documented 
cost estimate can improve an estimate's transparency, by capturing in 
writing such things as the source of the data used, the calculations 
performed, and the rationale for choosing particular estimating 
methods. Table 6 shows how the concerns of the UN General Assembly 
regarding the CMP's cost estimates could be addressed by using our 
best practices, as well as the potential benefits of this approach. 

Table 6: UN General Assembly Concerns Regarding the CMP's Cost 
Estimates as Related to Best Practices: 

Concern: Lack of transparency and timely information on the budget, 
forecasts, and projected cost overruns; 
Related best practice: Comprehensive; 
Specific element of best practice: Document all cost-influencing 
ground rules and assumptions in the estimate; 
Potential benefit: Clearly documenting the ground rules and 
assumptions of a cost estimate provides a basis for areas of potential 
risk to be resolved. 

Concern: Lack of transparency and timely information on the budget, 
forecasts, and projected cost overruns; 
Related best practice: Accurate; 
Specific element of best practice: Document, explain, and review the 
variances between planned and actual costs; 
Potential benefit: Properly explaining the variance between planned 
and actual costs allows estimators to determine the quality of their 
estimates and how the project has changed over time. 

Concern: Lack of transparency and timely information on the budget, 
forecasts, and projected cost overruns; 
Related best practice: Accurate; 
Specific element of best practice: Regularly update the cost estimate 
to reflect significant changes in the program so that it always 
reflects current status; 
Potential benefit: Updating an estimate allows estimators to analyze 
changes in program costs and provide decision makers with accurate 
information for assessing alternative decisions. 

Concern: Lack of transparency and timely information on risks; 
Related best practice: Credible; 
Specific element of best practice: Conduct a risk and uncertainty 
analysis that quantifies the imperfectly understood risk and identify 
these effects of changing key cost driver assumptions and factors; 
Potential benefit: A risk and uncertainty analysis can help managers 
determine a level of funding to hold in reserve to cover costs 
resulting from uncertainties. 

Concern: Lack of clarity regarding the renovation of the Library and 
South Annex; 
Related best practice: Well-documented; 
Specific element of best practice: Describe in sufficient detail the 
calculations performed and the estimating methodology used to derive 
each element's cost in the documentation; 
Potential benefit: Documentation can help validate and defend a cost 
estimate. 

Source: GAO analysis of UN General Assembly resolution A/RES/66/258 
and GAO Cost Estimating and Assessment Guide, GAO-09-3SP. 

[End of table] 

CMP officials told us that they plan to present the additional 
information requested by the UN General Assembly in fall 2012. 
Applying these best practices, as appropriate, may help the CMP office 
as it prepares updated cost materials. 

UN Considering Consolidation Building to Address UN Office Space 
Needs, but a Cost Estimate Has Not Been Completed: 

To address its future office space needs, the UN is considering the 
option of a new building that would be separate from the CMP, but it 
does not have an estimate of the project's costs. The UN estimates 
that its office space needs will exceed the capacity of its current 
real estate portfolio by 2023, due primarily to expiring leases. As a 
potential solution, the City and State of New York have proposed the 
construction of a new office building, to be located across the street 
from UN headquarters, known as the consolidation building. This 
proposal requires UN General Assembly approval, but the UN has not 
entered into any formal agreements regarding the building and the 
current lack of a cost estimate makes its cost implications for the UN 
and its member states unclear. We have previously reported that 
reliable cost estimates are critical to program success, including 
informed resource investments. 

The UN Anticipates Office Space Needs at Its Headquarters Will Exceed 
Capacity by 2023: 

In September 2011, the Office of the Secretary-General completed a 
report on future office space accommodation needs for UN headquarters. 
The study estimates that, as of 2014, its real estate portfolio in New 
York will consist of approximately 3.4 million square feet of space--
about 39 percent owned and 61 percent leased.[Footnote 25] The UN 
headquarters campus comprises the majority of the UN's owned space, 
with office space in the Secretariat Building, Conference Building, 
Library, basements, and General Assembly Building. The UN also leases 
space in various locations around its headquarters campus to 
accommodate staff that cannot be housed in its owned space.[Footnote 
26] 

However, due to the combination of expiring leases and estimated staff 
growth, the Secretary-General's report estimates that by 2023 the UN's 
office space needs will exceed the capacity of the owned and leased 
buildings currently in its real estate portfolio. Leases for the UN's 
two largest leased office spaces expire at the end of March 2018, with 
options to extend to the end of March 2023, but no renewal options 
beyond that date. The UN Development Corporation (UNDC)--a public 
benefit corporation of the State of New York whose mission is to 
provide office space and other facilities to help meet the current and 
future space needs of the UN--constructed these buildings in 1976 for 
use by the UN. The buildings provide approximately 670,000 square feet 
of office space, housing about 2,500 staff. The UN currently leases 
these buildings at below-market rates. According to the Secretary-
General's report, renegotiating the leases beyond 2023 would likely 
result in lease rates set at market rates, rather than the favorable 
below-market rates currently enjoyed by the UN.[Footnote 27] 
Additionally, the Secretary-General's report projects that 
headquarters staff levels will increase from 10,711 in 2014 to 11,911 
in 2023. Using the report's estimate that each additional staff person 
requires an additional 250 square feet of space per person, this 
increase will require an additional 300,000 square feet of office 
space. We have not independently verified the report's per person 
space estimate. However, in October 2011, the UN's Advisory Committee 
on Administrative and Budgetary Questions found that a more in-depth 
and comprehensive analysis of the factors affecting the UN's space 
requirements was needed. 

Consolidation Building Proposed as an Option to Address UN Long-Term 
Office Space Needs: 

The City and State of New York have initiated a proposal to construct 
a new office building--known as the consolidation building--that could 
help the UN address some of its long-term office space needs, but the 
UN has not entered into any agreements on the proposal. In July 2011, 
the Governor of the State of New York signed legislation authorizing 
the City of New York to transfer parkland to UNDC to construct a new 
office building for the UN as large as 900,000 square feet and located 
across the street from UN headquarters. In October 2011, key officials 
of the City and State of New York entered into a memorandum of 
understanding (MOU) regarding the consolidation building. The MOU, to 
which UNDC consented, obligates UNDC to specific actions, including 
initial funding for and issuance of bonds to finance the project. Per 
the MOU, the property will not convey to the UN until UNDC and UN 
reach agreement on the terms, with a deadline of December 31, 2015. 
According to UNDC officials, they would like to receive agreement from 
the UN by early 2014. 

UN officials told us that they were informed of the MOU by UNDC 
officials shortly before it was finalized and signed, but have not 
entered into a formal agreement regarding the consolidation building. 
UN officials stated that they did not see the MOU prior to the City 
and State of New York signing it in October 2011 and therefore had no 
input to the document. Moreover, while the UN is not a party to the 
MOU, the document contains requirements to which the UN must agree for 
the consolidation building to move forward. For example, the UN would 
have to agree to lease the new office building from UNDC, potentially 
in a lease-to-own or similar arrangement. UN officials expressed 
concern that some of the terms of the MOU could increase costs and 
risks to the UN. For instance, according to UN officials, leasing the 
building would likely require the UN to pay an amount roughly 
equivalent to the bonds issued by UNDC to design and construct the 
consolidation building.[Footnote 28] UN officials told us that since 
they will not know the potential lease costs until the bonds are 
issued, they would like the option to opt out of the project upon 
review of the potential costs. Additionally, according to the MOU, as 
a condition of agreeing to lease the consolidation building, the UN 
would have to extend the leases at two of its largest leased spaces at 
increased rental rates and with additional costs. For instance, 
according to the terms of the UN's current lease, its rates will 
increase from $27.50 per square foot (about $18.2 million per year) to 
$30 per square foot (about $19.8 million per year) if the organization 
exercises the option to extend its lease from 2018 to 2023. However, 
according to UN officials, under the MOU, the UN would have to extend 
the leases from 2018 to 2023 and its rates could rise to market rates, 
estimated by the UN to be approximately $77 per square foot. 
Additional costs include an amount equal to real estate taxes 
attributable to the space, which UN officials said was not originally 
included in the lease renewal terms. Finally, UN officials cited 
concerns related to "risk sharing" in the proposal. Specifically, 
officials expressed concern that the proposal places the entire risk 
for the cost of the project on the UN, rather than sharing the risk 
between the UN and UNDC. UN officials told us that they continue to 
discuss the consolidation building and its potential costs with UNDC 
officials. However, as of June 2012, the UN had not entered into a 
formal agreement regarding the consolidation building. 

UN officials told us that the UN General Assembly's Fifth Committee, 
which reviews administrative and budgetary issues, plans to discuss 
options related to the consolidation building at its fall 2012 session. 

Cost Estimate for the Consolidation Building Not Completed: 

While the UN has held discussions with UNDC, neither organization has 
completed a cost estimate for the consolidation building. In October 
2011, the UN's Advisory Committee on Administrative and Budgetary 
Questions reviewed the Secretary General's office space study. The 
committee noted that future UN space requirements could vary 
significantly depending on the underlying assumptions for estimating 
staff growth and space allowance per person, as well as alternative 
workplace policies. The committee also concluded that it was not fully 
convinced of the assumptions used to establish the baseline estimates 
of the UN's future office space requirements. Moreover, the committee 
stated its desire to compare all potential options for future office 
space accommodation, and recommended that the Secretary-General 
complete a detailed cost analysis of the consolidation building 
comparing the potential cost of the building to other options. 

We have previously reported that a reliable cost estimate is critical 
to the success of any program. Such an estimate provides the basis for 
informed investment decision making, realistic budget formulation and 
program resourcing, meaningful progress measurement, proactive course 
correction when warranted, and accountability for results. While the 
UN's recommendations did not clarify what to include in the cost 
estimate for the consolidation building, our research has identified a 
number of best practices that form the basis of effective program cost 
estimating and should result in reliable and valid cost estimates that 
management can use for making informed decisions. As noted earlier, a 
high-quality and reliable cost estimate is comprehensive, well-
documented, accurate, and credible. For example, a comprehensive cost 
estimate should include all life-cycle costs of a project, document 
all cost-influencing ground rules and assumptions affecting the 
estimate, and completely define the program and its schedule, among 
other best practices. See table 7 for the best practices associated 
with a high-quality and reliable cost estimate. 

Table 7: Best Practices for a High-Quality and Reliable Cost Estimate: 

Best Practice: Comprehensive; 
Best practice description: A comprehensive cost estimate should 
include costs of the program over its full life cycle, provide a level 
of detail appropriate to ensure that cost elements are neither omitted 
nor double-counted, and document all cost-influencing ground rules and 
assumptions. 

Best Practice: Well-documented; 
Best practice description: A well-documented cost estimate should 
capture in writing such things as the source and significance of the 
data used, the calculations performed and their results, and the 
rationale for choosing a particular estimating method. A well-
documented estimate can be traced back to and verified against sources 
and should be reviewed and accepted by management. 

Best Practice: Accurate; 
Best practice description: An accurate cost estimate should be, among 
other things, unbiased, not overly conservative or optimistic, based 
on historical data reflecting most likely costs, and adjusted properly 
for inflation. An accurate estimate should be updated regularly to 
reflect the current status, such as material changes in and actual 
cost experiences of the program, and steps should be taken to minimize 
mathematical mistakes. Further, variances between planned and actual 
costs should be documented, explained, and reviewed. 

Best Practice: Credible; 
Best practice description: The cost estimates should discuss any 
limitations of the analysis because of uncertainty, or biases 
surrounding data or assumptions. Risk and uncertainty analysis should 
be performed to determine the level of risk associated with the 
estimate. Further, the estimate's results should be cross-checked 
against an independent estimate. 

Source: GAO analysis based on the GAO Cost Estimating and Assessment 
Guide, GAO-09-3SP. 

[End of table] 

UN officials told us that they plan to conduct a cost analysis of the 
consolidation building. However, as of June 2012, the UN had not 
completed such an estimate. A cost estimate using our best practices 
could assist the UN in predicting the level of confidence in meeting 
the project's budget by quantifying risks and uncertainties associated 
with the project. Such an estimate gives decision makers perspective 
on the potential variability of the estimate, should facts, 
circumstances, and assumptions change. We have found that, without the 
ability to generate reliable cost estimates, projects risk 
experiencing cost overruns, missed deadlines, and performance 
shortfalls. As a result, absent a completed cost estimate for the 
consolidation building, the potential cost implications for the UN and 
its member states are not clear. 

Conclusions: 

As the CMP nears completion of the renovations of the Secretariat and 
Conference Buildings, the project is estimated to be approximately 
$430 million over budget and risks remain as some renovations have yet 
to begin. Financing options exist to address a portion of the 
projected cost overrun; however, the United States and other UN member 
states may be asked to provide an additional assessment to finance the 
remainder. Aware of this risk, the UN General Assembly has requested 
that the CMP produce additional reporting on its costs. We have found 
that the best practices of developing high-quality and reliable cost 
estimates help inform decisions to manage capital projects 
effectively. Given the cost overruns and challenges of the CMP, as 
well as the risks and unknown costs associated with the UN's potential 
consolidation building project, these practices should be used to 
enhance the CMP's future cost estimates and to develop cost estimates 
of prospective projects to address the UN's long-term space needs. 
Such an approach would likely improve the quality and reliability of 
cost information provided to the UN and its member states, as well as 
help decision makers evaluate costs and risks associated with these 
projects. 

Recommendations for Executive Action: 

To improve the quality and reliability of information provided to the 
UN and its member states, 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. Direct the CMP office to implement, as appropriate, GAO's best 
practices for cost estimation when it updates information on CMP costs. 

2. Direct the UN to ensure the development of a cost estimate for the 
consolidation building utilizing GAO's best practices for cost 
estimation. 

Agency Comments and Our Evaluation: 

We provided a copy of this report to State and the UN for review and 
comment. State and the UN provided written comments, which are 
reproduced in appendixes III and IV, and technical comments, which we 
have incorporated as appropriate. 

State concurred with our recommendations and expressed its concern 
that projected cost overruns of the CMP had grown to approximately 
$430 million. State also noted that it is not actively considering the 
use of TEF credits to address a U.S. share of a potential additional 
assessment for the CMP since member states have yet to decide on 
proposed funding options to address cost overruns. However, given that 
the estimated cost overruns of the CMP would still be approximately 
$212.7 million even if the UN approves the use of proposed funding 
sources, we maintain that an additional member assessment may be 
needed and that TEF credits attributable to the United States are a 
possible source of funding such an assessment. 

The UN noted that our report was an accurate assessment of the status 
of the CMP and that it provided constructive recommendations. 

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 [hyperlink, 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 at 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. 

Signed by: 

Thomas Melito: 
Director, International Affairs and Trade: 

Signed by: 

David Wise: 
Director, Physical Infrastructure Issues: 

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

This report provides information on the progress of the United Nations 
(UN) Capital Master Plan (CMP) and the status of the UN consolidation 
building. Specifically, we examine (1) the extent to which the CMP is 
meeting its planned renovation scope, schedule, and budget; (2) the UN 
General Assembly's evaluation of CMP cost estimates; and (3) the 
status of the UN consolidation building project. 

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 consolidation building. 
Additionally, we discussed the progress, plans, risks, and costs of 
the CMP and consolidation building project with officials from the 
Department of State's (State) Bureau of International Organizations, 
the U.S. Mission to the UN, New York City, and UN offices, including 
the CMP office and Central Support Services. We also discussed efforts 
related to the consolidation building project with the UN Development 
Corporation, a public benefit corporation created to develop and 
operate office space for the benefit of the UN. We focused on these 
agencies because they are involved in the efforts of the CMP and the 
UN consolidation building project. 

To examine the extent to which the CMP is meeting its planned 
renovation scope, schedule, and budget, we analyzed documents such as 
CMP annual reports, UN Board of Auditors 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 
information on risk assessments, 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 
February 2012, and analyzed reports on CMP progress and associated 
costs produced by the Advisory Committee on Administrative and 
Budgetary Questions and the Program Planning and Budget Division. We 
also discussed these costs and the CMP's integrated master schedule 
with CMP officials. To understand options for funding projected CMP 
cost overruns, we reviewed UN Financial Rules and Regulations, UN 
Financial Report and Audited Financial Statements, and relevant 
congressional requirements in Appropriations Law, such as the 
Consolidated Appropriations Act of 2012. Further, we held discussions 
with officials from the CMP office, the UN Program Planning and Budget 
Division, UN Board of Auditors, and State's Bureau of International 
Organizations to understand the various options that the United States 
could utilize to finance its portion of projected CMP cost overruns. 
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, various UN departments--Program 
Planning and Budget Division, Board of Auditors, Office of Internal 
Oversight 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. 

To examine the UN General Assembly's evaluation of CMP cost estimates, 
we reviewed and analyzed documents provided by the CMP office to the 
UN General Assembly's Fifth Committee describing the project's 
financial condition as of February 2012, UN General Assembly 
resolution 66/258 issued in April 2012, the 2011 CMP annual report 
proposing financing options, and the Advisory Committee on 
Administrative and Budgetary Questions report A/66/7/Add.11 on costs 
of the CMP. Further, we analyzed the extent to which best practices 
for cost estimating from our Cost Estimating and Assessment Guide 
could potentially address concerns raised by the UN General Assembly 
with regard to the cost information provided by the CMP office. We did 
not conduct a full assessment of the CMP's February 2012 cost 
estimates, as (a) the estimates were updated projections provided in 
response to questions from the UN General Assembly's Fifth Committee 
during briefings, rather than comprehensive cost estimates; and (b) 
the CMP office intends to provide a full report on the project's 
costs, including new cost estimates, in fall 2012. 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. We also held discussions 
with officials from the CMP office, UN Program Planning and Budget 
Division, UN Board of Auditors, and the U.S. Mission to the UN on a 
number of factors affecting CMP cost estimates. 

To examine the status of the UN consolidation project, we analyzed the 
memorandum of understanding (MOU) signed between the City and State of 
New York to identify actions required by the MOU. Additionally, we 
reviewed UN documents such as the Secretary-General's Feasibility 
Study on the United Nations Headquarters Accommodation Needs 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. We conducted interviews with officials from New York City, the 
UN Development Corporation, and the UN regarding negotiations related 
to the consolidation building and lease costs for buildings 
potentially affected. Further, we reviewed how our best practices for 
cost estimating could provide insight on potential project costs to 
inform UN decision making. 

We conducted our work from January 2012 to July 2012 in accordance 
with generally accepted government auditing standards. Those standards 
require that we plan and perform our work to obtain sufficient, 
appropriate evidence to provide a reasonable basis for our findings 
and conclusions based on our objectives. We believe that the evidence 
obtained provides a reasonable basis for our findings and conclusions 
based on our objectives. 

[End of section] 

Appendix II: UN Tax Equalization Fund: 

The United States annually pays assessed contributions to the UN 
General Fund to support the UN's programs and activities. One of these 
activities is a staff assessment, which is an amount deducted from the 
gross pay of all UN employees and used to fund the UN Tax Equalization 
Fund (TEF). The UN established the TEF to equalize the net pay of all 
UN staff members whatever their national tax obligations. While most 
UN employees are exempt from paying income tax on their UN earnings in 
their home country, some UN employees, including U.S. nationals, are 
not. For member states that levy income taxes on the earnings of UN 
employees, such as the United States, contributions to the TEF are 
first used to reimburse UN employees for the taxes they paid on their 
UN income.[Footnote 29] Unused TEF credits remain as a balance in a 
member state's TEF account. 

The UN reports TEF credits on a biennial basis. According to U.S. and 
UN officials, various factors, such as modifications in U.S. tax laws 
or changes in the number of U.S. employees at the UN, can result in 
TEF credits or debits in a member state's account. As shown in table 
8, credits in the TEF attributable to the United States and reported 
by the UN rose by over $160 million between 2001 and 2009--from $17.6 
million to $179 million. 

Table 8: Credits in the UN Tax Equalization Fund Attributable to the 
United States, 2001-2009, as Reported by the UN: 

December 31, 2001; 
Amount of credits: $17.6 million; 
Change from previous biennium[A]: [Empty]. 

December 31, 2003; 
Amount of credits: $50.8 million; 
Change from previous biennium[A]: $33.2 million. 

December 31, 2005; 
Amount of credits: $97.3 million; 
Change from previous biennium[A]: $46.5 million. 

December 31, 2007; 
Amount of credits: $126.0 million; 
Change from previous biennium[A]: $28.7 million. 

December 31, 2009; 
Amount of credits: $179.0 million; 
Change from previous biennium[A]: $53.0 million. 

Source: GAO analysis of UN Board of Auditors, Financial Report and 
Audited Financial Statements. 

[A] This table shows changes from previous biennium beginning with 
2003. 

[End of table] 

If a member state's TEF account has a balance, the Financial Rules and 
Regulations of the UN state that such a balance shall be credited 
against the mandatory assessed contributions due from that member 
state the following year.[Footnote 30] However, notwithstanding UN 
financial regulations that TEF credits should be applied toward a 
member state's assessed contributions, TEF credits attributable to the 
United States were applied to fund enhanced security upgrades to the 
CMP. In October 2010, the UN requested State's endorsement of the use 
of up to $100 million of TEF credits accrued in prior years. In a 
January 2011 letter to the UN, State acknowledged the UN's use of up 
to $100 million in U.S. TEF credits described as "attributable to 
annual U.S. regular budget contributions" to fund the enhanced 
security upgrades.[Footnote 31] 

This transaction differs from previous uses of TEF credits. For 
example, State has previously requested that TEF credits be applied 
toward assessed contributions for the UN. Specifically, we reported 
that in 1997 the U.S. payment for its regular budget assessment 
included a $27.3 million credit from surplus funds in the 
TEF.[Footnote 32] UN officials confirmed that TEF credits attributable 
to the United States were previously applied toward U.S. assessed 
contributions; however, they noted that in the case of the enhanced 
security upgrades the credits were used for a different purpose. 

[End of section] 

Appendix III: Comments from the Department of State: 

Note: GAO comments supplementing those in the report appear at the end 
of this appendix. 

United States Department of State: 
Comptroller: 
1969 Dyess Avenue: 
Charleston, SC 29405: 

July 9, 2012: 

Dr. Loren Yager: 
Managing Director: 
International Affairs and Trade: 
Government Accountability Office: 
441 G Street, N.W. 
Washington, D.C. 20548-0001: 

Dear Dr. Yager: 

We appreciate the opportunity to review your draft report,
"UN Renovations: Use of Best Practices Could Enhance Future Cost
Estimates" GAO Job Code 320892. 

The enclosed Department of State comments are provided for 
incorporation with this letter as an appendix to the final report. 

If you have any questions concerning this response, please contact
Ted Faris, Program Analyst, Bureau of International Organization 
Affairs at (202) 736-4823. 

Sincerely, 

Signed by: 

James L. Millette: 

cc: GAO — David J. Wise: 
I0 — Esther D. Brimmer: 
State/OIG — Evelyn Klemstine: 

[End of letter] 

Department of State Comments on GAO Draft Report: 

UN Renovations: Use of Best Practices Could Enhance Future Cost 
Estimates (GAO-12-795; GAO Code 320892): 

Thank you for the opportunity to comment on the draft report entitled UN
Renovations: Use of Best Practices Could Enhance Future Cost 
Estimates. The Department of State welcomes the report and concurs 
with the recommendation that the Capital Master Plan (CMP) Office 
should implement best practices for cost estimation contained in GAO's 
Cost Estimating and Assessment Guide, to the extent practical.
The Department was shocked to learn in March that the cost overrun had 
grown so significantly. The U.S. mission to the UN joined with other 
delegations in expressing concern to the CMP Office about the increase 
in the overrun. UN member states generally shared this concern and 
requested the Secretary General, through a General Assembly 
resolution, to ensure completion of the project within the approved 
budget. The General Assembly resolution also urgently requested a
report on measures taken to address the risks that the Board of 
Auditors identified and an in-depth technical construction audit by 
the Office of Internal Oversight Services addressing the circumstances 
that led to the $430 million cost overrun. 

The draft report raises the possibility of the UN applying Tax 
Equalization Fund credits attributable to the United States to address 
the U.S. share of a potential additional assessment for the CMP. The 
Department is not actively considering this possibility, given that 
member states have conveyed to the Secretary-General that the project 
should proceed within the previously approved level of funding, and 
given that member states have not yet decided on proposals by the CMP 
Office to use other existing sources of funding, such as the working 
capital fund and interest earnings, to support the project. [See 
comment 1] 

The Department acknowledges that a cost estimate for the consolidation 
building has not yet been provided. However, potential construction of 
the consolidation building is not part of the Capital Master Plan. 
While the Department concurs that a sound cost estimate is important 
for the United States and other member states to decide whether the 
proposed construction of the consolidation building makes sound 
economic sense, we question the association made in the report between 
the CMP major renovation project and the proposed new construction of 
the consolidation building, which would not be directly managed by the 
UN. [See comment 2] 

The following are GAO's comments on State's letter dated July 9, 2012. 

GAO Comments: 

1. We maintain that an additional member assessment may be needed and 
that Tax Equalization Fund credits attributable to the United States 
remain a possible source of funding for such an assessment. Given the 
Capital Master Plan's (CMP) projected cost overruns of approximately 
$430 million, even if the United Nations (UN) General Assembly 
approves the use of proposed funding sources and reductions in planned 
renovations, the estimated cost overruns of the project would still be 
$212.7 million. In the event of cost escalations over the approved 
budget of the CMP, the UN General Assembly decided that member states 
would be subject to a further assessment. The U.S. share of any future 
assessment would be 22 percent. 

2. Our report makes clear that the CMP project is separate from the 
consolidation building proposal. However, we maintain that regardless 
of whether the UN directly manages the construction of the 
consolidation building, a sound cost estimate should be developed as 
the UN will be responsible for financing the building should it agree 
to its construction. 

[End of section] 

Appendix IV: Comments from the United Nations: 

United Nations: 
Headquarters: 
New York, NY 10017: 
Tel.: 1 (212) 963-1889: 
Fax: 1 (917) 367-5377: 

17 July, 2012: 

Mr. Thomas Melito, Director, International Affairs and Trade: 
Mr. David Wise, Director, Physical Infrastructure Issues: 
U.S. Government Accountability Office: 
Washington, DC: 

Dear Mr. Melito and Mr. Wise: 

Thank you very much for your electronic communication dated 18 June 
2012 in which you requested our comments on GAO's draft report on the 
Capital Master Plan. 

In summary, the draft GAO report is an accurate assessment of the 
status of the project, and provides constructive recommendations. Upon 
receipt of your draft report, staff members from the Office of the 
Capital Master Plan were in contact with members of your team and 
provided several suggestions regarding the report. I understand your 
team will be taking these suggestions into account as you finalize 
your report. 

As you are aware, the Tenth Annual Progress Report of the Secretary-
General on the Capital Master Plan is presently under preparation, and 
will be submitted for consideration by the General Assembly in their 
fall session. That report will contain updated information on the
Capital Master Plan. 

I wish to extend my appreciation to your team for their continued 
courtesy and professionalism. 

Sincerely, 

Signed by: 

Michael Adlerstein: 
Assistant Secretary-General and Executive Director: 
Capital Master Plan: 

[End of section] 

Appendix V: GAO Contacts and Staff Acknowledgments: 

GAO Contacts: 

Thomas Melito, Director, International Affairs and Trade, (202) 512-
9601 or melitot@gao.gov: 

David Wise, Director, Physical Infrastructure Issues, (202) 512-2834 
or wised@gao.gov: 

Staff Acknowledgments: 

In addition to the contacts named above, Maria Edelstein, Assistant 
Director; Biza Repko; Adam Yu; Mark Dowling; Debbie J. Chung; Jason 
Lee; and Karen Richey made key contributions to this report. Joshua 
Ormond provided technical assistance. 

[End of section] 

Related GAO Products: 

United Nations: Renovation Still Scheduled for Completion in 2013, but 
Risks to Its Schedule and Cost Remain. [hyperlink, 
http://www.gao.gov/products/GAO-09-870R]. (Washington, D.C.: July 30, 
2009). 

United Nations: Renovation Schedule Accelerated after Delays, but 
Risks Remain in Key Areas. [hyperlink, 
http://www.gao.gov/products/GAO-08-513R]. (Washington, D.C.: April 9, 
2008). 

Update on the United Nations' Capital Master Plan. [hyperlink, 
http://www.gao.gov/products/GAO-07-414R]. (Washington, D.C.: February 
15, 2007). 

United Nations: Renovation Planning Follows Industry Practices, but 
Procurement and Oversight Could Present Challenges. [hyperlink, 
http://www.gao.gov/products/GAO-07-31]. (Washington, D.C.: November 
16, 2006). 

United Nations: Early Renovation Planning Reasonable, but Additional 
Management Controls and Oversight Will Be Needed. [hyperlink, 
http://www.gao.gov/products/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. [hyperlink, 
http://www.gao.gov/products/GAO-01-788]. (Washington, D.C.: June 15, 
2001). 

[End of section] 

Footnotes: 

[1] G.A. Res. 61/251, UN GAOR, 61ST Sess., UN Doc. A/RES/61/251 (2006). 

[2] For a list of previous reports we have issued on the planning and 
progress of the CMP, see Related GAO Products at the end of this 
report. 

[3] GAO, United Nations: Renovation Still Scheduled for Completion in 
2013, but Risks to Its Schedule and Cost Remain, [hyperlink, 
http://www.gao.gov/products/GAO-09-870R] (Washington, D.C.: July 30, 
2009). When we reported in July 2009, the CMP was scheduled to be 
completed in 2013. 

[4] The General Assembly is the UN's main policy-making body and 
comprises all 193 member states. 

[5] G.A. Res. 60/282, UN GAOR, 60TH Sess., UN Doc A/RES/60/282 (2006). 

[6] GAO, Cost Estimating and Assessment Guide, [hyperlink, 
http://www.gao.gov/products/GAO-09-3SP] (Washington, D.C.: Mar. 2009). 

[7] Additional buildings in the complex, such as the Library and South 
Annex, were built between 1960 and 1982. 

[8] GAO, United Nations: Planning for Headquarters Renovation is 
Reasonable; United States Needs to Decide Whether to Support Work, 
[hyperlink, http://www.gao.gov/products/GAO-01-788] (Washington, D.C.: 
June 15, 2001). 

[9] Value engineering is the process of reviewing a project's 
objectives and design, and finding ways to achieve the same objectives 
at a lower cost. In February 2009, the CMP office informed the UN 
Advisory Committee on Administrative and Budgetary Questions that the 
decision to renovate the Conference Building in a single phase was the 
most significant change to the scope of the project resulting from 
value engineering. The Committee noted that some of the savings 
identified by the CMP office through value engineering actually 
resulted from external, market-related factors. 

[10] The resolution also noted that the CMP office entered into 
commitments for associated costs absent the formal approval of the UN 
General Assembly. 

[11] Other associated costs requirements include moving supplies and 
services, archive space, and storage facilities. 

[12] The UN General Assembly also requested that the support account 
for peacekeeping operations absorb approximately $4.2 million in costs 
associated with the secondary data center. 

[13] The United States and the UN reached an agreement in January 2011 
on the design requirements for more stringent security measures than 
those originally planned for the CMP. In 2010, the CMP office, in 
consultation with the UN Department of Safety and Security, undertook 
additional studies to examine the effect on UN facilities of potential 
vehicle-borne explosive devices. As a result of these studies, the UN 
decided to implement enhanced security upgrades for the CMP. The 
United States did not object to the UN's use of up to $100 million in 
credits attributable to the United States from the UN Tax Equalization 
Fund to fund the upgrades. Noting this funding, the UN General 
Assembly decided that the costs related to the enhanced security 
upgrades would not be recovered through an assessment imposed on 
member states. 

[14] In October 2011, the CMP office reported that the options 
regarding the future of the Library and South Annex were (1) moving 
the off-ramp, (2) closing the off-ramp, (3) closing the Library and 
South Annex upon completion of the CMP, or (4) assuming that no 
solution would be found and demolishing the buildings. 

[15] [hyperlink, http://www.gao.gov/products/GAO-09-870R]. The CMP 
office's risk register identified the risk of security upgrades to the 
CMP as having a low probability of occurring, but a significant impact 
if it did occur. 

[16] The total cost overrun estimate includes a combination of accrued 
costs for work already completed and projected costs for work not yet 
contracted. For example, the CMP has awarded large contracts for 
ongoing work in the Conference Building, Secretariat Building, and 
basements. As a result, some portions of the total projected cost 
overruns for the CMP, such as swing space and asbestos costs, are 
actual costs. However, the estimated cost overruns also include a 
number of projected costs, such as those for the General Assembly 
Building, where the CMP office has yet to award contracts. 

[17] The CMP reported cost estimates as of May 2011 in its ninth 
annual progress report on the CMP, which was published in October 2011. 

[18] The CMP office reported similar information in 2009 when changing 
its budget reporting by combining the cost estimates for contingency 
and escalation. The CMP office reported that it combined the accounts 
because it had less uncertainty about the timing and risks of the 
project. Similarly, in September 2007, in remarking on accelerated 
strategy IV, the CMP office reported that it would know almost all of 
the contract values within the first 3 years of the project, greatly 
reducing the financial risks to the UN. 

[19] Although the UN General Assembly did not make a decision on 
whether the CMP office could utilize the working capital reserve or 
interest income in the March 2012 resumed session, the General 
Assembly did authorize the Secretary-General to enter into commitments 
of up to an additional $135 million for resources required for the CMP 
project through 2012. The UN General Assembly did not identify a 
source of funding for the $135 million in new commitment authority for 
the CMP. According to UN officials, the eventual funding could be 
sourced through the use of the working capital reserve and interest 
income on the CMP, or it could be sourced from an assessment on member 
states. 

[20] Pub. Law No. 112-74, 125 Stat. 1168. 

[21] It is unclear whether these provisions are relevant to the use of 
existing TEF credits attributable to the United States. According to 
State, once the United States provides assessed contributions to the 
UN, the organization legally controls them. While State officials said 
that the UN generally weighs U.S. preferences regarding the use of TEF 
credits it has contributed to the organization, ultimately the use of 
these credits is at the sole discretion of the UN. However, State 
officials told us that they will not endorse the use by the UN of TEF 
credits attributable to the United States for any purpose other than 
assessed contributions and that it is unlikely that the UN would act 
unilaterally to use TEF credits for a purpose to which State objected. 
UN officials confirmed this statement. 

[22] We previously reported that the CMP office changed its budget 
reporting by combining its cost estimates for contingency and 
escalation. While both categories account for uncertainties, combining 
them can reduce the transparency of how these funds are being used. 

[23] Over the years, we have reported that many programs overrun their 
budgets due, in part, to difficulties estimating program costs. While 
not an exact comparison, we reported that cost estimates for the 
Capital Visitor Center rose from $303.5 million in 2003 to $621 
million in 2007 due to uncertainties related to the preliminary nature 
of the design work, the unknown scope of pre-construction 
requirements, and security adjustments to the design after the events 
of September 11, 2001. 

[24] [hyperlink, http://www.gao.gov/products/GAO-09-3SP]. 

[25] The UN chose the year 2014 as the starting point for its long-
term space needs assessment. According to the UN, the organization 
plans to vacate temporary swing spaces leased for the CMP prior to 
2014. Therefore, it did not include these leased spaces in its 
assessment. 

[26] The CMP plans to renovate office space owned by the UN on its 
headquarters campus. However, even after the UN completes the 
renovation of these buildings, it will still require additional office 
space to accommodate its headquarters staff. 

[27] The UN has estimated that the market rates for the space 
effective in 2023 would be $77 per square foot. 

[28] UN officials told us the MOU may also require them to cover $73 
million in funds used to acquire the land on which to construct the 
consolidation building. 

[29] Member states that do not levy income taxes on the earnings of UN 
employees receive TEF credits as an offset against their mandatory UN 
assessments. 

[30] UN Regulation 4.12. United Nations, Financial Regulations and 
Rules of the United Nations, ST/SGB/2003/7. Mandatory assessed 
contributions include those in the UN regular budget, peacekeeping 
operation accounts, and international criminal tribunal accounts. 

[31] State also informed Congress of this pending transaction in 
letters sent in December 2010. 

[32] GAO, United Nations: Financial Issues and U.S. Arrears, 
[hyperlink, http://www.gao.gov/products/GAO/NSIAD-98-201BR], 
(Washington, D.C.: June 18, 1998). 

[End of section] 

GAO’s Mission: 

The Government Accountability Office, the audit, evaluation, and 
investigative arm of Congress, exists to support Congress in meeting 
its constitutional responsibilities and to help improve the 
performance and accountability of the federal government for the 
American people. GAO examines the use of public funds; evaluates 
federal programs and policies; and provides analyses, recommendations, 
and other assistance to help Congress make informed oversight, policy, 
and funding decisions. GAO’s commitment to good government is 
reflected in its core values of accountability, integrity, and 
reliability. 

Obtaining Copies of GAO Reports and Testimony: 

The fastest and easiest way to obtain copies of GAO documents at no 
cost is through GAO’s website [hyperlink, http://www.gao.gov]. Each 
weekday afternoon, GAO posts on its website newly released reports, 
testimony, and correspondence. To have GAO e-mail you a list of newly 
posted products, go to [hyperlink, http://www.gao.gov] and select 
“E-mail Updates.” 

Order by Phone: 

The price of each GAO publication reflects GAO’s actual cost of 
production and distribution and depends on the number of pages in the 
publication and whether the publication is printed in color or black 
and white. Pricing and ordering information is posted on GAO’s 
website, [hyperlink, http://www.gao.gov/ordering.htm]. 

Place orders by calling (202) 512-6000, toll free (866) 801-7077, or 
TDD (202) 512-2537. 

Orders may be paid for using American Express, Discover Card, 
MasterCard, Visa, check, or money order. Call for additional 
information. 

Connect with GAO: 

Connect with GAO on facebook, flickr, twitter, and YouTube.
Subscribe to our RSS Feeds or E mail Updates. Listen to our Podcasts.
Visit GAO on the web at [hyperlink, http://www.gao.gov]. 

To Report Fraud, Waste, and Abuse in Federal Programs: 

Contact: 
Website: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]; 
E-mail: fraudnet@gao.gov; 
Automated answering system: (800) 424-5454 or (202) 512-7470. 

Congressional Relations: 

Katherine Siggerud, Managing Director, siggerudk@gao.gov, (202) 512-4400
U.S. Government Accountability Office, 441 G Street NW, Room 7125
Washington, DC 20548. 

Public Affairs: 
Chuck Young, Managing Director, youngc1@gao.gov, (202) 512-4800
U.S. Government Accountability Office, 441 G Street NW, Room 7149 
Washington, DC 20548.