Procurement at the United Nations

The UN does not have an effective mechanism in place for holding procurement staff accountable for their actions

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The Government Accountability Office (“GAO”) is the independent audit and investigative arm of the United States Congress.

Last week, the GAO released a damning report on the state of procurement internal controls at the United Nations (“UN”).

http://www.gao.gov/docsearch/abstract.php?rptno=GAO-06-577

For more than a decade, experts have called on the UN Secretariat to correct serious deficiencies in its procurement process.

During this time, UN procurement tripled to more than $1.6 billion in 2005, largely due to expanding UN peacekeeping operations. More than a third of that amount is procured by UN peacekeeping field missions.

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The GAO found that weak internal controls over UN headquarters and peacekeeping procurement operations expose UN resources to significant risk of waste, fraud and abuse.

The UN’s overall control environment for procurement is weakened by the absence of:

1. An effective organisational structure – the UN has not established a single organisational entity or mechanism capable of comprehensively managing procurement;

2. A commitment to a professional workforce – 16 of the 19 field procurement chiefs did not possess a professional certification of their procurement qualifications and the UN had not demonstrated a commitment to improving the professionalism of its procurement staff in the form of training, a career development path, or other key capital practices critical to attracting, developing and retaining a qualified professional workforce; and

3. Specific ethics guidance for procurement staff.

The GOA found that:

• Although UN procurement tripled over the past 7 years, the size of the UN’s principal contract review committee and its support staff remained relatively stable.
  


• The UN has not established an independent process to consider vendor protests despite a 1994 recommendation by an investigative committee to do so as soon as possible.
  


• The UN has not updated its procurement manual since 2004 to reflect current UN procurement policy.
  


• The UN does not consistently implement its process for helping to ensure that it is conducting business with qualified vendors. As a result, the UN may be vulnerable to favouring certain vendors and awarding contracts to vendors that are unqualified.
  


• The UN lacks a risk assessment framework for identifying and managing the procurement activities that are most vulnerable to mismanagement.
  


• The UN lacks an integrated information management system, which adversely affects its ability to oversee field and headquarters procurement operations.
  


• Chief procurement officers in the field did not have a systematic, standardised approach for determining whether procurement under their supervision is consistent with UN regulations.
  


• The UN does not review their own audit reports in a methodical manner to determine whether changes to policy or processes are warranted to address systemic programs.
  


• The UN does not have a mechanism that provides reasonable assurance that corrective actions, once taken, are institutionalised.

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Perhaps most damning of all was the finding that the UN does not have an effective mechanism for holding staff accountable.

The GAO wrote: “the UN does not have an effective mechanism in place for holding procurement staff accountable for their actions … the UN’s lack of enforcement of accountability and reluctance to investigate the mismanagement of resources, fraud, and abuse of delegated authority has increased the risk of corrupt practices in UN procurement”.

The 2003 North American Electricity Blackout

The cascading effect of the failure of one power plant to crop trees resulted in the forced shutdown of more than 100 power plants.

The 2003 North American electricity blackout was a massive power outage that occurred throughout parts of northeastern United States and eastern Canada on Thursday August 14, 2003.

The blackout was the largest in North American history.

It affected an estimated 10 million people in the Canadian province of Ontario (about one-third of the population of Canada), and 40 million people in Ohio, Michigan, Pennsylvania, New York, Vermont, Connecticut and New Jersey (about one-seventh of the population of the United States). Outage related financial losses were estimated at USD$10 billion.

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On November 19, 2003 the United States – Canada Power System Outage Task Force released a report placing the cause of the blackout on FirstEnergy Corporation’s failure to trim trees in part of its Ohio service area. The report said that a generating plant in Parm, Ohio, a suburb of Cleveland, went off-line amid high electrical demand, and strained high voltage power lines later went out of service when they came into contact with “overgrown trees”.

It also found that FirstEnergy did not take remedial action or warn other control centres until it was too late because of a bug in the Unix based system that prevented alarms from showing on their control systems and they had inadequate staff to detect and correct the software bug.

The cascading effect that resulted ultimately forced the shutdown of more than 100 power plants.

The Task Force presented to the President of the United States and the Prime Minister of Canada a damning report of the internal control weaknesses at FirstEnergy which contributed to the blackout. It noted:

• FirstEnergy failed to assess and understand the inadequacies of its systems, particularly with respect to voltage instability.
  
• There was inadequate situational awareness at FirstEnergy – FirstEnergy did not recognize or understand the deteriorating condition of its systems.
  
• FirstEnergy failed to conduct rigorous long-term planning studies of its system and neglected to conduct appropriate multiple contingency or extreme condition assessments.
  
• FirstEnergy failed to ensure the security of its transmission system after significant unforeseen contingencies because it did not use an effective contingency analysis capability on a routine basis.
  
• FirstEnergy lacked procedures to ensure that its operators were continually aware of the functional state of their critical monitoring tools.
  
• FirstEnergy control centre computer support staff didn’t have effective internal communication procedures.
  
• Some of the regulator’s (NERC – the North American Reliability Council) planning and operational requirements and standards were sufficiently ambiguous that FirstEnergy could interpret them to include practices that were inadequate for reliable system operation.
  
• The industry was aware of the lack of specificity, lack of measurable compliance criteria and detail in some standards but they moved slowly to address these problems effectively.

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The Task Force noted that after each blackout in North America since 1965 an expert team of investigators has probed the causes of the blackout, written detailed technical reports and issued lists of recommendations to prevent or minimise the scope of future blackouts.

Yet several of the causes of the August 14 blackout are strikingly similar to those of the earlier blackouts.

The Task Force noted:

Clearly, efforts to implement earlier recommendations have not been adequate.

Recommendations have no value unless they are implemented.

Accordingly, the Task Force emphasises strongly that North American governments and industry should commit themselves to working together to put into effect the suite of improvements mapped out.

Success in this area will require particular attention to the mechanisms proposed for performance monitoring, accountability of senior management, and enforcement of compliance with standards.

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The New Mexico Governor Bill Richardson, who formally headed the Department of Energy, in a live television interview two hours into the blackout characterised the United States as “a superpower with a third-world electricity grid”.

In Europe, this statement was widely publicised accompanied with comparisons highlighting the tighter, safer and better interconnected European electricity network.

Six weeks later, Italy suffered an electricity blackout larger than the 2003 North American blackout.