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Home > Articles > Outsourcing > ArticleItem
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3/25/2006 8:29:10 PM
William B. Bierce
Secretary General Recommends Outsourcing and Offshoring
 On March 6, 2006, UN Secretary General Kofi Annan issued a report to the UN General Assembly recommending adoption of a managed procurement strategy.
The report highlights the high cost, inefficiency and ineffectiveness of insourcing virtually all services at high-cost locations such as New York and Geneva. It responds to a conditional commitment by the U.S. Congress to pay its annual subscription only if the U.N. takes steps to reduce mismanagement and corruption (as found in the Iraqi oil-for-food program under Saddam Hussein) and streamline a bloated organization. Secretary General Annan did not accept the recommendations of Paul A. Volcker, former U.S. Federal Reserve Bank chairman, to set up a position of chief operating officer to separate policy management from administration.
Converting UN Operations to a Global Procurement Organization. The Secretary General's report identified the distributed model including global sourcing as an important future paradigm for the global intergovernmental organization. His key proposals include:
(1) Decentralization of administrative services, including an upgrade of the information and telecommunications system under a new post of Assistant Secretary General for Technology (a "UN CIO");
(2) Distribution of administrative functions to low-cost countries, after "a detailed cost-benefit analysis in each case";
(3) "contracting out" many administrative services that are now furnished internally;
(4) Developing a new procurement organization with improved benefits to employees in the field generally and special funding for recruitment and training of a procurement department;
(5) Telecommuting from home for certain employees who do not need a local office for daily work;
(6) Termination of 1,000 jobs through a buyout of $100,000 each, for a total budget item of $10 million;
(7) Restructuring the rules governing employment of international civil service to allow for greater management flexibility in transferring personnel to locations outside the Headquarters;
(8) Adoption of best practices in procurement and purchasing procedures, which an internal audit has noted currently involve up to tens of millions of dollars in waste.
Budget for UN's Global Procurement Services. The UN's budget for procurement of services has ballooned from $400 million in 1997 to more than $1.6 billion in 2005. This rapid and unchecked growth will send the total budget to over $2 billion in the near future, due to the increase in peacekeeping costs, which account for 85% of the UN's budget.
Outsourcing and Offshoring. The report reveals that the Secretary General has adopted the spirit of outsourcing:
Compared to other organizations, including many within the United Nations family, the Secretariat has been slow to explore new ways of delivering services, such as relocations and outsourcing. While the character of the United Nations and the sensitivity of some of its tasks means that a core group of functions should always be carried out by a dedicated core of international civil servants at Headquarters, there are non-core functions for which other options should be seriously examined. Investing in the United Nations: for a Stronger Organization Worldwide, Report of the Secretary General, UN Gen. Assembly A/60/693 (Mar. 7, 2006, p.3).
In Proposal 12 (of a total of 23 proposal), the Secretary General proposed to undertake systematic and detailed cost-benefit analyses of relocation, outsourcing and telecommuting opportunities for select administrative services, as follows:
(i) Translation, editing and documents production by September 2006.
(ii) Internal printing and publishing processes by September 2006.
(iii) Medical insurance plan administration by September 2006.
(iv) Information technology support services by December 2006.
(v) Payables, receivables and payroll processes by March 2007.
(vi) Staff benefits administration by March 2007.
Best Practices. Like many private organizations, the UN currently requires its contractors to refrain from disclosing the contract for publicity or marketing purposes. Service providers considering offering their services to the UN need to consult their outsourcing legal counsel on the special governmental regime that relates to choice of applicable law, relationship governance and dispute resolution, contract administration, and privacy and confidentiality.
Conclusion. The contracting processes are open for improvement. This report virtually invites sourcing consultants and managed service providers to make their proposals. They should be aware of the unique legal status of the United Nations and the issues involving its contractual relationships. These issues may change as the procurement function is itself open for "improvement.
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Source: Outsourcing Law
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