Max-Otto Baumann and Mona-Lisa Limbach

BONN, Germany -- Member states of the United Nations are now negotiating reform proposals for the world body's development system. In the latest draft resolution, they welcome the secretary-general's proposal for "advancing common business operations" and "request" for their "implementation," in line with earlier decisions by the General Assembly (a previous draft requested "full implementation"). This is a minor element of the overall reform package, but it could be crucial for the entire reform process to succeed. According to an estimate by the UN Secretariat, this part of the reform alone could save 10 to 20 percent of the UN's expenses for business operations, or $190 to $380 million annually: a lot of money, given that UN member nations are inclined to veto any reform that is not cost-neutral. There is probably no one in the UN who could not offer an example of glaring inefficiencies in how the UN does business. On a recent trip to Pakistan, one of us learned how UN entities in the country still operate their own fleets of partly armored and thus insanely expensive vehicles. The UN in Pakistan estimates that it could achieve at least a 20 percent discount from a joint vehicle rental service contract. It turns out that UN agencies have difficulty sharing cars for joint field missions because of stubborn bureaucratic issues, such as who pays for the drivers and fuel. It is not that the UN hasn't tried to solve these problems. The harmonization and integration of business operations is one of the five pillars of Delivering as One, a 2006 initiative to induce more coherence and efficiency in the UN. Starting in 2012, UN country teams, the mainstays of the development system, were asked to prepare business operations strategies to cut costs in six areas -- information and communications technology, procurement, human resources, finance, logistics and facility services -- and reduce hurdles for collaboration. Today, 46 of the 129 UN country teams have prepared such strategies; of these, 25 are quantified and available online. An analysis of the 25 yields a projected potential savings at the country level. Our method is simple: if we know what these 25 strategies plan to achieve in savings, relative to the country budget, we can extrapolate what the entire UN development system could achieve at the country level. One case, Fiji, had to be factored out, since the UN country team there covers 14 Pacific Island countries and territories, projecting enormous savings of $2.4 million in ICT alone. The remaining 24 strategies aim to save an average of $837,000 annually. Scaling this up to the UN's 129 country teams (while factoring out 11 plans that have already been completed), we find that the UN could save $114 million a year, or 8 percent of operating costs, over the next four years. This amount is well below the UN's own estimate of potential savings in the UN development system. However, in a different scenario, more savings appear possible: when we look at the three top-performing country teams in each service area and extrapolate their average savings, we arrive at a potential efficiency gain of $363 million annually, or 26 percent of operating costs. Keep in mind that these numbers apply to the UN's spending only at the country level, where most (73 percent) of the development work is carried out. The UN's own estimate applies to the entire spending on operational activities for development. If we scale up our estimate to systemwide numbers, the potential savings become $498 million a year. This number does not include savings from common premises, which the UN estimates could yield another $120 million (which puts the best-case scenario at $618 million). Looking at the six service areas, we find that the biggest efficiencies can be tapped in finance -- precisely, in foreign-currency exchanges. In Rwanda, for example, the UN planned to save $10 million through a harmonized, competitive approach to foreign-currency exchange; another country-level office in the continent envisions saving $16 million through negotiating better exchange rates with the government. Procurement has a similar high efficiency potential. It is important to stress that estimates have weaknesses. Some strategies present inconsistent numbers. Some are more elaborate, others less so. The relative savings vary considerably between countries, which might reflect country-specific circumstances, but it also suggests that this exercise is driven more by committed individuals than by UN policies. All of the strategies describe targets, but there is no systematic evaluation on savings that have been achieved in the past and can, in principle, be empirically evaluated as opposed to those envisioned for the future. Achieving the potential of saving $363 million will require a collective effort by the UN, donors and developing countries. UN staff members working at the country level, while (pain)fully aware of the inefficiencies, feel little incentive for tackling the problem. They often lack a clear notion of what UN policies require and what their own agencies allow them to do; successful operations managers might have their teams reduced as a result of less work; resident coordinators are not appraised on their efforts for cutting operating costs. More politically, efficiency is connected with conflicting goals. Donors have long demanded better streamlining because of pressure from their electorate. In governing boards of UN agencies, however, donors consistently emphasize accountability and antifraud policies over interagency collaboration. The Group of 77 tends to see efficiency as a donor tactic for downsizing the UN's development work. As a result, UN directives require agencies to channel such gains into development activities, rather than investing in organizational performance. Anecdotal evidence suggests that at least some governments of developing countries see a benefit in inefficient UN structures that bring foreign money into the country. Cost savings in operations do not generally reduce the abilities of the UN in the same way that recent cuts to the UN peacekeeping budget have done. To the contrary, harmonizing and integrating business practices increases the UN's ability to work together more smoothly and exploit their synergies. It is time for member states and the UN to get their act together. There is both a clear business case for reform and an opportunity to set the UN on the right track. Secretary-General António Guterres estimates that a revamped resident coordinator system will cost $255 million annually, up from $175 million currently, reflecting the need to hire more personnel in the resident coordinators' offices, as well as in regional and global support units. Strengthened coordination will drive efficiency, but it will also benefit from less hurdles for interagency coordination. Even if, at the end of the day, only a fraction of the potential savings of $363 million is achieved, reform will pay off. This article was updated. Please consider making a tax-deductible donation to PassBlue, a nonprofit journalism site.

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Max-Otto Baumann and Mona-Lisa Limbach

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