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UNDP Procurement: Exceptions Are the Rule

The United Nations Development Program (UNDP), the U.N.’s anti-poverty flagship, has overridden its own rules requiring competitive bidding for procurement contracts on more than half of the $1.5 billion in goods and services it paid for over the past three years, an investigation by FOX News has determined.

Confidential UNDP procurement documents obtained by FOX show that over the past three years, the development agency has waived competitive bidding procedures for goods and services worth $879 million, roughly 58 percent of the total it disbursed during that time.

The value of the waivers ranged from $259 million, or 50 percent of total purchases in 2005, to a high of $409 million, or two-thirds of the total for 2006, before settling back to $210 million, or 54 percent of the total last year.

The totals are “shocking,” and “scandalous,” according to William Easterly, a former World Bank economist, who is currently a visiting fellow at the left-leaning Brookings Institution in Washington D.C. “There could be some extraordinary circumstances involved, but even those cannot possibly explain why the bulk of UNDP operations are waivers of competition.”

The waiver tallies were compiled by UNDP’s Advisory Committee on Procurement (ACP), which records the actions that four UNDP regional procurement committees take in more than 160 countries, and additionally must approve all waivers of competitive bidding on contracts worth $1 million or more.

In reply to a series of questions by FOX News regarding the awards and waivers, UNDP reported the overall awards in the same amount as shown on the documents obtained by FOX News. But in recording the waivers, UNDP offered a different interpretation..

Arguing that the term “waiver of competitive bidding” covered many circumstances, UNDP replied that true “exceptions to competitive bidding” totaled only $78 million in 2005, $120 million in 2006, and $99 million in 2007 — or just 20 percent of the procurement total.

The remainder of the waivers, UNDP said, were cases where “full competitive bidding” took place, “but where the outcome is less than 3 fully qualified offers.” This happens, UNDP spokesman David Morris said, “for reasons outside of UNDP’s control,” such as lack of attention from suppliers, “or for a number of other reasons.”

Morrison added that “UNDP acknowledges that using the same term to cover these two very different sets of circumstances can lead to confusion.”

That “confusion,” however, is embedded in UNDP’s own internal documents, where the distinction Morrison makes does not exist.

The same UNDP documents also show that by far the largest and most frequent requests for UNDP procurement cash — and their subsequent approvals — come from countries with questionable track records for government honesty and transparency. Among the big winners are the Democratic Republic of Congo, Sudan, Honduras and Iraq.

The volume of procurement funds requested for the Democratic Republic of Congo alone in 2006 — $264 million — represented 82 percent of that year’s entire UNDP African regional bureau requests. The tallies also record that Congo was the African country with the greatest value of procurement spending approved in each of the three years covered in the documents obtained by FOX. The UNDP documents do not state the actual value of the agency’s Congo funding approvals, and do not break out the amount of that money obtained through waivers of competitive bidding.

To see the UNDP documents, click here (large PDF: Firefox preferred).

In 2005, the Democratic Republic of Congo (DRC) ranked 144th on the “corruption perception index” of Transparency International, a private anti-corruption watchdog, while the U.S., by contrast, ranked 17th (and Iceland ranked 1st). In 2006, DRC skidded to 156th place on the index, while the U.S. slumped to 20th. In 2007, DRC fell to 168th place, while the U.S. retained its 20th-place ranking.

To see Transparency International's ratings, click here.

Tallies supplied by UNDP for the top countries in terms of procurement in 2007 were even higher than in the records obtained by FOX News, indicating that the FOX versions did not contain finalized totals for that year. (Approved procurement for 2007, according to UNDP, was $479 million, vs. $386 million in the documents obtained by FOX.) According to the UNDP, Congo received $41 million in 2007, with $5.8 million granted through all varieties of waivers. In this case and others, UNDP maintained, waivers as it now wished to define them would reduce the total by “40% or more.”

According to its own financial rules and regulations, UNDP is supposed to award contracts for goods and services based on the principle of “effective international competition,” carried out “on as wide a geographical basis as practicable and suited to market circumstances.”

Those rules allow for exemptions, or waivers, based on such factors as the existence of monopolies, lack of satisfactory results from a bidding exercise over a “reasonable time period” and “genuine exigency,” meaning pressing need for a product. The widest latitude of all is given outright to UNDP’s chief procurement officer, who can waive competitive bidding when the officer “determines that a formal solicitation will not give satisfactory results.”

UNDP’s procurement procedures became an issue on April 1, when FOX News questioned the agency’s 2007 authorization of 19 airport walk-through body scanners worth $2.3 million, on behalf of the Venezuelan government of Hugo Chavez.

The scanner purchase was approved without competitive bidding, rather than the “objective, transparent, efficient” exercise claimed by UNDP. The highly respected U.S. defense contractor that manufactured the equipment, L3 Communications, declared that it had only shipped 17 scanners to Venezuela, and these were for the country’s correctional system, not the customs and tax authority cited by UNDP.

Two days later, UNDP posted documents on its website, which FOX News pointed out contained different totals for the scanners, offered two different dates for the same purchase order, and produced a “project document” for the deal that terminated 3 1/2 years before the purchase was made, and never mentioned airports or scanners at all.

Oil-rich Venezuela, with an estimated GDP per capita of $12,800 in 2007, shares one characteristic with many of the biggest beneficiaries of UNDP funding: its low ranking on the Transparency International corruption perceptions index. In 2007, along with four other countries, it ranked 162nd — in the place immediately above the Democratic Republic of Congo.

George Russell is executive editor of FOX News.