Budgeting for the Renovation of the UN’s New York HQ

Wed, 31/03/10

Getting the funding right, for the massive renovation project at the UN headquarters in New York, was one of the major challenges for the team running the so-called Capital Master Plan (CMP).   

Upgrading the 17 acre (70,000 square metre) seven-building complex to meet the highest environmental standards was never going to be cheap. There had been no major refurbishment in 60 years of intensive use, and the upgrade, while simultaneously restoring and preserving its iconic modernist design features, also had to tackle a string of safety issues, not least the removal of asbestos. 

The eventual specification for the CMP has a price tag of nearly USD 1.9 billion,  for a project involving some 4000 people. The funding had to come from the member states, some of whom took some persuading that a major renovation really was in order – until a tour of the basement and its 1950s equipment helped convince them of its urgency.  Their individual contributions were worked out on the same scale as the regular 2007 budget assessment, and either spread over the five year period or made as one up front payment. They can also choose to make additional donations for the renovation of a particular space (each of which has had its costs determined by the CMP team), in which case they have the right to design input, and to be given recognition in that space. 

A working capital reserve fund has been established to mitigate cash flow fluctuations. There is also provision in the plan for obtaining an internationally syndicated letter of credit facility for the duration of the construction contract. This could be used, if necessary, to cover further temporary cash flow deficits.


Costs and benefits


Member states agreed to fund the USD 1,867.7 million CMP project on the basis of the benefits it will bring, both to the headquarters itself and to the UN as a whole. 

Reduced operational costs are part of this equation. Cost-effective measures with short payback periods should see the completed project delivering annual savings of USD 4 to 6 million on energy costs, building operations and maintenance. Other major plus points include a better working environment for staff, and lower environmental impacts. Last but not least are the reputational benefits for the organization of leading by example. 

Rigorous cost control is crucial in implementing the CMP. Its starting point is a realistic budget, based on a thorough work plan and proper investigation of the existing condition of the site. Controlling the scope of the project has meant not allowing it to be stretched into anything beyond its original aim of upgrading the infrastructure and safety features. This has required firm commitment from the top, strong project leadership, and real world design and construction expertise.


Greener building, greener working


Most of the renovations have a significant sustainability component. An estimated USD 50 million is allocated specifically to sustainability improvements to the buildings, incorporating a range of new technologies to minimise energy consumption, greenhouse gas emissions, water consumption and waste. A further USD 28 million is earmarked in the CMP budget as sustainability initiative funds, used mainly for improvements in energy efficiency – the most relevant factor in obtaining the highest certification under the US Green Building Council's Leadership in Energy and Environmental Design (LEED) standard for sustainable building design, construction and operation. 

Project architect Jack Howard is convinced that the CMP's green approach would also be beneficial at UN offices away from headquarters. “If new equipment and/or renovations are scheduled to take place,” he argues, “why not do it green? A simple payback period analysis could show that it is also financially sound. UN offices and agencies should be encouraged to do this. ”

Categories: Buildings, Finance