[Senate Hearing 109-497]
[From the U.S. Government Publishing Office]
S. Hrg. 109-497
U.S. FINANCIAL INVOLVEMENT IN RENOVATION OF U.N. HEADQUARTERS
=======================================================================
HEARING
before the
FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT
INFORMATION, AND INTERNATIONAL
SECURITY SUBCOMMITTEE
of the
COMMITTEE ON
HOMELAND SECURITY AND
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
----------
JULY 21, 2005
----------
Printed for the use of the Committee on Homeland Security
and Governmental Affairs
S. Hrg. 109-497
U.S. FINANCIAL INVOLVEMENT IN RENOVATION OF U.N. HEADQUARTERS
=======================================================================
HEARING
before the
FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT
INFORMATION, AND INTERNATIONAL
SECURITY SUBCOMMITTEE
of the
COMMITTEE ON
HOMELAND SECURITY AND
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
__________
JULY 21, 2005
__________
Printed for the use of the Committee on Homeland Security
and Governmental Affairs
U.S. GOVERNMENT PRINTING OFFICE
23-164 WASHINGTON : 2006
_____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512�091800
Fax: (202) 512�092250 Mail: Stop SSOP, Washington, DC 20402�090001
COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
SUSAN M. COLLINS, Maine, Chairman
TED STEVENS, Alaska JOSEPH I. LIEBERMAN, Connecticut
GEORGE V. VOINOVICH, Ohio CARL LEVIN, Michigan
NORM COLEMAN, Minnesota DANIEL K. AKAKA, Hawaii
TOM COBURN, Oklahoma THOMAS R. CARPER, Delaware
LINCOLN D. CHAFEE, Rhode Island MARK DAYTON, Minnesota
ROBERT F. BENNETT, Utah FRANK LAUTENBERG, New Jersey
PETE V. DOMENICI, New Mexico MARK PRYOR, Arkansas
JOHN W. WARNER, Virginia
Michael D. Bopp, Staff Director and Chief Counsel
Joyce A. Rechtschaffen, Minority Staff Director and Chief Counsel
Trina D. Tyrer, Chief Clerk
FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT INFORMATION, AND INTERNATIONAL
SECURITY SUBCOMMITTEE
TOM COBURN, Oklahoma, Chairman
TED STEVENS, Alaska THOMAS CARPER, Delaware
GEORGE V. VOINOVICH, Ohio CARL LEVIN, Michigan
LINCOLN D. CHAFEE, Rhode Island DANIEL K. AKAKA, Hawaii
ROBERT F. BENNETT, Utah MARK DAYTON, Minnesota
PETE V. DOMENICI, New Mexico FRANK LAUTENBERG, New Jersey
JOHN W. WARNER, Virginia MARK PRYOR, Arkansas
Katy French, Staff Director
Sheila Murphy, Minority Staff Director
John Kilvington, Minority Deputy Staff Director
Liz Scranton, Chief Clerk
C O N T E N T S
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Opening statements:
Page
Senator Coburn............................................... 1
Senator Dayton............................................... 4
Prepared statement:
Senator Carper............................................... 43
WITNESSES
Thursday, July 21, 2005
Hon. James Inhofe, a U.S. Senator from the State of Oklahoma..... 5
Hon. Jeff Sessions, a U.S. Senator from the State of Alabama..... 6
Christopher B. Burnham, Under Secretary General Department of
Management, United Nations..................................... 8
Anne W. Patterson, Deputy Permanent Representative of the United
States to the United Nations, U.S. Department of State......... 20
Martin J. Golden, New York State Senator......................... 29
Donald J. Trump, Chairman and President, the Trump Corporation... 31
Alphabetical List of Witnesses
Burnham, Christopher B.:
Testimony.................................................... 8
Prepared statement with attachments.......................... 59
Golden, Martin J.:
Testimony.................................................... 29
Prepared statement........................................... 312
Inhofe, Hon. James:
Testimony.................................................... 5
Prepared statement........................................... 46
Patterson, Anne W.:
Testimony.................................................... 20
Prepared statement with attachments.......................... 243
Sessions, Hon. Jeff:
Testimony.................................................... 6
Trump, Donald J.:
Testimony.................................................... 31
Prepared statement with attachments.......................... 315
APPENDIX
Chart submitted by Senator Coburn entitled ``United Nations
Headquarters Renovation''...................................... 45
Questions and responses for the Record from:
Mr. Burnham.................................................. 72
Ms. Patterson................................................ 250
U.S. FINANCIAL INVOLVEMENT IN RENOVATION OF U.N. HEADQUARTERS
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THURSDAY, JULY 21, 2005
U.S. Senate,
Subcommittee on Federal Financial Management,
Government Information and International Security,
of the Committee on Homeland Security
and Governmental Affairs
Washington, DC.
The Committee met, pursuant to notice, at 2:34 p.m., in
room SD-562, Dirksen Senate Office Building, Hon. Tom Coburn,
Chairman of the Subcommittee, presiding.
Present: Senators Coburn and Dayton.
OPENING STATEMENT OF SENATOR COBURN
Senator Coburn. The Federal Financial Oversight Committee
will come to order.
The topic of this hearing is one that many are interested
in. There is not a debate on whether or not there needs to be
structural repair and reform and remodeling of the U.N.
headquarters. This is not intended to be a hearing where we
take advantages of the weakness in operation that are noticed
and recognized, and the problems inherent in some of the
management difficulties, but rather the purpose of the hearing
is to look at the Federal taxpayers, who are going to pay a
large portion of this over the next 30 years, are getting value
for the dollars. The American people are quite generous. It is
the obligation of the U.S. Congress and this Subcommittee,
Federal Financial Management in particular, to review and to
look at the costs associated with our participation in this
organization.
In 1952, the United Nations complex cost $65 million to
build. In today's currency that is a little less than $500
million. Today, the U.N. occupies seven buildings located in
downtown Manhattan, New York, spanning over 2.6 million square
feet and housing office space for thousands of employees.
It is anticipated that the renovation would include the
remodeling of the General Assembly, the Conference Building,
the Library and 39 floors of the U.N. Secretariat. To renovate
the complex, the U.N. is asking the American taxpayers to
provide a loan in the sum of $1.2 billion. Over the life of
that loan that will come to over $600 million in cost to the
American taxpayer.
The purpose of this hearing is to examine that price-tag
and determine if the loan would meet the standards that this
Subcommittee demands of all Federal expenditures:
Accountability, transparency, fair and open competition,
spending discipline, and priority-setting.
U.S. commitment to the U.N. is already more than most
people realize--$3.8 billion just this last year. That is
almost a million dollars for every U.N. staffer occupying the
Manhattan headquarters. Americans are a generous people, but
when a recent Luntz poll in July 2005 asked a random sample of
Americans how they felt about this loan, 69 percent opposed it,
and over half of the respondents strongly opposed it.
Americans expect Congress to look closely at major
expenditures like this, and that is what this Subcommittee is
about. This is our 10th hearing on Federal spending in this
Congress, and we take oversight very seriously. We are
committed to accountability at all levels of the Federal
Government and all levels in which this government is involved.
The first principle of accountability is transparency. I
would like to talk about transparency at the U.N. for a moment.
Unlike our Federal agencies, the U.N. rarely makes any of its
internal audits public. It simply declares its audits to be
sufficient without supplying proof. Secretary General Kofi
Annan's spokesman is on the record as bragging that the Oil-
for-Food Program had been ``audited to death.'' But these
audits were only released under intense pressure from the U.S.
Congress.
That culture of secrecy continues today. The U.N. has not
cooperated in good faith with this Subcommittee's
investigation. The U.N. has kept details of competition for
contracts in the dark. We do not know how or why the
contractors who won awards were selected over other bidders. We
cannot even get a straight answer on the size of those
contracts. Was the contract for the design work on the
renovation $8 million, $33 million, or $44 million as claimed
by Fox News based on internal U.N. documents?
Another principle is timeliness. That is a core principle
of accountability. Our relationship with the U.N. needs to be a
two-way dialogue. The U.N. is asking for a massive loan from
the American taxpayers. When Congress asks for information
about that loan, we expect to receive it in a timely fashion.
As of this morning, the U.N. had still not submitted its
testimony to the Subcommittee. That is understandable. That
happens a lot from our own Administration. But it is still not
a good way for us to be able to do an effective job in
evaluating the information given to this Subcommittee.
Another building block of accountability is spending
discipline. This loan will not exactly be paid back in full to
the American people. The loan will be paid back by the U.N.,
and the U.S. is the largest contributor to the U.N. budget.
What that means is that Americans will be paying themselves
back, with interest. After interest accrues on this loan over
30 years, Americans will have been on the hook for in excess of
a half a billion dollars. It also means that dollars which pay
for things that are not necessary and are not needed for the
servicing of this loan, will not be available for core U.N.
missions like food, water, development, treatment of diseases,
malaria, or HIV.
I note that no other country has stepped up to offer help
with this loan. Until recently, until last year's Omnibus bill,
there was a statutory ban for the U.S. Congress and this
government in terms of participating in such borrowing.
Conveniently, that law was repealed in the 2005 appropriation
process.
With the Federal deficit encroaching on the future of our
children and our grandchildren, the Medicare and Social
Security programs actually in the tank in the very near future,
this loan to the U.N. is a serious commitment of money and
time, and it requires an equally serious commitment to
oversight by Congress.
When leading experts in real estate development publicly
criticize the U.N. renovation project, Congress has to pay
attention. We have been told that this project should be half
the cost the U.N. is citing. Let us look at the breakdown on
those costs. Labor and materials bring the cost to $482
million, but contingency fees and other fees on top of that
core are driving the overall cost up over a billion dollars. We
will look under the hood a bit today and examine some of that
padding.
But this will not be the end. Congressional oversight on
this project is only beginning. Before we write checks for any
loan, Congress needs to be convinced that fair and open
competition has occurred, and that every item in the renovation
plan is critical to the U.N.'s core central missions. That may
mean some hard choices need to be made, because another
principle of accountability is priority-setting. Does the U.N.
really need $1.2 billion to refurbish this building, or could
the essential renovations be completed at a much lower cost?
We might not be paying such close attention if it were not
for the regrettable fact that the U.N.'s credibility on
financial management is at an all-time historic low. Is the
Oil-for-Food scandal simply a symptom of systemic
mismanagement? U.N. election monitors failed to prevent
election fraud in Venezuela. U.N. Peacekeepers are now infamous
for raping civilians rather than protecting freedom. In these
cases and others, the U.N. has demonstrated an accountability
deficit in matters of life and liberty, sound procurement, and
program management. I wonder if this is really the best time
for the U.N. to pass the collection plate around America,
asking the taxpayers to once again open their wallets for what
looks, to many outside observers, like a corruption-riddled
bureaucracy.
The loan matters, because we can not forget the important
mission of the U.N. Will an investment in a new building really
buy the world more consensus in the Security Council? Will
better conference space lead to more international cooperation
after natural disasters? Or would they believe that, if only
the U.N. 6,000 annual meetings were held in nicer, more
climate-controlled, more secure rooms, that the world would
find the will to stop the genocide in Darfur? Would the U.N. be
able to end child abductions in Northern Uganda, forced
abortions in China, or religious persecution in Saudi Arabia?
Might there be needs more pressing than excessive contingency
fees on the renovation project?
I believe that our Nation, and this Congress in particular,
will be judged for how we steward the vast dollars that are
entrusted to us. Ultimately, this renovation must help the U.N.
fulfill its core mission--to bring help, hope, freedom and
peace to the darkest corners of the earth. All renovation
expenditures must be justified in the context of that most
urgent mandate.
I look forward to hearing from our witnesses today as
Congress tries to determine if sound justification can be made
for the cost of this renovation and the proposed U.S. loan. All
our witnesses have traveled from New York City, with the
exception of our Senators, and I am very pleased to welcome
them, and I thank them very heartily for their willingness to
participate.
Senator you will be recognized for an opening statement.
OPENING STATEMENT OF SENATOR DAYTON
Senator Dayton. Thank you, Mr. Chairman. Thank you for
holding this hearing. I commend you for the discipline you are
imposing on this process and for your oversight. I could not
agree with you more, it is important to make sure that every
dollar that is asked of the American taxpayer is well expended.
I am glad that you recognize appropriately near the conclusion
of your remarks the enormous importance of the United Nations.
It is probably unfortunate that right now is the time for this
transaction because of some of the practices of the United
Nations programs that have come to light. My colleague, good
friend from Minnesota, Senator Coleman, has chaired one of the
Subcommittees that has looked into that and I sit on that
Subcommittee.
I think it is very important for all of us here to separate
the practices of the United Nations from the institution of the
United Nations and to recognize that as important as it has
been in the last 60 years, despite its deficiencies which need
to be overcome, it is going to be even more critical over the
next 60 years.
If we think the cost of this loan is expensive, we should
look at the cost of war, cost of unilateral engagement in war,
which we are learning in Iraq, versus a multinational approach
under the auspices of the United Nations. We talk about Darfur
and others, places where to be effective, to bring about any
possibility of peaceful resolution, not to mention eradication
of hunger and famine and disease, pestilence through the world,
we are going to have to do a better job to be sure, but we are
going to have to do it with other nations, and the United
Nations is vital to that.
It is a great symbol of our leadership in the world, that
it has been originated and is housed in the United States, in
New York. It is a phenomenal asset to the city. It brings
people from around the world. It enhances the city. It enhances
our country in the leadership role which the rest of the world
properly looks to us to play. The only thing worse than the
United Nations as it is perhaps now is a world without the
United Nations, and the United Nations not located, as it
should be, in the United States.
It is important to do this project right, important to do
it well. I hope this hearing will serve that purpose. Thank
you.
Senator Coburn. Thank you, Senator Dayton.
It gives me great pleasure to recognize two U.S. Senators,
both of which are my heroes, the senior Senator from Oklahoma,
Senator Jim Inhofe, and the Senator from Alabama, Senator Jeff
Sessions. You are recognized each for the length of your
testimony, and which ever would like to go first is fine with
me.
Senator Sessions. I would defer to our senior Senator and
distinguished Chairman from Environment and Public Works
Committee.
Senator Inhofe. You did not say senior citizen. [Laughter.]
Senator Coburn. Senator Inhofe, you are recognized.
TESTIMONY OF HON. JAMES INHOFE,\1\ A U.S. SENATOR FROM THE
STATE OF OKLAHOMA
Senator Inhofe. Thank you. Mr. Chairman, I appreciate it
very much, and as I have told you privately, I am glad that you
are doing something about this. You and I share the same State,
we hear from the same people. But I would suspect in the State
of Alabama, you get the same comments that we do.
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\1\ The prepared statement of Senator Inhofe appears in the
Appendix on page 46.
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I will be very brief because we are doing our highway bill
right now, and of course, as you know, I know that you have
some very distinguished panel members that need to be
addressing this specific subject.
Before addressing that subject, I would only mention to you
that it has been my experience in the 19 years that I have been
here, that the United Nations in its performance is not getting
better. It has been my experience that public opinion is more
and more aware, at least they call it to my attention, the
problems that exist.
I have been very active in my chairmanship of the
Environment and Public Works Committee and dealing with the
climate control issues. It is kind of interesting that it all
started with the United Nations, the Kyoto Protocol. I will not
argue that issue right now, but I would say this: In the
various meetings that they have had around the Nation, every
year they have a meeting. It is in different places. They are
fine places, Milan, Italy, for example, Mr. Chairman. I was
there during one of the climate meetings sponsored by the
United Nations, and I will not mention the name of the West
African country, but when I talked to the person who was
representing that country there, I said, ``You know, I did not
think you were really buying onto this whole climate change
argument.'' He said, ``Oh, I am not, but this is the biggest
party of the year.''
I have yet to find out how much that cost, but we are
talking about every year it is some exotic place. They all go
in there, crowd in there, and it is the big party of the year
for these people. I do not think there is really any accounting
of what is going on. In fact, I made a request about 6 months
ago. I said, ``I would like to have an accounting, a statement
as to expenditures,'' and I specifically asked for these
things. I was told by them that I was the first one ever to
have made establishment requests.
One area that I am very familiar with is Africa, as the
Chairman knows. There is an organization, a part of our
government called the African Development Foundation. It is
something that I stumbled onto by accident, and it is one of
the rare examples of just one that is operated perfectly. Every
cent that goes in to incentivize businesses, small businesses,
is done and is done very well. Ward Brehm is the chairman of
that. I am proud that I was one who recommended him to the
President, and he became chairman of that organization. Paul
Kagame, a good friend of mine, the President of Rwanda, was
talking about comparing the ADF, the African Development
Foundation, with the various entities in the United Nations as
to how much money actually gets to the problems. I am going to
submit that and have all of that in the record because there is
not time to go over it all.
But when you hear things about Kofi Annan knew about Rwanda
before the genocide took place, about the Oil-for-Food scandal,
the sex misconduct and all of this. I happened to be up in
Uganda, up at Gulu, where up there for some 25 years now one
individual is heading up a group that takes kids out of their
families, 14-, 12-year-old kids, teaches them how to be
soldiers, and if they do not go home and murder their families,
they bring them back and cut their ears off. I said, ``Where is
the United Nations?'' They are not really addressing that
problem. It has been there for 25 years.
If you look at what is happening in Western Sahara, Mr.
Chairman, 175,000 people taken from their countries, and
supposedly we are trying to get an accounting of how much of
the money that is expended by the United Nations actually
reaches Western Sahara, and I can assure you it will be very
disappointing when we find out.
Now, really quickly, rather than to go into some of the
things that will be in the record, I would like to say that
when we were considering the Foreign Affairs Reauthorization
Act, I put together 14 amendments that would require
transparency, and would require business practices in the big
renovation that is coming up. I am very glad that Senator Lugar
and his staff agreed to accepting 11 of the 14, and then we
passed the others in a modified form. Of course, that is not
out yet. Hopefully that will be of some help.
In cost comparisons, because I chair the Environment and
Public Works Committee, we have GSA, we deal with new
buildings. We spend a lot of time trying to see how much we can
get from this. I know that later on people will be testifying
more specifically, but I would only say that if you take the
capital master plan and look at what they are talking about in
the cost of $452 per square foot of renovation in those
buildings that we have built--not renovated, but torn down old
buildings, built new buildings, in the Berkland Courthouse, the
Islip Courthouse, Ronald Reagan Building, and so forth. I have
these listed. It is considerably less in every case to build a
new building than the renovation costs that we are looking at
now.
So I am hoping that you, Mr. Chairman, can get something
done about this, and I hope that while we are trying to do a
better job in this renovation, that we could also look at the
overall problems that exist in the United Nations and address
those at the same time.
I thank you very much for allowing me to appear before you.
Senator Coburn. Thank you, Senator Inhofe. Senator
Sessions.
TESTIMONY OF HON. JEFF SESSIONS, A U.S. SENATOR FROM THE STATE
OF ALABAMA
Senator Sessions. Thank you, Mr. Chairman. Thank you for
your eloquent opening statement and your commitment to good
management.
You are a fresh face here, and it is a fresh approach, and
we need more of it. All of us in this Senate ought to feel bad
that we do so little oversight, because if you do not watch the
taxpayers' money, somebody will get it and it is unlikely that
you will get the full bang for the buck that we are entitled
to.
Mr. Chairman, the United Nations can play a more important
role in making the world a safer and better place. I am pleased
its headquarters is in New York. I do not dispute the fact that
the U.N. building is in need of renovation and do not oppose
its renovation in principle, nor do I oppose the United States
making a loan at a fair rate for that purpose.
My concern arose after a New York Sun news article
presented shocking construction cost numbers. Importantly, the
article quoted several prestigious New York developers,
including Donald Trump, as saying the reported renovation cost
of the 39-story building and other buildings would far exceed
what they listed as the highest possible legitimate cost. To
finance the renovation of the 39-story U.N. building, they are
seeking a $1.2 billion loan from the United States.
Taking the entire square footage of the project, including
the parking garage, the total cost per square foot is $453. As
we calculate it, excluding the parking garage, which would be
appropriate, the cost is $568 per square foot. It is clear that
renovation should cost less than new construction, but here
renovation costs more than new construction. Mr. Trump built
the brand new top-of-the-line, state-of-the-art 90-story Trump
World Tower almost across the street for $350 million. How
could this renovation cost 1.2 billion? We hope this hearing
today will provide information on this issue.
Again, Mr. Chairman, the United Nations can and has done
good work in this troubled world eradicating hunger,
peacekeeping missions, reducing child mortality, combating AIDS
and malaria and other diseases, opposing genocide in the Sudan.
But it can do much more, and it must not waste any of the
precious funds entrusted to it from the world's nations,
including the largest contribution, 22 percent, from the United
States.
The truth is that the U.N. financial management has been
poor at best. In fact, the individual who was charged with
managing this renovation recently resigned after allegations of
conflicts of interest. Further, I am sincerely concerned that
when Mr. Trump met with the Secretary General Annan to discuss
his belief and concerns about the cost, not much interest was
shown in his observations.
New York is a tough place to do business. Any major project
that is not managed well can result in exorbitant costs quicker
than you can bat an eye. We must not allow that to happen here.
Ambassador Patterson, who is our Acting U.N. Ambassador, in her
statement has cited two GAO reports to defend the cost
estimates. But the first GAO report was preliminary and early
on and is of little value to us, but the second never purported
to verify the actual cost estimates. They never went behind the
papers submitted to them by the U.N. employed companies, and
their report cannot tell us whether this is a $1.3 billion
project or a $600 million project. They did not determine fair
market value and could not.
Both of the firms that provided the figures to justify the
cost estimates refused to provide any information to my staff
when they asked. In that regard at least it is not transparent.
So there are many concerns and questions. The world's
nations who support the U.N. are entitled to know this will be
a well-managed project and one that does not waste one dime,
and on the sweets for high officials that could be saved to
help the poor, the ill, and the oppressed.
Mr. Chairman, thanks for holding this hearing. Every dollar
saved can save lives around the world. Since the renovation is
to be financed by a U.S. loan and since we are the host
country, the United States does have a special responsibility
to ensure that our distinguished guests are getting top dollar
and not taken to the cleaners. I hope this hearing will make
sure that happens.
Thank you, Mr. Chairman.
Senator Coburn. Thank you, Senator Sessions.
Senator Dayton, do you have any questions of our esteemed
colleagues?
Senator Dayton. I just want to thank both for their
initiative and their leadership. Senator Inhofe, thank you for
mentioning a good Minnesotan, a friend of mine, Ward Brehm, of
the African Development Foundation. Your sponsorship was
outstanding. Thank you both.
Senator Coburn. I would invite you both to be a part of the
dais, and without objection, your additional comments and
materials will be made a part of the record.
I believe Ambassador Patterson would like to have Mr.
Burnham go ahead of her, and we would be happy to honor that.
To do that we need to recess the hearing, because under U.N.
protocol, they do not testify before Congress, but will give us
an advisory briefing.
And with that I would like to introduce to you, when I find
my script, Christopher Burnham. I want to say at the outset I
have a lot of confidence in the leadership of President Bush in
placing him in this position. He recognizes the significant
problems that lie within the U.N. in terms of financial
management, transparency, priority setting, and accountability.
And I am disappointed. I did not actually go through your
testimony prior to this hearing because it was not made
available to me until about an hour and 40 minutes ago.
Nevertheless, I look forward to your briefing for us, and would
hope that you would entertain some questions from that.
His title is the Under Secretary General from Department of
Management. Prior to this position, Mr. Burnham was Acting
Under Secretary of the United States Department of State for
Management.
Mr. Burnham, you will be recognized, and please give us
your briefing.
BRIEFING BY CHRISTOPHER B. BURNHAM,\1\ UNDER SECRETARY GENERAL,
DEPARTMENT OF MANAGEMENT, UNITED NATIONS
Mr. Burnham. Mr. Chairman, thank you very much. I do
apologize that the testimony was not up here sooner. I wrote it
myself. As you point out, the President recommended me for this
position, although Kofi Annan selected me for this position,
and as such, having served in the Bush Administration for the
last 4 years, my family is down here, and without pulling too
many heartstrings, I went home last night to see my 5- and 7-
year-old daughters and my 10-year-old son, and that interrupted
the completion of my drafting my testimony last night, so,
Senator, I apologize.
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\1\ The prepared statement of Mr. Burnham with attachments appears
in the Appendix on page 59.
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Senator Coburn. That is a great excuse. [Laughter.]
It is better than the ones I get from the Administration.
Thank you. [Laughter.]
Mr. Burnham. Mr. Chairman, Members of this Subcommittee, it
is my high honor to be here, and I want you to know that
anytime you want me to come back down here, either to brief you
in this setting or to meet with you one-on-one individually, I
am absolutely pleased to do that.
For the past 4 years, as I mentioned, I have been with the
Bush Administration. This spring I resigned to take this
position, and I did so because I believe in the United Nations.
I believe that we need to make it a better place. I believe we
need to make it a more efficient, effective, accountable, and
transparent place, and a place that embraces fully, ethics and
ethic standards.
Of the many tasks the Secretary General has assigned to me,
few are more important than the capital master plan. You need
not see the movie ``The Time Machine.'' Simply walking into the
headquarters of the U.N. is a nostalgic return to the 1950s.
Its architecture, furniture, design, function and systems are
charmingly retro. Unfortunately, it is also egregiously in
violation of any reasonable level of efficiency and safety.
My colleague will put up a slide which reviews some of the
reasons for this project which you have already mentioned, Mr.
Chairman. I will not dwell on them here. Instead I would like
to address the solution and my shared concerns with this
Subcommittee that we accomplish this economically and with the
best value to all the taxpayers around the world who will fund
this project.
In addressing the CMP, I am reminded of the standard five-
paragraph order of the U.S. Marine Corps: Situation, mission,
execution, administration, and logistics and command.
Here is the situation. We have seven buildings with over
2\1/2\ million square feet of office, conference and support
space on 17 acres located in the middle of the most expensive
city in America. Constructed in 1950 with later editions in the
1960s and 1970s, this complex fails to meet minimum fire code,
building code, safety code, and lacks modern sufficient
security. It is riddled with asbestos, including dripping from
the insides of my air conditioning unit just 3 feet from my
desk. It lacks proper fire detectors, a sprinkler system. If
one of the massive steam pipes, which are now lead, were to
blow, there is a real potential that a large area surrounding
the U.N. would be contaminated with asbestos, requiring the
evacuation of the area until cleaning crews could decontaminate
it.
The building lacks a high-tech backbone that leads to
greater efficiency and cost savings. It is unsafe for the
employees of the U.N., including the more than 1,200 Americans
who work there, members of the General Assembly, and
potentially for the city.
Here is our mission. With the greatest efficiency and the
lowest cost to the global taxpayer, move thousands of employees
and delegates out of the complex and into swing space by June
2007. Renovate, modernize and secure all facilities and systems
as quickly as possible.
This is how we are going to execute: We have hired a
leading construction project manager, Gardiner and Theobald,
founded in 1840. Their responsibility will be both project
management and cost management. This is the same group that has
worked on Goldman Sachs, JP Morgan Chase, the New York Times,
Standard and Poors, all their headquarters, and I also might
add, Windsor Castle.
The Secretary General announced Tuesday the hiring of a new
Assistant Secretary General to oversee this project, Fritz
Reuter, whose brief bio I have attached to my remarks, sir.
Most recently, he was in charge of the massive $1 billion plus
New York Weill Cornell Medical Center project that was built
over the FDR Drive next to the East River. Fritz Reuter brought
that project in early and under budget. Assistant Secretary
General Reuter will have a skilled and experienced old New York
hand overseeing the day-to-day leadership of the U.N.
renovation, and reporting directly to me.
Slide three. We have done four separate cost estimates for
the project using four different groups. The project costs have
been estimated throughout the process by major New York
construction management and construction consulting companies,
and I point out that Turner Construction is the largest in the
United States. In addition, the costing methodology was
reviewed by GAO, as Senator Sessions has spoken about. With our
cost estimates in place and vetted four times, the next thing
to do is to make sure we are not out of line with other
projects of similar type and scope. This can be difficult,
although this is not a lot different than my days as an
investment banker in New York with CS First Boston and the kind
of comparables we would do between companies to try and find
what is the fair market value of a company.
In this case I went back and looked at total cost
renovations of the U.S. Capitol, another historic building,
between 1950 and 2001, exclusive of the Visitors Center.
Although it is more than $1.3 billion in 1950, 1960s and 1970s
dollars--not today dollars--it is quite difficult to compare
this renovation project to the U.N. on a per square foot basis.
I also took a look at the State Department, where we have an
ongoing 10-year more than one billion dollar renovation project
going, also difficult to use on an apples to apples basis,
moreover, there in Washington, and the U.N., as we all know, is
in New York.
When we are doing this we also have to ask, what do we mean
by the cost? Do we mean the cost of the U.N. Secretariat
Building, the 38-story building? Do we mean just the
construction, the trade and material costs, or do we also mean
planning, design, the construction costs, swing space cost,
rental space, salaries of the capital master planning team,
salaries and overhead as well as asbestos abatement, and
security measures necessary to make the complex meet modern
security standards? Very difficult to do that on an apples-to-
apples basis, Senator, although I am trying.
Slide four does show the per square foot estimates that we
have had using the four companies I have already mentioned.
Proliferation the proposed construction and the comps we do
have, for example, on the U.N. Development Corporation, slide
five, the all and fully-loaded costs for that were $545 per
square foot. Gardiner and Theobald, based on their database of
dozens of large-scale new building projects, estimate
construction costs of New York headquarters' buildings with the
owner as the occupier, also a difference to note, runs in the
range of $550 per square foot to $650 per square foot.
By contrast, the new U.S. Capitol Visitors Center, with
increased security costs--and I do not mean to just point out
the Capitol costs here--but that U.S. Capitol Visitors Center
are running, according to the GAO, $950 per square foot. The
new U.S. Mission to the U.N., we demolished the building just a
few months ago and are constructing a new 140,000 plus
building. The building costs of that building, the new mission
to the U.N., will be $600 a square foot, and if you include the
cost of swing space, as well as the demolition costs, it is
more than $910 a square foot.
Senator Sessions already said that we have--and I respect
that sir--that we have $365 per square foot. I will tell you
what I am going to do tomorrow or tonight when I get back up to
New York. I am going to take a look at those per square foot
costs and we are going to figure out whether or not it is
appropriate to include the garage in there, sir, and I will
come back to you personally if there is any issue there. I
promise you, as not only a former chief financial officer,
former chief executive officer of a Wall Street firm, as well
as a State treasurer and a former member of an appropriations
committee, we are going to find out what those true numbers
are, sir.
Slide five shows the proposed budget that we have
constructed using these four firms. The swing space figure is
one I want to note because it is based on an estimate made 3
years ago for what the cost of the swing space would be if the
New York legislature had approved the application of the U.N.
Development Corporation to construct a new building for the
U.N. next to the existing campus first to be used as swing
space and then as consolidation space from other buildings that
we now currently occupy around midtown Manhattan. This number,
$96 million, is based on an old estimate. Because the U.N. will
not have the advantage of using the UNDC as a landlord for
this, we are now going to have to rent commercial swing space
in New York at market rates. So I anticipate this number will
climb.
Finally, slide 6 shows the full per square foot cost broken
down by area. What do we need to get the job done? The United
States has generously agreed to lend the United Nations the
money for the project. I need this approved by the General
Assembly at United Nations this fall. We are going to move from
the planning phase to the design phase that we are now in, and
by August we expect to have these designs 60 percent complete,
enough to begin seeking indications of interest from
construction companies, culminating in a bid competition
sometime in the fourth quarter of next year or early 2007. I
expect to move out of the existing buildings no later than June
2007, and the renovation to begin shortly thereafter.
While the plan is to currently be back in 2011, I have
asked my team to accelerate this schedule and to shoot for
2010.
How will we ensure command and control? I am involved on a
daily basis. Two days ago we hired one of the most accomplished
project managers in New York, Fritz Reuter, to oversee our in-
house team. I plan to create a high-level advisory board of
experts on this type of project from the New York community, an
example I have taken from the renovation and new construction
efforts by New York Metropolitan Museum of Art. We have hired
an external construction and cost manager, one of the most
respected, and we have brought in other firms to validate our
assumptions. We will continue to work with the GAO as they also
opine on this critical renovation project.
Mr. Chairman, again, I served 6 years on my Connecticut
House of Representations Appropriations Committee, for the past
4 years Chief Financial Officer of the U.S. Department of
State, and I bring a passionate desire to make sure that our
taxpayer money is not wasted. I intend never to drop my guard
on this project, and you can rest be assured, I am going to run
a lean and efficient operation.
Mr. Chairman, I am absolutely honored and thrilled to
answer any questions you or the Subcommittee may have.
Senator Coburn. Thank you, Mr. Burnham. First of all, your
frame of reference is not one that is accepted by this
Subcommittee in terms of how the U.S. Government does it,
because we know we are in a world of hurt, and the Capitol
Visitors Center is the boondoggle of the century in this city
in terms of its cost overruns, mismanagement and inappropriate
contracting and bidding. So using it as a frame of reference,
if that is what we are going to compare to, you are never going
to be successful in New York City with that.
I am also reminded by staff, based on U.N. headquarters
renovation and GAO document--this is a GAO document--and it
said that the total cost for the new construction on the U.S.
mission was $309 a square foot, not $600 a square foot, by
GAO's testimony to us.
The other thing that comes to mind, my thought is, why do
you have to evacuate the building? Why can you not do it in a
staged process? Why do you have to spend $100 million on leased
space when in fact the Pentagon was redone by moving people
around, the U.S. Senate Capitol Buildings redone by moving
people around? And asbestos abatement goes on here all the
time, lead paint abatement goes on here all the time. Why has
the decision been made already that this project cannot be done
in a sequential fashion?
Mr. Burnham. Thank you. Mr. Chairman, I, in fact, have
asked that question, and I have asked whether or not it would
be cheaper for us to do it in thirds, not only because of what
it would take in terms of less swing space I have to rent, but
also whether or not it would be easier on the men and women who
work at the United Nations. Based on that assessment, which I
have done in the last 30 days, I do not want to spend years
doing this. We have done this at the State Department. It is a
10-year project to renovate the State Department. They move out
hallways, renovate it, move it back. The State Department also
has asbestos issues. These are concerns for the employees, it
is morale issues for the employees. It is much easier just to
take the skin off that building to take the asbestos out, to--I
am speaking now of the Secretariat, to renovate it and to move
everybody back in.
As far as the General Assembly is concerned, and others, we
are working very diligently to do those as quickly as possible
as well.
Senator Coburn. So your testimony is that is not
necessarily an economic but a management decision based on what
is best for the organization?
Mr. Burnham. I believe it would be both of those because
there is an acceleration to costs as you lengthen a project
from 3 to 4 years to 10 years.
Senator Coburn. Has an economic model been looked at? Is it
$100 million? Again, I want to go back. If it is only $60
million additional cost, that is $40 million that can go to
treat HIV around the world. We can cure malaria in Africa with
$40 million in terms of treatment, nets and spraying. I mean
there are a lot of things that $40 million can do. So that kind
of decision is paramount in terms of how the dollars are spent.
Mr. Burnham. Yes, sir. We have looked at whether or not the
right decision is to do it in thirds or to do it all at once. I
believe it is do it all at once, but I have been encouraged by
others to review that. I did review it. And on your
encouragement today, sir, I will review it again, and I will
ask this question, whether or not we have fully vetted the
management decisions versus the economics decisions on that,
and I would be happy to get back to you on that, sir.
Senator Coburn. Thank you very much. Let me ask you just
some very specific questions. How much has the U.N. in total
already committed to this renovation project, which is outside
the $1.2 billion figure?
Mr. Burnham. It is under $30 million currently. We were
just authorized by the fifth committee of the United Nations to
spend an additional $25 million to finish the design project.
So I believe the actual figure is $39 million. Do we have the
total figure? I will take it for the record, sir, but it is
under $40 million.
Senator Coburn. Can you account for Fox News' release of
this $44 million in terms of being committed for design?
Mr. Burnham. That is the first we have heard of it today,
sir. I will have to peel the onion back on that one.
Senator Coburn. Thank you. In terms of the procurement
officer in charge of the capital plan recently resigned due to
some allegations of impropriety related to the Oil-for-Food
scandal. He oversaw the contract to Renato, the Italian design
firm who did the renovation plan. This just raises some
questions, and not necessarily accurate, but the questions
ought to be asked. Has Renato done any renovation international
projects outside Italy or in New York before?
Mr. Burnham. I am not aware of that. Renato is no longer
contracted with us. That was before I arrived at the United
Nations, and none of the contracts with which the individual
that Fox News wrote about, none of those contracts are we
currently still contracted with.
Senator Coburn. Are there problems with the Renato bid in
terms of transparency, economics, cost, effectiveness?
Mr. Burnham. I am sorry, Mr. Chairman. That was, I think,
years before I got here, and----
Senator Coburn. But you are not aware of that?
Mr. Burnham. Renato is no longer under contract with the
United Nations.
Senator Coburn. All right. Is it inappropriate for this
Subcommittee to ask for the bidding process and contracting
process associated with the U.N. renovation?
Mr. Burnham. Is it inappropriate to ask for it, or is it
inappropriate to ask that I ensure that it is going to be run
in the most transparent and open process we can?
Senator Coburn. No. I am asking very specifically, as the
Federal Financial Management Subcommittee of the U.S. Senate,
is it inappropriate that we ask you for those documents so we
look as a Subcommittee, at the transparency, at the evaluation,
at the bidding process for those contracts? Since in fact, the
American people are going to pay a half a billion dollars on
this project? Is that inappropriate in your mind?
Mr. Burnham. I do not know the answer to that, Senator,
because I do not know the protocol of the United Nations. I do
know the protocol of the State Department, where I worked for
the last 4 years, and I know that some of the issues we had
with internal budget documents that the GAO have wanted and
Members of Congress have wanted, and that we pushed back then.
But this is a question I would love to take for the record,
sir, if you will permit me.
Senator Coburn. I would be happy to. I would tell you the
American people will not think it is inappropriate that we
assure that our cost of that building renovation look at in
terms of just openness, transparency and fairness, and I would
appreciate you getting back to me. My time has expired.
Senator Dayton, you are recognized for questions.
Senator Dayton. Mr. Chairman, the point you just made, I
mean any commercial lender would be asking for that kind of
financial information from anyone asking to borrow any amount
of money, certainly $1.2 billion, and would not just take at
face value the representations of the borrower. So I think
given the difficulty we have had in the last few months getting
information from the United Nations, if you want to make this a
really serious, controversial and almost impossible matter to
get approval of, that would be the surest way to do it, if you
would pass that on. I mean, diplomatic communications and
protocols are one thing; dollars are dollars. And as you say,
we are the lender, I think we are entitled to that information.
You said that it is going to be June 2007 before people are
moved to the swing space. Given the seriousness of the asbestos
problems and others that you mentioned, that seems like far
away removed from now.
Mr. Burnham. My understanding is, is that this is the
amount of time we need to: (A) finish the design phase of the
renovation; (B) go out and solicit bids from first indications
of interest and then bids from the construction companies; and
have----
Senator Dayton. But if it has unsafe, unhealthy conditions,
sir, do you not want to get them out into some better space
immediately even if the preliminary matters are not completed?
It just seems like a contradiction.
Mr. Burnham. Absolutely, and if I can accelerate it, I
will.
Senator Dayton. There is one report here at our table,
talking about the estimated costs of swing space options. I do
not know if this envisions a particular option, but it has the
leasing, 62 million; commercial space, 69 million. Then it has:
Construction, addition to an existing building, 73 to 91
million; a new low-rise building, e.g., north lawn area, 67
million; new building off site, 78 million. Are you renting
space or are you building?
Mr. Burnham. There is no new construction within this.
There will be come new features within the existing facilities
such as two or three or four conference rooms. In addition, I
have concerns about the library. I think that we can make
better utilization of 125,000 square feet. I have raised this
before in past issues associated with libraries' usage in the
Federal Government. I am not anti-library. I just think that
using the Internet and using new methodologies for managing
library facilities, that we can condense that and reutilize
that space for things, perhaps that are more important to
pursuing the mission of the United Nations. As such, we have
hired a consultant who is an expert in libraries to advise us
on how we can move forward on that.
Senator Dayton. So this document I have before me, the
United Nations General Assembly Capital Master Plan, page 17,
that talks about construction costs as part of the swing space,
that is outdated and part of the present plan?
Mr. Burnham. I would have to get clarification of exactly
what you are speaking. There is no construction of swing space.
There was originally planned construction of swing space known
as DC5, built by the United Nations Development Corporation,
which was going to build a building one block south of the
existing complex. To do so, that would have required approval
by the New York General Assembly. That approval was not
forthcoming, and thus, that is no longer an option for swing
space. I have to go out into the marketplace in central
Manhattan for----
Senator Dayton. Do you have to be in central Manhattan? I
know there is considerable space----
Mr. Burnham. Well, I have also been looking at Brooklyn. I
have considered Governor's Island. I am looking at southern
Manhattan as well for these things.
Senator Dayton. South Bronx?
Mr. Burnham. The Bronx, sir?
Senator Dayton. South Bronx, yes.
Mr. Burnham. South Bronx.
Senator Dayton. There actually, the construction----
Mr. Burnham. Well, we are missing a couple stadiums these
days up there. It might be appropriate to look beyond those
borders of Brooklyn and Manhattan.
There may come a time when the New York General Assembly
approves U.N. Development Corporation to use that plot of land,
that park known as Robert Moses Park just south of the U.N.,
and to build on that plot, and to be able to--for the United
Nations to consolidate space that we now rent out there in
Manhattan, commercial space, and to consolidate our operations
right there, next door to the existing campus. And I would
certainly encourage the New York State Legislature to do so
because I think that also would be important, and in dealing
with the United Nations Development Corporation and their chief
executive officer, Senator Roy Goodman, retired of the New York
State Legislature, and an old friend of mine, as well as George
Klein, who is a developer in New York, who is the chairman of
that organization. I think it could be very useful to the
United Nations in the future, but it is not part of this plan
any more.
Senator Dayton. I comment you for your public service.
Anyone who would leave the private sector to take on the U.S.
Congress and the New York Legislature deserves our thanks. I
wish you well with this project as we will be overseeing it.
Mr. Burnham. Thank you, Senator.
Senator Dayton. Thank you, Mr. Chairman.
Senator Coburn. Just a couple of comments before I
recognize Senator Sessions. The scientific literature today
shows that the cost per life saved on asbestos abatement is $1
billion per life saved in this country. That is an interesting
phenomenon, when if we spend a billion dollars on breast cancer
we could save thousands of lives. So as we use those things, it
is important for us to recognize the price we pay for lack of
scientific clarity in what we do.
The other thing I wanted to make just a note of, Senator
Dayton, is the swing space was not part of the $1.2 billion. It
had nothing to do with the $1.2 billion, the new building. That
was not part of the $1.2 billion. I will come back after you
finish, with a couple other little items.
Senator Sessions.
Senator Sessions. Thank you, Mr. Chairman.
Mr. Burnham, you are a stand-up guy. You did not even
really emphasize that you just took office June 1 in this
position, and what has happened before, happened before your
watch. But we have to think about those things rather
seriously.
I noted you are involved in a daily basis, reading from
your statement, and 2 days ago you hired an accomplished
project manager from New York. So I have a sense that you
realize that this project has some serious problems and that
you have a responsibility to get it back on track; is that
correct?
Mr. Burnham. Senator, thank you. I have the responsibility
to ask all the questions you are asking, to carry your
questions with me because this is my money, and I anticipate
that I am going to continue to ask the kinds of questions that
you would expect when a new Under Secretary General for
Management who has been tasked with overseeing this project
would ask. Are we on the right path here? Are things too
expensive here? Is the scope too big? Is the scope too little?
Do we have enough focus on the security which is inadequate
right now? You know, ensuring that we have adequate security
for the United Nations facilities going forward. I am
approaching this very much in my training as the Chief
Financial Officer and as a former banker, sir.
Senator Sessions. If you will let me interrupt.
Mr. Burnham. Yes, sir.
Senator Sessions. But you have the responsibility in your
new position with the U.N. You are with the U.N. now.
Mr. Burnham. Yes, sir.
Senator Sessions. And is it your responsibility to
supervise this project?
Mr. Burnham. Yes, sir.
Senator Sessions. I would just advise you that at some
point along this process, you may be asked to provide
information for the Secretary of State because legislation I
offered and that we all agreed on, said that it is the sense of
the Senate that the amount of any loan for the renovation of
the United Nations headquarters building located in New York
should not exceed $600,000, provided that if any loan exceeds
$600,000, the Secretary of State shall notify the Congress of
the current cost of the renovation and cost containment
measures. And in fact, to get more than that, she is going to
have to certify that she is firmly convinced and has firm
numbers to justify that extra cost.
So I guess I am saying to you, are you prepared to get to
the bottom of this and give her those numbers if you expect to
ask for more?
Mr. Burnham. One hundred percent, Senator.
Senator Sessions. I think that would be important, and we
will be counting on you for that. Also I am concerned about the
design, the architectural firm from Milan, Italy. Are you not
aware now how much they have been paid and what their contract
price is?
Mr. Burnham. Is that the Renato firm?
Senator Sessions. Renato firm.
Mr. Burnham. Yes. We no longer have a contract with Renato.
That happened before I arrived at the United Nations. I have
seen a figure for how much they received, a few million
dollars. But we have in fact asked for a review of all those
contracts, and we have asked for that review specifically
because of the Fox News piece on the procurement officer who
was involved with a piece of that, so we are--I am continuing
to pursue that, but we do not currently have a contract with
it, and I do not think we will going forward.
Senator Sessions. We have heard figures, $7, $10, $15, or
$44 million to be paid to them. If they have a contract, they
may be entitled to funds even if they have been terminated.
Mr. Burnham. Senator, I will get to the bottom of that for
you, and I will call you tomorrow.
Senator Sessions. I think that figure is important. As I
understand it, we are still using their cost figures for this
project; is that correct?
Mr. Burnham. I believe those are one-fourth of the cost
estimates we have utilized, yes, sir.
Senator Sessions. With regard to the GAO report,
particularly the second one--and that has been referred to to
defend the cost that we have here--you would agree, would you
not, that GAO did not go behind the cost estimates that were
submitted by firms hired by your predecessor at the U.N., and
that those are the cost estimates they are relying on; is that
correct?
Mr. Burnham. I do not know the answer to that, Senator, but
I presume you are correct in that.
Senator Sessions. I think that is correct, and so therefore
I do not believe that the GAO report can be utilized to say
this is a fair market value for the project.
Thank you.
Senator Coburn. Thank you.
I just want to follow up again with you, Mr. Burnham. The
contract with Renato developed the cost estimates for this
project, correct?
Mr. Burnham. I believe we have four firms that have done
the cost estimates. In my mind, the most important were Turner
Construction.
Senator Coburn. So you have four firms that have done cost
estimates for this project?
Mr. Burnham. Yes, sir.
Senator Coburn. All four of those were subsidiaries of
Renato; is that not true?
Mr. Burnham. Turner Construction is not a subsidiary of
Renato. Turner Construction is the largest United States based
construction company.
Senator Coburn. I will give you a document from the GAO
Report, architect engineering firm, Renato Sarno Group;
consulting engineer, Ove Arup and Partners; cost estimating
subconsultant was Turner, all working under the Renato Group.
Cost estimating consultant, Hill International; Security
Subconsultant, Ducibella, Venter and Santore; Project
Management Consultant, Atkins, Hanscomb, Faithful and Gould.
These were all subconsultants to Renato, so the cost base
came through the contract with Renato, correct?
Mr. Burnham. Yes. To the best of my knowledge, Senator, we
have four different methodologies that we have used to estimate
the construction costs here. And moreover, construction costs
are not--construction estimates in this case are not what we
are actually going to pay. Just the way, when we say what we
think the value of a stock is as bankers may be one thing, but
the marketplace is going to determine what the cost of that
stock is, and ultimately the marketplace or the construction
managers who bid on this are going to be the ultimate
determiners of how much this project will cost.
Senator Coburn. If that is the case, how did we come to a
$1.2 billion loan from the U.S. Government?
Mr. Burnham. Because my understanding is, and before I got
here, Senator, that they had four different ways of estimating
what the costs were. That methodology was validated by one of
those, which is our cost and project manager, Gardiner and
Theobald. So we have taken some of the best and the brightest
we have here. We have taken Turner Construction, we have taken
Gardiner and Theobald, who have come up with a cost estimate
plan.
Ultimately what we have to do now is complete the design
phase. When you go through the design phase, things can change,
the scope can change, estimates can change. Once we accomplish
that, we can then go out for indications of interest. If there
are construction firms--and I want to assure you I welcome
anyone to bid on this project and to try and protect my
American taxpayer dollars, which are 22 percent of this
project--that if we can do this more inexpensively, and if
there is a firm out there that can do it more inexpensively
because we have overestimated or because Gardiner and Theobald
or Turner overestimated the cost of this project, then we will
know that. We will know that when the bids come in and we will
be able to choose the low bidder and we will be able to save
the world taxpayers some money.
Senator Coburn. I want to go back to your $365 figure and
make a note for us and those in the room, us that just
represents 50 percent of the cost associated with this project
because 50 percent of the cost of this project is based on
contingencies. Is that correct?
Mr. Burnham. I will take your word for it, sir.
Senator Coburn. So if we look at it, so the $365 is not an
accurate figure of the total cost, it is more like $560 to $580
total cost. And so like you made a good point which I think is
valid, you have to compare apples to apples, and apples to
apples is not $365, it is this chart right here. The apples to
apples is, based on what GAO has given us and what you have
given us, the actual labor and materials cost is $482 for a
refurbished building. The design contingency is $72 a square
foot. Actually, those are dollars, not square foot. General
conditions and all the rest as you go through that, you come up
to the billion and 49 million dollars. And then you end up the
scope of options that are associated with it. So I think it is
important that if you divide the 2.6 million square feet into
the total, you are talking about $580 per square foot.
The whole question of this hearing is with your security
needs and with the needs of the building's shape that it is in
today, could somebody else provide what you all need at a lower
cost than $580 per square foot? Could somebody build you a
brand new building with all your needs for less than $580 per
square foot? I think that is a legitimate question.
Mr. Burnham. Absolutely.
Senator Coburn. We ought to talk about what the real costs
are per square foot because it is not $365 per square foot
because you all have built in another $600 million in those
costs for contingencies. So we cannot use $385 when the real
cost--and you say as scope may change, the price may go up and
the market may go up. And so one of the criticisms that I have
heard on the street of this project is $1.2 billion is not
going to be close to what it is going to cost. It is going to
cost a whole lot more than that. That is of some concern to
this Subcommittee as well, because whatever cost overrun is
going to be there, ultimately we will pay through dues to the
United Nations.
I would just like your comment on that.
Mr. Burnham. Senator, I am absolutely obligated to you to
come back to this Subcommittee and to clarify an apples to
apples comparison. I do not believe that at this time, with
nearly 60 percent of the design done--and we will reach that
point I believe by late August--that it makes sense to try to
go out there and estimate what the cost of this project is
going to be going forward. If there are contingency costs in
there, the contingency costs are in there because that is what
I am told is the best practice of how you do a renovation and
construction project like this.
Senator Coburn. That is a good answer because that is an
honest and transparent answer, and I want to tell you I
appreciate it.
Senator Dayton, do you have other questions?
Senator Dayton. No, thank you.
Senator Coburn. Senator Sessions?
Senator Sessions. No, thank you.
Senator Coburn. Let me thank you so much for being here.
You have committed to send us a couple of things. I want to
just follow up one last thing and that is on transparency. Do
you believe that the U.N. has a right to keep its finances
secret?
Mr. Burnham. No.
Senator Coburn. Do member-states have a right to know
exactly how money is being spent by the U.N.?
Mr. Burnham. Yes.
Senator Coburn. Will you work and dedicate in your office
to make sure that transparency is the No. 1 goal of the
finances of the United Nations?
Mr. Burnham. Under the leadership of Colin Powell, and
through Colin Powell my work as Chief Financial Officer, David
Walker awarded the U.S. Department of State this year the
transparency award for all of Federal Government just a few
months ago. I carry the same mission to the United Nations.
Senator Coburn. Thank you very much, Mr. Burnham.
Mr. Burnham. Yes, sir.
Senator Coburn. The Subcommittee will reconvene back into
hearing. I invite Ambassador Patterson to come and testify.
Anne Patterson became Acting Permanent U.S. Representative
to the United Nations in January 2005. She became Deputy
Permanent Representative in August 2004. She is a career
minister in foreign service. She is from a great part of the
country, real near Oklahoma, Arkansas. We welcome you and your
comments.
Ambassador, please begin.
TESTIMONY OF ANNE W. PATTERSON,\1\ DEPUTY PERMANENT
REPRESENTATIVE OF THE UNITED STATES TO THE UNITED NATION, U.S.
DEPARTMENT OF STATE
Ambassador Patterson. Thank you, Mr. Chairman, Senator
Dayton and Senator Sessions. I appreciate you giving me this
opportunity to testify before this Subcommittee on the planned
renovation of the U.N. headquarters facility in New York. I
would like to summarize my statement for the record.
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\1\ The prepared statement of Ambassador Patterson with attachments
appears on page 243.
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As the United States is the largest contributor to the
United Nations, the Administration has a particular
responsibility to ensure that costs are reasonable, and we
welcome your engagement on this issue.
Mr. Chairman, I think Mr. Burnham has described the state
of the U.N. headquarters and the number of----
Senator Coburn. Could I interrupt you for just a moment? I
think it is very important for some of Mr. Burnham's personnel
to stay here if they in fact want to hear a balanced view on
others opinions about what is going on. I would just interrupt
you to make that point, and I see that they have all left. Is
anybody with Mr. Burnham still in the audience? That is part of
our problem, is we only want to hear one thing.
You are here and you are going to take notes?
Audience Member: [Inaudible.]
Senator Coburn. OK, thank you.
I am sorry, Ambassador.
Ambassador Patterson. No. Mr. Chairman, I will skip the
description of the building, but let me just say that I took a
tour of the building to prepare for this testimony, and I found
it in scary condition, and particularly some of the fire
abatement procedures. After I went there I was almost worried
to let my people go there for meetings, so it is in quite bad
shape, and Mr. Burnham has gone through the details.
But I know that you and your colleagues are very concerned
about the cost and I want to tell you what we are doing to
ensure that these are monitored and consistent with industry
standards.
When I arrived at the U.S. mission about a year ago, I was
pleased to find the apparatus in place to provide a high degree
of oversight, both within the U.N. structure and within our own
government. The United Nations had established a new separate
office under the authority of the Under Secretary General for
Management, and I might add, Mr. Chairman, that the United
States always seeks, because of our large contribution to the
United Nations, to have an American as Under Secretary General
for Management.
The U.N.'s Office of Internal Oversight Services--that is
the U.N.'s IG--had established a permanent linkage to the
project and was reviewing the project regularly. We believe the
United Nations has structured an organization in a way that is
well suited to administer this project.
Just as importantly, Senator, the Administration has
exercised oversight of the Capital Master Plan for a number of
years. The U.S. Mission's Management and Reform Office has been
involved in reviewing this project since its inception. But
given its unique nature, the Administration decided to create a
task force based in Washington to manage overall U.S.
participation in the project. This task force includes staff
from the State Department and OMB, as well as an expert
consultant with years of experience managing major U.S. Embassy
construction projects.
U.S. oversight, as Senator Sessions had mentioned, also
extends to the Government Accountability Office, which has
undertaken two reviews of this project. GAO reviewed the
processes being followed thus far by the U.N.'s Capital Master
Plan team, and found them to be consistent with best industry
practice.
How were the costs for this project evaluated? The U.N.
contracted with three internationally known construction firms.
Our task force has also looked carefully at the bidding and
contracting process for the design work that is currently under
way. I understand that the GAO is soon initiating a third
review of the Capital Master Plan, and again, I welcome GAO's
involvement.
In sum, Mr. Chairman, the costs were developed in a
transparent manner, and bids for the $19 million spent to date
were let by competitive transparent procurement practices.
Costs were reviewed by reputable world-class firms, and
reviewed repeatedly by the U.N.'s internal auditors and GAO.
Mr. Chairman, the United Nations needs the United States,
and we believe the United States needs the United Nations. We
work in the United Nations to get the Syrians out of Lebanon or
to send peacekeepers to Haiti and Sudan. As host country we
have a special responsibility to ensure that the facilities
used by the United Nations are adequate to meet its needs and
are safe and secure for all its employees and delegates. I
believe our offer of a loan at an interest rate of up to 5.5
percent to finance this project is fair, and provides a way
forward to accomplish the renovation. But I am also mindful we
need to ensure that the project is carried out in a cost
effective and transparent manner.
I believe this has been the case to date, and assure you
that we will remain vigilant in our oversight throughout the
course of this renovation to see that the best interests of the
United States are served.
Thank you, Mr. Chairman, and I would look forward to your
questions.
Senator Coburn. Ambassador, thank you so much for taking
time out of your schedule to be here. I want to tell you that I
appreciate it.
A couple of things. We understand that there are problems
with the building. There is no debate that things need to
change in terms of the facilities of the United Nations. Nobody
here is questioning that, and there is no debate that the
security concerns at the United Nations need to be of paramount
importance to protect the lives of those that are guests in
this country, and that is not a debate.
We actually went through square footage cost last night,
talking about the security concerns of about $35 a square foot.
That is a legitimate cost for that facility. All those points
you have made, we do not have any problem with. That is not
what we want to look at. We are concerned, first of all, at the
frame of reference of cost, and the U.N. renovation is
estimated to cost somewhere between, I think probably closer to
$550, $580 a square foot. It depends on how you want to play
for the numbers, but having built several manufacturing plants,
and unfortunately was in the home building business for a time
when it was not quite so good as it is today, I can tell you,
cost estimates are important because the financing is
important.
The U.S. Mission to the U.N. is also getting a new
building, correct?
Ambassador Patterson. Yes, Mr. Chairman.
Senator Coburn. Can you tell me where that project is as of
now and how far along it is in terms of its completion?
Ambassador Patterson. Yes. The building is demolished and
we are in the process of seeking bids. Since we are in the
actual process of seeking the bids right now, I can give you
quite a bit more information, but I would frankly prefer not to
give it in an open session.
Senator Coburn. Absolutely, and I will take you up on that
and we will have a conversation about that. Thank you.
In looking at the U.N. renovation project, did the United
States do a cost comparison of what we think we are going to be
paying for the U.S. Mission in New York?
Ambassador Patterson. Again, I would rather not get into
the cost per square footage, but it has frankly been on our
minds, yes.
Senator Coburn. Then you would testify that there is
probably a significant cost differential between those two
facilities per square foot?
Ambassador Patterson. No, there is not, Mr. Chairman. And
again----
Senator Coburn. Well, that concerns me even more. Maybe we
will have a little hearing on the U.S. Mission to the U.N.
Ambassador Patterson. We can discuss that. As I say, we are
in a sensitive stage there with the letting of the bids, but I
would rather discuss that with you privately.
Senator Coburn. All right, and I will defer my next
question on that.
In your comments you alluded to the GAO studies of the U.N.
renovation projects. Is it not true that the GAO studies did
not look at the procurement contracts, nor did they conduct a
cost analysis of the renovation project?
Ambassador Patterson. Yes, Mr. Chairman, but let me sort of
back up and start from scratch on the development of the cost.
Renato Sarno was the Italian design firm that did the original
cost. My understanding is that Turner Construction was a
subcontractor and a world class firm is estimating cost. They
evaluated those. Hill International came in later. That too is
a world class construction firm with thousands of employees and
billions of dollars under contract. They estimated the cost
independently. Now we have Gardiner and Theobald, which is
likewise a world class firm who has estimated the cost, and all
these estimates were very close together.
In addition, GAO examined the processes. There have been
two internal audits by the IG of the U.N., and their auditors
are embedded with the Project, and the Board of Auditors, which
oversees the entire U.N. system, has also done an audit. So
there have been a number of reviews and fail safes I think
built into this process that should give us a fair degree of
confidence, and we will remain vigilant that these costs
estimates are within the ballpark.
Senator Coburn. Are those audits available to the
Subcommittee?
Ambassador Patterson. Absolutely. I think I have them in my
bag.
Senator Coburn. Wonderful. I thank you for that.
Again, to make the point, GAO did not look at the
procurement contracts, nor did they themselves do a cost
analysis of the renovation project.
Ambassador Patterson. They did not, Senator.
Senator Coburn. Thank you. The United States has offered to
provide a $1.2 billion 30-year loan at 5.5 percent interest.
What happens if interest rates go to 10 percent?
Ambassador Patterson. Well, I guess that is the difficulty
we run with any loan that we make at any time. I mean most
commercial loans--and this is close to commercial--the rate we
made at the time was close to the commercial rate. It is a 30-
year loan, interest only for 5 years and then repayment over 30
years.
Senator Coburn. And the subsidy cost to the American people
by statute?
Ambassador Patterson. The insurance of $6 million. I think
interest rates, frankly, Mr. Chairman, have been lower than we
anticipated.
Senator Coburn. Would that imply that there is some padding
then in the cost estimate for the interest cost of this
project?
Ambassador Patterson. Well, no, I do not think--I think
interest rates were lower than we anticipated. They have been
below 5.5 percent.
Senator Coburn. Up until recently U.S. law prohibited
taxpayers' money being used to pay interest on any U.N. loan.
Last year's Omnibus Appropriation Bill waived this prohibition
at the request of the Administration. Does the Administration
think it is generally a good idea to weaken law that protects
the American citizen from footing the interest cost of the U.N.
loan?
Ambassador Patterson. I do not know, Mr. Chairman, because
I was not involved in that process. I can only speak to the
fact that I think this is a worthy use of the taxpayers' money,
a 30-year loan at basically a commercial rate.
Senator Coburn. None of the funds appropriated through the
appropriations to the United States available for U.S.'
contribution to an international organization for the U.S.'
share of interest cost made known to the United States
Government by such organizations for loans incurred on or after
1984 through external borrowings. And here is the change:
Except that such restriction shall not apply to loans to the
United Nations for renovation of its headquarters.
So we made a specific separate exception for this project;
is that correct?
Ambassador Patterson. Yes, and I think for two reasons.
One, we did not want to pay it directly out of assessments,
that it would be more economic for us as well. And keep in
mind, Mr. Chairman, that there are many other countries
involved in this, too, who are worried about cost control. The
Japanese pay almost 20 percent of this, and they have been very
aggressive in seeking cost control on this project as well.
But, yes, for renovation. I think another factor too, Mr.
Chairman, quite frankly, is that 90 percent of this money will
be spent in the United States.
Senator Coburn. Good point. We are going to employ people
with it. But there are a lot of advantages and disadvantages.
We do not want the United Nations to go anywhere. We want them
to stay in New York City. That is not what this debate is
about.
But are the other countries contributing to the loan? In
other words, is this a fractionated loan? Is Japan offering to
cover $300 million of this?
Ambassador Patterson. Well, no. The loan is from the United
States, but the repayments will be in percentage to your
assessment. We pay 22 percent, Japan pays 19.6, Germany pays
8.7. So these other countries just are not getting a free ride
at our expense. They are contributing to this effort, and I
think the really special factor here, unlike some other loan
that would be taken out for some other activity, is it is
basically an American expenditure.
Senator Coburn. I want to ask this last question for my
grandchildren. So we are going to borrow the money to loan to
them, right? We do not have the money, correct?
Ambassador Patterson. Right.
Senator Coburn. United States, we have a $452 billion on-
budget deficit. We have $7.9 trillion in debt. We have a
bankrupt Medicare, Social Security system. So we are going to
go into the market and we are going to borrow from the Japanese
the money, and so we are going to hedge this. We are going to
pay whatever the going rate is, which is going to rise over the
next few years, and then we are going to loan it to United
Nations. So we are going to subsidize the loan at multiple
points interest rate over what projected rates are going to be
in the future on short-term rates.
Ambassador Patterson. I guess that depends on what interest
rates are. Actually, we thought they would go up, and they have
gone down. I do not know what interest rates are going to do.
But when we made this loan agreement, when it was put in the
appropriations 5.5 percent seemed like a reasonable rate of
interest.
Senator Coburn. Our longest maturity right now is about 10
years, and that is what the trading parameter is, it is at 4.2
percent?
Ambassador Patterson. At 4.19 precent, yes.
Senator Coburn. And it is projected to somewhat sneak
higher, so the point is, is at best it is a wash. My point is,
we are not in the financial position to loan money to anybody.
We are a net borrower. And if individual, it is difficult for
us to rationalize putting additional debt on our children when
we are going to add $1.3 trillion to their debt this year. You
do not have to answer that.
Ambassador Patterson. I do want to answer that, Senator,
because let me make a point about the project. I think the
other option was basically coming up with the money out of our
current poor fiscal situation. In other words, we would have to
come up with an assessment, because as Senator Dayton
mentioned, this is really an urgent project for a lot of
reasons, not to mention the safety and security issues that are
so much on our minds. So we would have had to come up with $144
million, which was our estimated cost in 2006. We are not
budgeted for it. Given our severe financial situation, I think
people thought it was easier to finance with a long-term loan.
So it is not just the U.N. and the member-states. It is
also our own inability to come up with this on an assessed
basis in the short run. The longer we delay, Senator, the more
the cost will go up. I mean people in New York tell us that
construction costs are rising very rapidly.
Senator Coburn. I understand. Thank you very much. Senator
Dayton.
Senator Dayton. Thank you, Mr. Chairman. Thank you for your
excellent questions and probing. I share your concern about our
overall fiscal situation, and I voted against the budget
resolution for that reason. But of those many billions which I
could not justify to my children or grandchildren, this
project, if it is handled properly--and I think with your
oversight looks very promising that it will be--I would say to
my grandchildren it is a very sound investment in their future
and in the world's future.
Given again this issue about the asbestos, the exposure of
staff and others, is the move out of this building possible to
accelerate?
Ambassador Patterson. Thank you, Senator. I think as Mr.
Burnham mentioned, they are going to do this as quickly as
possible, and I know that they are actively engaged in the
search for office space. But more than asbestos, what really
worried me was fire, because when you take a tour you can see
that the fire prevention standards are such that they could not
identify where a fire breaks out in the building.
So I think, as Mr. Burnham said, they are going to move
this forward as quickly as possible. And another factor too,
another reason to move it very rapidly ahead is the increasing
cost over time.
Senator Dayton. Mr. Chairman, I would ask that the
Ambassador or Mr. Burnham or both keep the Subcommittee advised
of the timetable for moving the staff out of there. June 2007,
to me, is too far into the future. I am not an expert on how
you move a large number of people like that in a city like New
York City, but it seems to me that is a long time away, so if
we could see what you can possibly do to accelerate that for
their safety and well-being.
I would also just ask, is there anything we can do here, or
not do to make your job better or easier or facilitate your
success?
Ambassador Patterson. Thank you very much, Senator Dayton.
I think we will be happy to keep you advised, and I would urge
you to come up. That is always useful. We have had many of your
colleagues there. They take a tour of the facilities. They see
for themselves, and you can also see the work that the U.N.
does in the Security Council and humanitarian issues and a
broad range of other issues.
Senator Dayton. I taught public school in New York City for
2 years. I have seen my share of New York's fire traps, but
thank you anyway.
Is there anything that we can do? I mean that sincerely.
Ambassador Patterson. No. Thank you for your--we welcome
the attention of this Subcommittee to monitor this project. It
is always a help when you engage with the U.N. Committee
structure and with the other nations.
Senator Dayton. I thank you for the service you are
rendering to our country and your post. Thank you.
Ambassador Patterson. Thank you.
Senator Dayton. Thank you, Mr. Chairman.
Senator Coburn. Thank you. Senator Sessions.
Senator Sessions. Ambassador, have you personally--I assume
you have not--but have you ever personally developed and
managed the construction of a major project in a metropolitan
area?
Ambassador Patterson. Certainly not, Senator.
Senator Sessions. That is not your or my expertise for
sure. I know you have relied on this GAO report, and cited it,
the project as being, ``subject to in depth, on site reviews by
the Government Accountability Office.'' Have you read that
report carefully?
Ambassador Patterson. Yes, sir.
Senator Sessions. Is it not true that GAO did not look at
the actual numbers of the project, but really the process that
these numbers are developed and did not go behind those numbers
to see if they represented actual, competitive fair market
value cost for construction?
Ambassador Patterson. Yes, Senator Sessions. That is what
auditors do and that is what they did in this case.
Senator Sessions. So they are just auditing the thing, and
to really say that tells you what a fair market value is, is
not correct. They are just repeating what the firm hired by
Renato----
Ambassador Patterson. No. And I did not mean to imply that.
What I was trying to say, Senator Sessions, in my reply to
Senator Coburn, was that the process of development involved
multiple firms and multiple world class firms who evaluated
these costs, and took a second pair of eyes and a third pair of
eyes and a fourth pair of eyes on these costs. It was audited
repeatedly by not only the GAO but also internal auditors.
Senator Sessions. Audited, I am not sure what audited
means. You can read somebody's paperwork and add it up and say
that is accurate, but if you go behind that to say was it
really valid to begin with is a different thing. So they did
not do that.
Now, the Renato architect/engineering firm that did this
estimate, do you know how much they have been paid or how much
the contract----
Ambassador Patterson. I believe $8.5 million, Senator, but
I will double check that.
Senator Sessions. Do you know what their contract--what
about this $40 million figure?
Ambassador Patterson. I am unfamiliar with that figure, but
I will check on this figure, but my recollection is that Renato
Sarno was paid $8.5 million. And the Turner firm that validated
the cost, was a subcontractor to Renato Sarno.
Senator Sessions. Did they get additional funds?
Ambassador Patterson. I do not know, Senator, but we can
check on that, but it is about $8.5 million, and I do not know
where the $44 million figure came from. I believe it came from
a Fox News story.
Senator Sessions. I have a report from the CRS that
indicates $26 million has been paid for that. Are you aware of
that?
Ambassador Patterson. I will check if I was mistaken.
Senator Sessions. And that 5.7 percent of that came from
the United States. You note that the figures are in the
ballpark. But even the GAO report says on page 12 that there
could be a plus or minus 30 to 50 percent variation in those
figures, does it not?
Ambassador Patterson. Yes, sir, and I believe the GAO
report also says that that is fairly customary at this stage of
design, but let me assure you, Senator Sessions and Mr.
Chairman, that we too have oversight procedures in place within
the U.S. Government to look at this. I most assuredly am not a
construction engineer, but we do have experts that we have
particularly assigned, specifically assigned to this project
within the U.S. Government, whose job it is to be sure that the
taxpayer's dollar is well spent on this.
Senator Sessions. Well, it is just hard. I think this is
the Big Apple and if you can make it there you can make it
anywhere, but you better be good or they will take you to the
cleaners. It is tough to know and get good information. I think
we need to listen to some of the people who have actually built
buildings there who maybe can give us some information based on
firsthand experience.
Thank you for your service.
Ambassador Patterson. Thank you, Senator Sessions.
Senator Sessions. That is all I have.
Senator Coburn. Ambassador, thank you for being here. We
have about three questions we would like to ask you, as well as
discuss some of those other things that you were not prepared
to discuss in open hearing today, and I would like just your
assertion that you will grant us that privilege of doing that.
Ambassador Patterson. Of course I would be honored, Mr.
Chairman. Thank you.
Senator Coburn. Thank you very much.
Ambassador Patterson. Thank you.
Senator Coburn. It gives me great pleasure to introduce a
friend of mine. He is a member of the House of Representatives
from New York, Congressman Vita Fossella, who will introduce
our next panel.
Mr. Fossella. I thank you very much, Mr. Chairman, and
distinguished Senators.
I appreciate the opportunity to come to introduce to you
two great individuals, two friends, and indeed, two great New
Yorkers. One has dedicated much of his life to the public
sector, serving as a New York City Police Officer, and then
making the transition to the private sector successfully, and
then back to the public sector where he has served with
distinction in the New York City Council in the Bay Ridge-Dyker
Heights section of Brooklyn, and now is a New York State
Senator. His name is Marty Golden.
The other has a reputation, a good reputation at that for
being a successful, urbane businessman, but above all, he is, I
think, a great American and a great New Yorker.
And the one thing that both Donald Trump and Senator Marty
Golden have in common is that they believe in New York City,
they believe it is the greatest city in the world, and they are
great Americans. And in this case, they believe that--and they
share my view--that the United Nations can play a positive role
in this world, and it should remain in New York City, but it
also has an obligation to the U.S. taxpayer to be accountable,
transparent, and when it does what it does, it should do so
with the highest degree of responsibility to all of us.
Mr. Chairman, I want to thank all of you for convening this
very important hearing, for shedding light on what I think is
an important matter, not just in New York, but across the
country, and allow me to introduce to you, my good friends,
Marty Golden and Donald Trump. Thank you.
Senator Coburn. For our audience, State Senator Marty
Golden is a conservative and independent Republican,
representing Southwest Brooklyn, was first elected on November
5, 2002, and was reelected to the New York State Senate on
November 2, 2004.
Mr. Trump is a world-renowned real estate developer,
entrepreneur, author, now television producer and star of the
reality show ``The Apprentice.'' You know, there is something I
want to say here, but I dare not say it. [Laughter.]
State Senator Golden, if you would, keep your remarks to 5
minutes. We have read your testimony, appreciate your hard
work. I would also remind everyone, our whole purpose is what
the United Nations is doing with this building. All of us have
some strong feelings about the United Nations, but I would like
for us to focus our attention on the process here of what we
are directing to, and not all of the other problems that we are
all aware of at the United Nations.
Please begin.
TESTIMONY OF MARTIN J. GOLDEN,\1\ NEW YORK STATE SENATOR
Mr. Golden. Thank you, Mr. Chairman, and thank you for this
opportunity to speak before you, Chairman. Senator Sessions,
Senator Dayton, thank you also. Members of the Subcommittee and
invited guests, I am the New York State Senator, Martin J.
Golden from Brooklyn, and on behalf of the State Senate
Majority and Senator Joseph Bruno, the Majority Leader, I want
to thank you for this opportunity here to testify and explain
to the Subcommittee Members my efforts to put a stop to a
crucial piece of the New York State Legislature necessary for
the United Nations planned renovation and expansion.
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\1\ The prepared statement of Mr. Golden appears in the appendix on
page 312.
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Typically, a New York State Senator rarely engages in
issues of international organizations, but late in the fall of
2004 it was brought to my attention that a bill was poised for
passage in the New York State Senate which would eliminate a
children's playground adjacent to the United Nations, and a
swap for another site, thereby allowing the United Nations and
expansion project to move forward.
Land swap deals that improve public space are fairly
commonplace in New York State because they have community
support, and in some instances municipalities are required to
get the approval for that legislation.
Supporters of the bill believe that the continued viability
of the United Nations site is important to the city of New
York, the State and to the world community. The intent of the
bill is to force in appropriate planning process with due
deference to the need of the local community for parks and
historic preservation.
I agree with the continued vitality of the United Nations
is important to the city of New York, the State and to the
world community. But I objected to rewarding the United Nations
with taxpayer dollars and the privilege of expanding in New
York because it is a mismanaged and deeply troubled
organization.
United Nations leadership is responsible for the
organizational mismanagement and the blame falls squarely on
the shoulders of Secretary General Kofi Annan and his failure
to implement a standard of accountability and transparency.
You have heard that here today from several of the people
who have testified. Everything just seems to be in a mishmash.
There is nothing that has been vetted. Everything seems to be
out there. Nobody seems to be able to pinpoint a dollar figure,
and you have pointed it out very well, Senator Coburn, this is
going to impact our children for many years to come.
Under Kofi Annan's tenure, he presided over the shameful
Oil-for-Food program in what appears to be the largest dollar-
for-dollar humanitarian scandal in world history. I simply
could not trust United Nations under Kofi Annan's leadership
with taxpayer dollars, and will not support this legislation to
allow the privilege of expanding the United Nations in New
York.
I believe that Kofi Annan's office should have been more
forthcoming in the inquiries of Senator Sessions, Senator
Coleman, and you, sir, Senator Coburn, as well as the inquiries
from other Senators about the United Nations renovation and the
expansion project. Senator Sessions' inquiries were for the
benefit of the American taxpayer, who is responsible for the
proposed $1.2 billion loan and yearly operating costs.
It is your hearing today, Senator Coburn, that will also
bring out the cost. What a lot of people do not understand is
what this country puts into it, the 2006 operating dollars for
the U.N. is $469 million, and we put in $1.2 billion in
humanitarian relief, and $1.5 to $1.6 billion to go to $2
billion annually. That is what this country, what the taxpayers
put into this.
Ultimately this stonewalling is indicative of mismanagement
and a potential for the United Nations to waste millions of
taxpayer dollars on this renovation and expansion plan.
The world's premier developer, Donald Trump, estimates that
the world body stands to waste hundreds of millions of dollars
due to incompetency and theft. I value Mr. Trump's opinion and
share his concerns.
When I first expressed my opposition to the United Nations'
expansion, Secretary General Kofi Annan probably had no idea
where Bay Ridge, Brooklyn was, and for that matter, who I was.
He had no idea how seriously I take my oath of office to uphold
the Constitution of the United States and the State of New
York.
Yet this issue has brought me here today before this
Subcommittee because expanding the United Nations under Kofi
Annan's leadership is not reflective of New York's diverse
population, which is represented by a majority of State
Senators with conservative value.
Some New York State Senators have objections based on
terrorism concerns, like Senator Michael Balboni of Long
Island, who pointed out that the plan to upgrade the United
Nations involves putting a 35-story building on top of what is
listed as a major terrorist target, the Queens Midtown Tunnel.
Every driver going through there would be burdened by whatever
security precautions are put into place. Over 80,000 vehicles
pass through that Queens Midtown Tunnel daily. Restricting use
of the tunnel is not just an inconvenience, but also an
economic hardship.
Other State Senators such as Senator Serf Maltese of Queens
had deep philosophical objections toward the United Nations
because of its anti-Americanism, its anti-semitism, human
rights violations by U.N. staffers, unpaid parking tickets and
many other issues.
And the issue which we all agree upon in this room today is
the scandalous United Nations Oil-for-Food program, $60
billion, billions wasted, gone, corruption.
My opposition and the amount of negative publicity
associated with getting the bill passed in the New York State
Senate set off an intense lobbying effort.
Despite intense lobbying efforts, I told the people
supporting New York State Senate, passage of the legislation
that my request is simple: Kofi Annan must resign and the
standard of accountability and transparency be instituted
before I will support this bill. The resignation of Kofi Annan
would be the beginning of a systematic change to the management
and oversight of the United Nations.
I understand that the United Nations generates tax revenue
and adds to the international appeal of the city of New York.
However, in my opinion, I firmly believe that the United
Nations will remain in New York City despite my staunch
opposition to State legislation. Kofi Annan's leadership, the
use of taxpayer dollars, and my philosophical objections
towards the United Nations will not stop the United Nations
from staying here.
In my heart I know I made the right decision for the people
in my Senate District, the city, the State of New York, and to
the future children that are going to pay this debt here in
America.
The debt will just continue to mount. The money that this
Nation will put into the U.N. will continue to mount. We need
an institution that is capable of managing itself, and we have
heard testimony here today that tells you it cannot manage a
simple project of building a building in Manhattan. Why would
we want to pour hundreds of millions and billions into that
facility, into that organization without accountability and
transparency, so it can be effective.
Thank you, Senator Coburn, Senator Sessions, and Senator
Dayton.
Senator Coburn. Thank you, Senator Golden.
Just a little housekeeping chore I want to thank Mr.
Burnham's staff for returning. I appreciate your willingness to
listen to the other viewpoints.
Now we would like to hear from you, Mr. Trump. We, first of
all, appreciate that you would take time out of your schedule
to come down here. I think it is an important area. We
recognize your success in the very areas that we are talking
about, and look forward to hearing what you have to say about
your opinions, but also what you have heard here today.
TESTIMONY OF DONALD J. TRUMP,\1\ CHAIRMAN AND PRESIDENT, THE
TRUMP ORGANIZATION
Mr. Trump. Thank you very much, Mr. Chairman and Members of
the Subcommittee. It is a great honor to have been invited, and
if I can lend a hand, I would certainly love to do so.
---------------------------------------------------------------------------
\1\ The prepared statement of Mr. Trump with attachments appears in
the appendix on page 315.
---------------------------------------------------------------------------
I have to start by saying I am a big fan, a very big fan of
the United Nations and all it stands for. I cannot speak as to
what has been happening over the last number of years because
it certainly has not been good, but the concept of the United
Nations and the fact that the United Nations is in New York is
very important to me and very important to the world as far as
I am concerned. So I am a big fan, such a fan in fact that at
great expense I built a building across the street. It is the
tallest apartment house in the world. It has been a
tremendously successful building, sold out, and I am very proud
of it. And if the United Nations were not there, perhaps I
would not have built it in that location, so it means quite a
bit to me.
My involvement with the United Nations began with a letter,
which I will give to the Subcommittee, from the Ambassador to
the United Nations from Sweden, and it is a long letter and a
very beautifully written letter, and essentially he read an
article about the success of Trump World Tower, which is the
building that I can show you right here, which is, as you can
see, very substantially taller than the United Nations, bigger
than the United Nations. And he read an article in the New York
Times saying that the building cost approximately $300 million
to build.
So he wrote me a letter and ultimately called me and said,
``Is it possible that that building cost $300 million, because
it just seems so much bigger and so much better and so much
more expensive and so much more luxurious, and how could you
have done that for $300 million?'' When at that time, Senator,
they were talking about $1.5 billion to renovate the United
Nations and this was around December 2000. I said, well, there
are only two reasons, either gross incompetence or something
far worse than that, and you know what the something is, and
that is corruption, because there is absolutely no way that
that building could have cost $1.5 billion to build.
And I did a chart, and I looked at other buildings, and I
heard the numbers today. I am very impressed with Mr. Burnham,
but Mr. Burnham, it is not his business. Mr. Burnham is in a
different business. The man he hired who has done some work, I
guess, has just been on the payroll for 2 days, so perhaps he
will be a great genius and he will bring down the cost to what
it should be, which I think is about $700 million tops, and
that is complete.
But I did a little chart, and I looked at buildings that
were comparable that I built, and I looked at fees also,
architectural fees. The architectural fee for this building--
and you have to understand a residential luxury building is far
more complex than an open-floor office building to build. It is
much more. You have many more bathrooms, you have many more
kitchens, you have many more rooms. It is more complex. An
office building is essentially open space with subdividers.
So I looked at it and I added up some of my costs, and for
Trump World Tower, across the street, built not long ago, I
spent approximately $258 a foot. It is the tallest residential
building in the world, $258.32 a foot. I have 871,000 feet. It
cost $225 million to build.
Anybody that says that a building of renovation is more
expensive than building a new building does not know the
business, because you have a frame built, you have your
foundations built. You have in many cases elevators that can be
reutilized in their entirety, but fixed. You have many
components that can be used, and it only costs a fool more
money.
I did the Grand Hyatt Hotel from the old Commodore Hotel. I
did Trump International Hotel and Tower from the old Gulf and
Western Building at 1 Central Park West, if you remember. I did
the Trump Park Avenue Building from the Delmonico Hotel. I love
doing renovation because it costs you half. It does not cost
you more, it costs you less if you know what you are doing.
Now, if you do not know what you are doing, it can be
fraught with cost overruns, etc.
So I looked at a couple of other buildings, 40 Wall Street
is a building which is unfortunately and sadly now the tallest
building in downtown Manhattan, sadly because the World Trade
Center came down. It replaced 40 Wall Street. It was actually
the tallest building in the world for a period of 1 year, and
then superseded by the Chrysler Building and then the Empire
State Building. But downtown Manhattan, it was superseded by
the World Trade Center, 40 Wall Street is approximately 72
stories tall. It was a complete gut renovation identical to
what you are doing. We put all brand new windows, brand new
everything in it, and I have a renovation cost of, let us say,
$100 a foot if you add everything, and that would mean that
your job would cost somewhere in the neighborhood of half the
number that you are talking about, and even less.
The way I look at it, the number that they are talking
about--and I agree with Senator Sessions--is close to $600 or
$700 a foot. They are not adding garages. And by the way,
garages are very inexpensive to renovate, so that brings the
number way down. They are not adding a lot of things that have
to be added.
When I went to see the Administration, and when I went to
see Kofi Annan, I was actually quite excited because I thought
that I could save this country, this world, everybody including
myself, a lot of money just by sitting down and having a
meeting. Unfortunately, as our great Senator to my right said,
there was just no response. They did not really care. It got a
lot of press. I walked into the room and I sat down. I felt
like a head of State. I was sitting with Kofi Annan, and a door
opened, and there were literally hundreds of reporters taking
my picture. I said, ``What are we doing? I just want to tell
you I can build a building a lot cheaper.'' And that was the
end of it.
I wrote letters, and you have copies of the letters.\1\ I
wrote letters after the meeting. I thought the meeting went
amazingly well. I was expecting a call the following day from--
whether it is Kofi Annan or his people--at that time it was a
man named Conners. I met with Mr. Conners.
---------------------------------------------------------------------------
\1\ The letters submitted by Mr. Trump appears in the Appendix on
pages 324-332.
---------------------------------------------------------------------------
Mr. Conners did not know the first thing about what he was
doing. He did not know whether or not the curtain wall was
going to be new, old, and did not even know what a curtain wall
was. I said, ``What are you going to be doing with the curtain
wall?'' He said, ``What is a curtain wall?'' Now, he was in
charge of the project. The curtain wall is the skin of the
building. I said, ``Will it be new or old?'' He said, ``I don't
know.'' I said, ``Are you using New York steam or are you using
a new boiler system?'' He said, ``I don't know what New York
steam is.'' It is a very common form of heating in the
building. He had no clue.
The price, at that time, was $1.5 billion. I do not know
why it came down because the world has gone up, but it came
down. That was in the year approximately 2000 to 2001. So he
did not have a clue. I do not know if he is still there.
Perhaps he is.
The one thing I found him very good at is that he did not
want to lose control of this project. He was a man that
absolutely wanted to keep control of the project, but he did
not have even the slightest inkling of what it was all about,
knew nothing about it.
He then told me that he may move people out, he may not
move people out. He did not know. He thought he might. He was
not sure. He just did not know. So I went through a whole list
of questions for him, and then I realized that the United
Nations is in serious trouble, because the $1.5 billion that
they were talking about, there was no way it was going to
happen for that.
And I say today that the $1.2 billion, which they brought
down even though it is basically the same work and even though
things have gotten more expensive, so I do not know why they
brought it down because I do not think they brought it down for
any particular reason. But the $1.2 billion, in my opinion, I
will be sitting here in 3 years, and I will be saying--and I am
going to predict that it will cost over $3 billion because they
just do not know.
I was very impressed with Mr. Burnham, but again, you have
to deal in New York City construction to see what tough people
are all about, to see what tough contractors are all about, and
if you have not done it, you are going to go to school and they
are just going to take you to lunch, and you are just not going
to even know what happened.
So this project at $1.2 billion, will cost in my opinion $3
billion. In my own opinion, however, in my real opinion, it
should cost approximately $700 million.
I have been listening to a couple of different things,
first, swing space. I do not think you need swing space. First
of all, what landlord in New York is going to rent space for a
year and a half or 2 years? Who is going to do that? You are
going to give up a building for a year and a half or 2 years
and say, oh, good, you just go in, mess up my building for a
short term and then move out. Nobody is going to do that unless
they are totally desperate, and you do not have to be desperate
in New York. It is the hottest real estate market in the world,
today probably, and I am saying where are they going to find
this space to start off with? It is going to be a disaster. And
if you know New York City landlords, and some of you do, there
is no worse human being on earth. [Laughter.]
They are going to have more fun with these folks from the
United Nations when it comes to signing that lease, and the
United Nations, their heads will be spinning. Assuming there is
honesty, their heads will be spinning.
So I do not know where they are going to get the space.
They are going to have to pay so much, and no landlord is going
to fix the space. You know, I am listening to these people that
are very naive, and I respect them, but they are very naive in
this world. Now, I might be naive in their world, but in this
world they are naive to think that they are going to go into a
building and rent hundreds and hundreds of thousands of feet of
space--if they can find such a building and I do not know of
any building like that--and then they are not going to have to
pay for the renovation of that space and fixing up the space
for a couple years.
Now, people do that but they sign 25- and 30-year leases. I
do not mind going into an office building and fixing up space,
but I sign a 30-year lease or a 20-year lease or at least a 15-
year lease. These people are going to sign a 1-or a 2-year
lease. It is ridiculous. So their concept of swing space, in my
opinion, does not work from an economic--and the number of $98
million is a joke because that number will be hundreds and
hundreds of millions of dollars in just the renovation cost
alone.
One of the things that I had mentioned to Kofi Annan and
the whole group, when I was at the meeting, was that there was
no reason to move anybody out. In New York City we have a lot
of asbestos buildings, and there is a whole debate about
asbestos. I mean a lot of people could say that if the World
Trade Center it would not have burned down, it would not have
melted. A lot of people think asbestos, a lot of people in my
industry think asbestos is the greatest fire-proofing material
ever made, and I can tell you that I have seen tests of
asbestos versus the new material that is being used, and it is
not even a contest. It is like a heavyweight champion against a
lightweight from high school. But in your great wisdom you
folks have said asbestos is a horrible material, so it has to
be removed.
Space is constantly being renovated. Asbestos is constantly
being gotten rid of with tenants in possession. You sit there.
They wrap it, they conceal it, they do it. There are many
professional firms. They move the asbestos. Estee Lauder's
company, they did it while they were in possession. I could
name a hundred tenants where it has been done while they sit in
their offices, literally working. Sometimes it is done over
weekends. Sometimes it is done at a little different time. They
take sections of offices and they do it, and the people move
from that section to another section and they are
inconvenienced for a day and a half. And then they rebuild the
office.
So the concept of moving to swing space, dealing with New
York City landlords, is absolutely ridiculous.
Now, you can do the entire building. You can put new skin
on the building. You can put new piping, you do not have that
much piping because the bathrooms are all centralized. Not
every office has a bathroom. It is not like an apartment house.
But you can do this entire building, like I did the Grand Hyatt
Hotel. I took the old Commodore Hotel and I made it into the
Grand Hyatt Hotel on 42nd Street and Park Avenue. It is a great
success. I have done this with many buildings. But it is not
necessary to have everybody leave the building in order to
rebuild a building, and you do not have to necessarily even do
it at one floor at a time. You can either fix the skin or put a
new skin on the building, and what you do is you do the roof
first, and you seal it, and you get a 30-year guarantee. And
what I do best in life is build, even better than ``The
Apprentice,'' I must say. [Laughter.]
The thing I do best is build. But you put a new roof, as I
did with the Commodore Hotel into the Grand Hyatt, you put a
brand new 20- or 30-year roof that is a guaranteed roof, and
now your roof is done, like an umbrella, and then you bring the
skin down, and as you are bringing the skin down, you are
taking the old skin off. So by the time--and you literally have
very little gap, very little space, but you are bringing the
new skin down and just think of an umbrella. You are bringing
the--and you should put new skin. This skin has been up there
for 60 years, it is over. You can copy the skin identically.
You can copy the color of the glass identically. You can bring
in all the modern technology including triple pane or double
pane glass in terms of heat and cooling and everything else,
but you bring the skin down and--you have scaffold--and as it
is coming down, the old skin is coming off, everything is
sealed up beautifully.
In the meantime, inside, your pipes are going up, your
asbestos is coming out, your electric is being redone. You have
companies that do nothing but redo electric. Now, these are
different companies. You have companies that do new electric,
they would not know how to redo electric. Then you have
companies that redo electric, they do not know how to do new
electric. I mean it is just a specialty.
But you have special people that redo apartments, which are
being renovated all the time with people in possession, that
redo all sorts of buildings. I just built a building on Park
Avenue and 59th Street. I had tenants in possession when I did
it. I mean I built a major building, essentially brand new, the
old Delmonico Hotel, and I had people living in the building
when I did a major $100 million job. It is a $200 million
building. So the concept of moving to another location and
getting everybody out of this building is absolutely asinine
and will cost you so much money you are not even going to
believe it, and then you are going to have to move in.
Many other things. When I did the Wollman Rink, the City of
New York was boggled down for a period of 7 years. They had
spent $21 million. It was a tremendous embarrassment to the
Koch administration. And I said, ``I would like to take over
the project.'' And they said--the New York Times came out with
an editorial, the New York Post came out with a great
editorial, and they said, ``Let Trump do it,'' and finally the
city let me do it. And I rebuilt, and believe me, I used
nothing that was there before. Everything had to be gutted out
because it was totally incompetently done, 7 years, $21
million. I redid it--and the Senator remembers this very well I
guess--I redid it in 3 months for $1.8 million, and it opened,
and I still run it today, and that was quite a while ago.
This is no different, and in fact, in a certain way this is
even easier. All week long you have tenants in New York
renovating their space, you have buildings being renovated with
what we call tenants in possession. There are tenants in
possession, they are in possession of the space. Now, I
listened to one thing and I have seen one thing and one number
that sticks out more than all of the rest, because whether or
not somebody does not know what New York steam is or what
boilers and whether or not they have boiler rooms, which the
people at the United Nations did not do. But the number of $44
million for an architect is one of the great numbers in the
history--in fact, I think this man is a genius, whoever he may
be, wherever he may be in Italy. I think he is a great genius.
I would like to meet him. [Laughter.]
He is without question the richest architect in the world.
And as one person said, ``I think they only got $500,000.''
Another person said, ``I think they got a million dollars,''
and then changed their mind and it was $7.8 million. And then I
listened to Senator Sessions, who actually did his homework,
said they got paid $27 million, because you were able the check
the books. So they got paid $27 million, have not done
anything. They do not even have plans. Nobody even knows what
they are building, and they got paid $27 million.
Now, I have respect for a lot of people, and I have great
respect for architects, but I am going to give you an example.
The tallest residential building in the world my architect got
paid approximately $1.5 million. This architect got $44
million. A building at 40 Wall Street, my architect got paid,
believe me, peanuts, I think, less than $1.5 million. In
Chicago, where I am building a building of 92 stories at the
old Sun Times site, 2.7 million square feet, which is more than
the United Nations if you add up all of the projects that they
are talking about, it is larger, substantially larger. I am
spending $600 million and they are saying they are going to
spend $1.2 billion, so they are spending much more, and this is
a 92-story building with brand new structure, brand new
foundations. I am building all the roads. Mayor Daley made me
build roads around the building. I had no choice. Otherwise, if
you know Mayor Daley, you are not going to build the building.
He is a great man but he made me do that. So all of this is
$600 million, and they are spending $1.2 billion.
Now, there is no way they are spending $1.2 billion, in my
opinion, and based on what I have heard. When they have spent
$27 million and terminated the architect, there is big trouble,
because I do not think they have a new architect. So if they do
not have a new architect, who is going to do the plans and who
is going to do the bidding? Because in order to do a job, you
have to have a complete set of plans and specs. If you do not
have a complete, finished, set of plans and specs, you have
nothing to bid on, there is no way you can bid. The worst thing
you can do--and you said you were in the home building business
for a while--the worst thing you can do, as you know, is start
a job without complete plans and specs because the
subcontractors will eat your lunch. So it is one of those
things.
So they do not even have an architect. They spent $27
million and they do not have an architect. Now, I have asked on
numerous occasions, to go in and I would help them. I would
love to help them. I do not want any money. I want nothing. I
have made a lot of money. I do not care. I want nothing. If
somebody said, what would be your dream on this site? Well, my
dream is a dream that will not happen, but it is a dream that I
might tell you. It is a dream to take the United Nations--the
Senator over here is probably going to go crazy--move it to the
World Trade Center as a brand new United Nations, sell the
United Nations site--which is one of the greatest sites in the
world--for much more money than the whole thing would cost--and
you end up building a free United Nations at the World Trade
Center, where I do not think anybody is going to want to stay
anyway. I think it is going to be a very hard rent up at the
World Trade Center.
But let us assume that is not going to happen--not a bad
idea though----
Mr. Golden. Got no problem with it.
Mr. Trump. Not too bad. He has no problem. Most people do
not have----
Mr. Golden. Put Kofi Annan on the top floor. [Laughter.]
Mr. Trump. OK. I will not get into--I did not say that. But
the fact is that the United Nations building, with all of its
buildings, with its parking, should be completed--and I mean
completed--at a cost of $700 million. And it is my opinion that
it will not be completed for less than $3 to 3.5 billion. They
do not know what they are getting into. And please remember
this, as somebody that has probably built as much as anybody my
age anywhere--I do not know of anybody who has built more--if
you do not have a complete set of plans and specifications,
there is no way you can build. And from what I understand, they
do not even have an architect.
One final point. They give you some nice firms, Turner and
this one, and Gardiner and Theobald. The fact is that I can
take those same firms and tell them the way I want it built,
and those same firms will come up with prices that are half the
price that they are coming up with. They are being told what to
do by people who do not know what they are doing. So if I take
Turner Construction, which is fine, or if I take a couple of
other--and by the way, when I say ``fine'', fine but Rolls
Royce. They spend money. But if I take a couple of those firms,
and if I show them the right way to do it, and if I lead them
down the right way--which is really what a good developer
does--that number that they are coming up with will be cut in
half.
So that is it. Congratulations, you have yourself a mess on
your hands, and it is only going to get worse.
Senator Coburn. Mr. Trump, thank you very much. Let me ask
you a couple of questions. Your renovation cost per square foot
on an average building, and let us say with asbestos abatement,
what is it, $100 or $150?
Mr. Trump. I think any professional--I was speaking to
somebody very professional, Richard LeFrak before. He said he
just gave out an architectural contract on a million foot
building for $1.5 million, not $44 million, $1.5 million, so it
is the same size, $1.5 million.
I would say that because of the United Nations in terms of
security and some enhanced needs, let us assume it is beyond
even your normal high-grade office building--which it is really
not; essentially it is an office building. But let us add
something for security. I would think you should easily do it
for $250 a foot, easily. And that means complete. That is not
adding up all of this other stuff, which by the way was not
given to you. You have many things listed on that board that
were not given to you.
Senator Coburn. Right. When you say $250 a square foot,
that is in today's dollars, so if we wait 2 years, there is
going to be some price inflation in that?
Mr. Trump. They do not even have an architect so how can
they start sooner than that? First of all, to do a good set of
plans and specs is going to take you a good year, so if you do
not have an architect even hired yet because the last one
ripped you off or did whatever he did--that guy is
unbelievable. I mean this guy, I want to meet him. I can learn
from that guy. So you have a man that got paid $27 million that
you are not going to use. So now let us assume you have to
start all over because no architect is going to take over
somebody's plans in the middle. You just do not want to do
that, OK?
The other thing is, how do you hire an architect from
Italy? I love Italy. I love the Italians. How do you hire an
Italian architect? What happens? Every time he wants to check
the building, he gets on a plane and flies for 8\1/2\ hours,
and he goes to the New York City Building Department and he
does not even speak English? I mean it is ridiculous.
So what they have is they really have a problem and I do
not see how they can ever start. Now, if you put a developer
like myself or like any one of five other people--and I can
only think of five--in charge of a job like that, you could
have that job started immediately. You could have the asbestos
removed with tenants in possession. You could have the entire
building rebuilt in less than 2 years.
You know, Kofi Annan asked me one question. At the time--
and I am only increasing it because of the fact that when I met
him it was 4 years ago--but at the time I said I could do it I
think for $400 million versus their $1.5 billion. Slightly
different number, right? He said, ``What would be the
difference in the building?'' I said, ``The difference would be
my building would be better, be much newer, much richer.'' I
was putting in all brand new marble floors on the ground--I
like marble--I was putting in all brand new marble floors. They
have all broken up terrazzo floors. Under their plan they were
leaving these all broken floors. They are broken, old, and
terrazzo is not exactly a great material, it is garbage. But I
was putting in all brand new marble. I was putting in an all
new curtain wall. They were going to fix their curtain wall. If
you fix that curtain wall, it is a disaster. You have to put in
a brand new curtain wall. You will get another 50 years. If you
fix it, it is not the answer. It is going to leak, it is going
to be a problem.
So he asked me the question, and I said, ``The answer is it
is going to be better. It will be brand new in its entirely.
You will not have to move anybody out. You will not have to go
and build''--at that time they were talking about, as you
remember, building a new building to house the people, and they
were going to--and they were actually thinking about then
ripping the building down, so that is a real beauty. But they
do not know what they are doing, so here I am.
Senator Coburn. So if the United Nations decides to go
ahead on the track that they are going now, and go out for a
$1.2 billion contract, you going to go get that business?
Mr. Trump. No, I am not going to get it. First of all, they
do not know what they want. They do not know what they have.
They have no idea what they are doing. It is a problem where
you cannot bid on a job like that. And I would not bid on it
anyway. I offered my services free. I wanted to save close to a
billion dollars, actually $1.1 billion at the time. I wanted to
save a billion dollars for the United Nations, for the world,
in a sense. I wanted to do it. I liked doing the Wollman
Skating Rink. I mean this is a bigger version of the Wollman
Skating Rink, that is all it is to me. And I said, ``I do not
want a fee, I do not want anything.'' They did not like the
idea.
Now, the Senator would have his own reasons. He is stronger
on it than me, but they did not want the idea.
Senator Coburn. Are you surprised, Senator, about that?
Mr. Golden. No. I think that would be a good location, and
I spoke in jest, and I apologize for the jest, but I think the
downtown Manhattan would be a good site or where it presently
is, and I think you could do an outstanding job. Anybody could,
as long as you have accountability and you have real
transparency, and you have real bids going on and real people
managing these projects.
Mr. Trump. I think that is not going to happen. I think it
is a very interesting idea, but I think it is not going to
happen. I love the idea of the downtown switch. Sell the land.
You will make such a fortune on the land, etc. It is not going
to happen from a practical standpoint. It should happen, but it
is not going to happen. But just in terms of the renovation
itself, you have to get the right architect. I mean there are
architects and there are architects. You have to get the right
architect, and you have to know who those architects are. I
mean I can only think of five architects who would do a great
job on this building. You have to know who the architects are.
You have to get your plan started. You have to do it as a
renovation, and the renovation should be done quickly,
effectively, and in my opinion, by the end of 2007, this whole
job should be complete. It can be started immediately because
of the fact that you are doing it the way I am saying. Within 3
to 4 months of planning, you can start your contracts without
extras. In other words, you can start what I call hard
contracts, contracts without fluff and without extras.
I think the entire job can be done by the end of 2007. I
promise you, Senator, they will not even have the people moved
out by 2007.
Senator Coburn. One little follow up. They gave us $1.2
billion, $482 million going to labor and materials, and $471
million set up for contingency and professional fees.
Mr. Trump. Nobody has ever heard of such a number.
Senator Coburn. In your experience, when you plan a
project, what do you figure for contingencies, the whole thing,
the cost overrun, liability, the whole works, what do you
figure?
Mr. Trump. Their contingency number was what, $400 and some
odd million?
Senator Coburn. Yes, $471 million.
Mr. Trump. Craziest number I have ever heard. My building
in Chicago is $600 million. I believe we have a $30 million
contingency, and of the $30 million, if I use any more than $3
or $4 million, I am going to be very angry at my people. That
is a 92-story building. I have a $30 million contingency, and I
do not expect to use it. I set aside $30 million. I expect that
if I use more than $3 million, I am going to be a very unhappy
camper. To have a $400 and some odd million contingency is
totally unheard of.
Senator Coburn. Thank you. Senator Dayton.
Senator Dayton. Thank you, Mr. Chairman.
Well, you build good buildings, Mr. Trump.
Mr. Trump. Thank you.
Senator Dayton. I go to Napoleon's.
Mr. Trump. Very good.
Senator Dayton. When can you start? [Laughter.]
Mr. Trump. I would like to do--it was amazing. The Swedish
Ambassador just piqued my attention, and he should get a lot of
the credit for this. I mean his letter is here. It is such a
beautifully written letter, and it is written by a man--I do
not even know him--it is written by a man of great common
sense.
Senator Dayton. And you met with the Secretary General 4
years ago?
Mr. Trump. Four years ago.
Senator Dayton. And I see here the United Nations General
Assembly Capital Plan I referred to before is dated June 2000.
So I mean this project now on 5 years is going nowhere.
Mr. Trump. Right. I could have built it twice.
Senator Dayton. How does the United Nations, or how does
whoever it is, the lender if we are going to be the lender, how
do you regain control of the project? Do you start with a
developer?
Mr. Trump. Well, actually, Mr. Burnham said, ``I would like
to call you tomorrow,'' and I thought that was terrific.
Honestly, I thought that was terrific. This is what I do. This
is what I do the best. And I am in New York. And as the Senator
said, Senator Sessions, New York is a tough place to do
business. You know, I have had great success, and sometimes you
take your lumps. You have to know the contractors. I know ever
contractor in New York. I know the ones that are going to--I am
not going to say the words, there is too many wonderful women
in the room--but I know the contractors that are going to,
``take advantage of you. I know the contractors that are slow.
I know the contractors that are fabulous, that do not ask for
extras. I know all of them. I know the good ones and the bad
ones.''
I told a friend the other day--he was doing his apartment,
he told me the contractor--I said, ``Do not use them.'' This
was about a year ago. He got killed by this guy. He got killed.
I said, ``Use somebody else.'' He came to me the other day, he
said, ``I should have taken your advice.''
The United Nations people do not know. We have major slime
in New York, and much of that is in the form of contractors. Is
that not a sad thing to say? And every one of them, I guarantee
you, will find their way to the United Nations. [Laughter.]
Senator Dayton. When would you like to take over rebuilding
the Visitors Center and a few other projects?
Mr. Trump. That is true, you have had your own difficulties
with that.
Senator Dayton. We have. But it shows the difference
between someone who knows what he is doing and people who do
not. Thank you very much.
Mr. Trump. Thank you, sir.
Senator Coburn. Senator Sessions.
Senator Sessions. Mr. Chairman, thank you very much for
caring enough about the American taxpayers' money to have this
hearing, and I think you have got something planned. Mr. Trump
is a breath of fresh air for this Senate. And it ought to
embarrass all of us because all of us have oversight committees
that are not doing a very good job, and if we could save $1
million, Mr. Trump, that is a million dollars that can be used
for good cause, and I think there is a potential to save a lot
more than that.
You have given us a tutorial on reconstruction and
renovation and construction in big projects. I hope people were
listening, and I think the main point is you have got to know
what you are doing in this city and this kind of construction
project or you can be taken to the cleaners. Your contributions
are going to help us save money, and I believe help us have a
better U.N. building, and you would not have said that if you
did not believe in the institution and want it to be better,
and want it to have the best building it can and the best
balance sheet it can.
So I just want to thank you for it, and we will note that
you said it could be completed by 2007. The plans are at this
date to begin moving people out by June 2007. So once again, we
have longer time frames and more costs. Again, I want to thank
you for your courage, your willingness to speak out on an issue
that a lot of people would have avoided, but you brought your
expertise to bear and I believe it will help the U.N. do a
better job.
Thank you very much.
Mr. Trump. Thank you, sir.
Senator Coburn. Mr. Trump, if someone in your organization
paid twice the amount for a project than it should have cost,
in two words or less, what would you say?
Mr. Trump. You're fired. [Laughter.]
Senator Coburn. We are dismissed.
[Whereupon, at 4:42 p.m., the Subcommittee was adjourned.]
A P P E N D I X
----------
PREPARED STATEMENT OF SENATOR CARPER
Thank you, Mr. Chairman, for holding this very timely hearing.
Since its establishment on June 26, 1945, the United Nations and
its agencies have played integral roles in addressing global issues
ranging from peacekeeping to human rights.
Since its inception, a number of geopolitical milestones have
resulted:
The State of Israel was created by a vote of the United
Nations partitioning a section of Palestine to make a permanent home
for the thousands of Jewish immigrants, displaced by the Holocaust
prior to and during World War II.
In September of 1960, the U.N. accepted 16 African states
as members of the U.N. who had seceded from colonial rule and
established their independence.
Additionally, the U.N. was major factor in bringing about
the downfall of the apartheid system in South Africa, by imposing
measures ranging from an arms embargo to a convention against
segregated sporting events.
The U.N. is important not only to the international community, but
also right here at home to the U.S. and to the city of New York. The
U.N. employs over 40,000 people, including 1,400 Americans, making it
one of New York's largest employers. New York City lists the U.N. as
one of its major tourist attractions, with approximately 40 million
visitors having toured the building since 1952 and contributing by some
estimates $800 million yearly to our economy.
The U.N.'s presence in New York creates an inherent solidarity with
New Yorkers at a time of peril from terrorism. Both the General
Assembly and the Security Council of the United Nations quickly and
forcibly condemned the terrorists' September 11th attack on New York,
and the Security Council mandated a strong program of anti-terrorism
measures binding on all 190-member states.
The tasks assigned to the U.N. by its member states since the end
of the Cold War have grown and evolved in ways that the U.N.'s founders
could not have envisioned; unfortunately, the physical structure of
U.N. Headquarters does not reflect this growth.
The U.N. Headquarters was designed to accommodate 70 member states;
there are now 191 member states occupying the building. The U.N.
Headquarters were designed for 1,500 meetings per year; it now
accommodates approximately 5,800. Both the U.S. and New York City fire
and safety codes and accessibility standards have changed significantly
since the 1950s; the U.N. is unable to meet either.
Problems within the U.N.'s infrastructure include the existence of:
asbestos; lead paint; poor fire separation between buildings; falling
and leaking ceilings; a lack of sprinkler systems; and spaces that
would be inaccessible to emergency responders, such as firefighters.
The U.N. Headquarters also lacks enhanced security measures like
shatterproof glass windows and blast-proof General Assembly building
walls which are essential in a post 9/11 world.
To address these hazardous work conditions, the United Nations has
created a Capital Master Plan to refurbish and modernize its
headquarters. The U.N. has hired experts to offer counsel on the
development of the design and construction plan. The GAO has examined
the progress of the Capital Master Plan in 2001 and again in 2003:
In its May 2003 General Accounting Office Report: Early
Renovation Planning Reasonable, but Additional Management Controls and
Oversight Will Be Needed, the GAO found that: ``U.N. officials followed
a reasonable process consistent with leading industry practices and
recognized guidelines in developing the headquarters renovation plan--
the first phase of a five-phase renovation process.'' (GAO REPORT, May
2003 03-566)
In its June 2001 General Accounting Office Report:
Planning for Headquarters Renovation Is Reasonable: United States Needs
to Decide Whether to Support Work, the GAO found that: ``The planning
efforts for the proposed renovation of U.N. headquarters in New York
City have been reasonable and have conformed to industry best
practices. U.N. officials have identified critical problems in the
buildings that need to be remedied and developed options for correcting
the deficiencies. They have also developed preliminary, but reasonable,
cost-estimates for them.'' (GAO REPORT, JUNE 2001 01-788)
Additionally, the U.S. Mission's Management and Reform Office has
conducted ongoing reviews of this process since its start. Also, a task
force has been created that includes the State Department, OMB, and
consultants that have worked on U.S. embassy construction projects.
I am confident that testimony from our witnesses today will
demonstrate the severity of the hazardous conditions under which U.N.
employees work on a daily basis. I believe that our witness from the
State Department and our briefing from Under Secretary General Burnham
will assuage any concerns expressed about the fiscal responsibility of
the Capital Master Plan. I look forward to learning how Congress and
the Administration can work together to ensure that the Capital Master
Plan is implemented without delay.
However, I must also take some time to relay some things that have
troubled me about this hearing.
First, the timing for this hearing seems somewhat odd considering
that just last year Congress approved a $1.2 billion market-rate
interest loan at 5.54 percent, which has already been offered to the
U.N. U.N. Secretary-General Kofi Annan has encouraged the U.N. to
accept the loan by the September 30, 2005 deadline. Additionally,
Congress just a few months ago approved a $6 million loan guarantee to
prevent losses in the event that the U.N. should default on the loan.
It seems that a hearing of this nature would have been more timely
before these Congressional actions took place.
Second, I am unclear as to why GAO, a neutral observer who has
conducted two rigorous oversight studies on this issue and is planning
a third, is not testifying today. Instead, we are faced today with a
series of witnesses who have little insight into the nuts and bolts of
this process. For instance, one witness says that he is against the
project simply because Kofi Annan is heading the U.N. and that he will
support the project if Annan steps down.
I'm told that Kofi Annan will no longer even be the Secretary
General by the time the construction of this project begins. I'm sure
there are countless individuals we could have called before us today
who have strong opinions about the U.N. and what it does. But at a
hearing of this nature, I'm interested in facts, not opinions, so I'm
disappointed that some of today's witnesses know very little about the
details of the Capital Master Plan and the costs associated with the
plan.
If there truly is a problem with this project, I'd be among the
first members of this subcommittee to say that we should do something
about it. But it seems clear to me that this is a sound project that
GAO and other parties have a close eye on. That being said, I look
forward to hearing testimonies from our witnesses today that really
address the nuts and bolts of the renovation and any related issues of
concern.
Thank you.
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