CORRUPTION: U.N. Deal With PwC Is Faulted In Audit

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By JOE LAURIA

United Nations officials made "serious breaches" of U.N. rules in awarding PricewaterhouseCoopers with a multimillion-dollar consultant contract on a project to overhaul the U.N.'s computer system, according to a U.N. audit reviewed by The Wall Street Journal.

The audit report from the U.N.'s Office of Internal Oversight Services contends there were numerous ways in which the U.N. procurement department and the U.N.'s project director skirted U.N. regulations to favor PwC over other bidders.

The report argues that PwC's approximately $16 million contract bid was nearly $11 million higher than the lowest bid and exceeded the $11 million the U.N. had allocated for the project. The project, known as Umoja, involves a redesign of the U.N. procurement, human resources and financial management computer systems.

The project's director, Paul van Essche, and the U.N.'s procurement department declined a request for comment.

PwC wasn't awarded the contract on its overall financial bid but on a proposed day rate, the report says. But U.N. procurement files do not show the final agreed number of days needed for the project, making it impossible to determine the estimated cost to the U.N., the report alleges.

"PwC is serving as the design consultant to the Umoja project and was engaged through the U.N.'s standard procurement process," a PwC spokeswoman said. "The firm complied with the U.N. procurement process and is not aware of any violations." The spokeswoman said she could not go into more detail because of client privilege.

The report provided responses from procurement officials, who said the selection panel had the required experience needed to choose PwC and that requesting a best final offer would limit its ability to negotiate with a bidder. They also said no spending ceiling—required by U.N. regulations—was put in the contract to keep PwC from knowing how much funds the U.N. had available.

The U.N. has hired PwC numerous times in past years. In 2007, the firm was employed to confidentially review the financial disclosure statements submitted by U.N. staff. In 2005, the company donated 8,000 hours of staff time to investigate any abuse of donor aid following the Indian Ocean tsunami of the previous year.

The U.N. procurement department has been hit with a series of scandals in recent years. One procurement official was convicted in 2007 on bribery and fraud charges for giving contracts worth millions of dollars to a friend for money and a sweetheart deal on two luxury apartments. Another pled guilty in 2005 to taking $1 million dollars in bribes from foreign companies seeking U.N. contracts.

Write to Joe Lauria at newseditor@wsj.com