Managing property in the public sector

Sir Peter Gershon was commissioned in 2003 by the government to assess how the public sector could exploit opportunities for efficiency savings, and release resources for front line public service delivery. As a result, all councils were set an efficiency target by the government of 2.5 per cent per year over the next three years (the Comprehensive Spending Review 2004). The efficiency targets will continue as a feature for the three years 2008/09 to 2010/11.
In order to maintain investment in front line services, public sector organisations will need to release resources, as it is not likely to be any significant additional money coming from central government sources. Therefore the better use of property is integral to meeting the government’s aspirations. There is likely to be a particular focus on the condition and management of the asset stock as a basis for making investment decisions, including disposal programmes and improved utilisation.
Property management
As an integral part of Gershon, the Lyons Review involved a study into the management of public sector assets and how it might be improved to contribute to the Government’s objectives of securing £30 billion of asset sales and achieving further efficiency gains. While the report is mainly directed to central government departments, Lyons considers that local government disposals of approx £4 billion pa are achievable, along with efficiency savings of £760 million from more efficient management of offices alone.

Key findings of Lyons included:

  • Asset management doesn’t yet have the strategic approach it needs
  • There is no consistent approach in identifying, valuing and challenging the use of assets
  • Crossing boundaries [or partnership working] is in its infancy, with economies of scale being lost as a result
  • There is inadequate focus on ongoing maintenance.

A third strand of context for local authorities is the Comprehensive Performance Assessment (CPA) process, which includes a use of resources assessment of how a council manages and uses its financial resources. Integral to the assessment is effective asset management. It shows that the importance of property as a strategic resource is increasingly being recognised by central government and the Audit Commission.
So, whether it’s the Audit Commission, the extended principles of the Gershon Review or the Lyons Report, the message is clear – councils need to review their land and property holdings, specifically including offices and service delivery mechanisms.

Addressing the Challenge
Local authorities hold a massive amount of real estate – estimated at £766 billion in the whole public sector in 2004 - and it is therefore imperative that:

  • the optimum portfolio is held for service delivery;
  • the running costs/occupancy costs are efficient;
  • buildings contribute effectively to service delivery improvements, including joint working and joint use;
  • the highest capital receipts are obtained for surplus assets, to service capital programmes.

These ideas are not new for local authorities and it has been acknowledged both by Sir Michael Lyons and the government that there are many good examples of effective asset management in local authorities where the challenges are being met. I am pleased to say that St Edmundsbury Borough Council is working very closely with Suffolk County Council, which aims to deliver customer-driven integrated service provision from new headquarters in Bury St Edmunds. This will form the nucleus of a Public Service Village for co-location of other public services and will achieve the sort of efficiencies encouraged by the government, Gershon and Lyons.
Below is an extract from a recent article written for ACES’ members by Roy Gregory, chief property manager for the London Borough of Redbridge. This is a good example of the government’s aspiration for delivering ‘transformational services’ and addresses the key issues identified above.
“One of my principal tasks at Redbridge is to promote and introduce new ways of working in my authority. Redbridge is an outer London borough with a population of about a quarter of a million. Its principal office buildings comprise 24,100 sq. metres of space. It employs about 1,700 office staff, and office accommodation costs equal about 1.5 per cent of the council’s revenue budget.
“Our portfolio of office accommodation is mainly of 1960s vintage and we have a traditional town hall, which is Grade II Listed. Traditional town halls are long on civic pride and faded elegance, and short on efficient and cost-effective office space. Ours costs 50 per cent more to heat and light, and three times more to maintain per member of staff accommodated than our 1960s stock.”
“As efficient asset managers, we’d all claim to know what we own. But let me drill a little deeper: Are all your offices DDA compliant? How do they measure up to the new EU Energy Consumption standard? How much backlog maintenance still needs to be tackled? Do you have up to date condition survey information?
“Since asset registers became the norm, we’ve had an annual rolling programme of concise condition surveys. However, much more detailed surveys will be needed before you embark on making your portfolio more efficiently used.
“In Redbridge, depending on the building, our average floorspace per employee ranges from less than 8m2 to nearly 14m2. Energy costs per sq. metre in some of our buildings are 3 times higher than in others. Cost of building maintenance per sq. metre per annum ranges from £43.00 per m2 in the town hall to around £10.75 per m2 in some of our other buildings. And with gas prices doubling in the last few months, these costs need to be under constant review.
“You need to be able to undertake this sort of spatial analysis in order to inform your accommodation strategy. Which leads me on to “Suitability and Sufficiency”. This is terminology which has come out of asset management planning. So what do your staff really think of where they work? Have you asked them? How can you embark on a strategy for new ways of working without asking them?
“There’s the “what do you think of your building?” example, which is very physical, and buildings-related. And then there’s another type, which tackles the issue more from the standpoint of working practices and how these are facilitated, or hindered, by the office accommodation in which they take place. Finally, there’s the issue of how well the space is used.”

Looking forward
“We have recently undertaken a space audit of our office accommodation, which involves monitoring the use of desk space at regular intervals in order to build up a picture of space utilisation and an analysis of the staff themselves in order to categorise them according to their workspace. This is in preparation for exploring hot-desking, remote and home working, and also to inform the design of any new office space which may be procured.
“The survey reveals that a significant percentage of desks are only occupied for about 50 per cent or less of the day, and the obvious conclusion is that we should be thinking about a hot-desking policy, or a remote working policy, with touchdown locations where staff out in the field can write their reports and deal with their emails without returning to the office. Or, to take it a stage further, could some of these staff work from home for a couple of days per week? There are huge cultural issues here, not least for a generation of managers who tend to want to see staff in the office to ensure they’re working.
“And then you need to determine the role of your office accommodation. If you deal with members of the public in any numbers, then there’s an issue of front office/back office split. Despite the public’s increasing use of new technology, there are still large numbers of people, particularly the elderly and some ethnic minority groups, who prefer to visit public offices in person.
“First Stop Shops are now offering wide services, including partnerships with other public service providers, such as health authorities and the voluntary sector. There are issues here around how you share accommodation equitably (which was one of the key issues addressed in the RICS paper “Whose property is it anyway?”). And for back office staff, do they need to be in the town or city centre? Do they even need to be within your authority’s geographical boundary?”

Managing the Politics of Change and source of funds
“So, why do it anyway? Change is never popular with customers (waste of money), staff (loss of ‘cosy’ office) and politicians (other priorities). Isn’t it all just too much effort? Building new offices or refurbishing old ones is very expensive and scores low on the political scale compared with funding front-line services. Almost certainly the main sources of funds will be the generation of capital receipts. After a slow start it appears that more use is now being made of the Prudential Code to fund Ways of Working. Needless to say, a robust business case including option appraisal and whole life costing is fundamental.
“Finally, you need to obtain the support of council leaders, chief executives and board members, who are generally not very interested in office accommodation. If there are decisions to be taken on whether to spend limited funds on improving where people work, or providing better front line services, there are no prizes for predicting where the money will be spent. Unless you develop your business case around the national “drivers” referred to earlier, and make linkages between new ways of working and your organisation’s corporate objectives, such an important and strategic decision for office accommodation rationalisation may not be made.”
“The sale of surplus assets is one of the main drivers for government efficiency. ACES has been assisting the joint DCLG/Treasury task force set up to improve the release of surplus land for housing. One of the main points we have been making is that generally, local authorities, through implementation of their asset management plans and property strategies, have been identifying and releasing surplus assets onto the market.
“In order for councils to meet their corporate priorities, particularly capital programme commitments, a steady supply of disposals is necessary for new projects. One of the successes of property management has been to link it to budgetary planning over at least a five year period.
“A potential conflict is, however, on the horizon. The government has launched a wide scale consultation as part of a review of the third sector’s future role in social and economic regeneration. This is being launched as the ‘community right to buy’ whereby public sector assets are made available to community groups to manage locally. ACES has been involved in this consultation and is participating in a series of regional seminars. While the principle is endorsed, much ground work will be needed to ensure that property transfers do not lead to inefficiencies in use or management. A major issue to be resolved is how the aspirations of Lyons is achieved, to maximise returns from asset sales and meet the £30 billion target, while potentially gifting property assets at the local level.”
“Government statistics state that the public sector currently has a £125 billion procurement budget and another of the key elements of Gershon efficiencies is more effective procurement. Property management has a part to play in achieving sustained savings.
“The Department for Communities and Local Government issued on 23 August a report setting out progress in the second year of the national procurement strategy (2005) entitled ‘The National Procurement Strategy for Local Government: Two years on - Consolidating progress, becoming more efficient’.
“Local government procurement decisions in England account for around £40 billion per year. The National Procurement Strategy and the local government efficiency agenda have given greater impetus to delivering effective and innovative procurement practices. During the last few years councils have given an increasing priority to procurement, often working with other local authorities and they are responding to the National Procurement Strategy. Much of this has been achieved through sharing and encouraging good practice. Significant achievements in the period include:

  • £1.9 billion of efficiency gains expected from Councils by the end of 2005/06
  • 41 per cent of Councils are now working with their Regional Centre of Excellence on improving procurement performance (up from 14 per cent in 2004)
  • 59 per cent (31 per cent in 2004) of councils are involved in joint commissioning of services (not including health and social care)
  • 32 per cent of Councils are involved in creating a shared procurement function
  • 29 per cent of Councils are creating other shared corporate service functions and 25 per cent working on other shared services

“There is still a long way to go, but ACES is of the opinion that with good networking and leading by example, property managers in local government can make a difference.”

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