Getting the best from public sector office accommodation

Transcription

1 Gettig the best from public sector office accommodatio REPORT BY THE NATIONAL AUDIT OFFICE JUNE 2006

2 The Natioal Audit Office scrutiises public spedig o behalf of Parliamet. The Comptroller ad Auditor Geeral, Sir Joh Bour, is a Officer of the House of Commos. He is the head of the Natioal Audit Office, which employs some 800 staff. He, ad the Natioal Audit Office, are totally idepedet of Govermet. He certifies the accouts of all Govermet departmets ad a wide rage of other public sector bodies; ad he has statutory authority to report to Parliamet o the ecoomy, efficiecy ad effectiveess with which departmets ad other bodies have used their resources. Our work saves the taxpayer millios of pouds every year. At least 8 for every 1 spet ruig the Office.

3 Gettig the best from public sector office accommodatio REPORT BY THE NATIONAL AUDIT OFFICE JUNE 2006

4 cotets Foreword 1 Terms commoly used i this report 2 Executive summary 4 Aex to summary 11 Part 1 Itroductio 12 Well-maaged property is vital to efficiecy 12 ad service delivery The use of office property i the UK is chagig 13 The Natioal Audit Office team comprised Gwy Bassett, Keith Davis ad Hugh O Farrell. The Natioal Audit Office was supported by a team from Cocerto Cosultig. The Cocerto Cosultig team comprised Fred Guscott, Rob Harris, Tim Paley, Paul Stasall ad Matthew Symes. Chages i the use ad maagemet of 15 public sector space The NAO s examiatio 18 For further iformatio about the Natioal Audit Office please cotact: Natioal Audit Office Press Office Buckigham Palace Road Victoria Lodo SW1W 9SP Tel: equiries@ao.gsi.gov.uk Natioal Audit Office 2006

5 Part 2 Best practice property ad 19 space solutios How the performace of the case studies 22 compares to idustry bechmarks A assessmet of the fiacial savigs achievable 26 from wider adoptio of good practice The further beefits that could be delivered by 28 cotiued developmet of Shared Service Cetres Part 3 Flexible offices ad proposals 30 for the future The emergece of a flexible office market 30 The demad for flexible office solutios 31 Proposal for future public sector 34 estate maagemet The opportuity for chage 36 Aexes 1 Methodology 40 2 Flexible Maaged Offices 41 Photographs courtesy of Alamy.com, Erst & Youg ad Vodafoe.

6 foreword Foreword

7 foreword Virgiia Gibso, Professor of Corporate Real Estate, Uiversity of Readig Property is a key resource for all orgaisatios the dace floor for staff, customers, ad a host of other related groups. Gettig the property resource right has implicatios for orgaisatios cost base ad productivity, ad the way they are perceived by the commuity. I the dyamic world i which we all exist, cotiuig to alig the property to the eeds ad objectives of a orgaisatio is challegig. Flexibility is the by-word of all property maagers: how ca they create a property solutio that is able to flex with ever-chagig operatioal eeds? Durig the last decade, the debate o the role of property has come to the fore ad property issues are ow o the ageda of may seior maagemet teams. Sometimes for the right reasos How ca property cotribute to the wider orgaisatioal chage ageda? ad sometimes for the wrog reasos What is the true cost of past property decisios i terms of liabilities ad exposure to property market risk ad how ca these be miimised? I either case, because property is ofte critical to success, it is beig take seriously. Kowledge ad uderstadig of the role of property has improved over the last decade. It is ow clear that property caot be plaed or maaged i isolatio. The key drivers of property demad are i costat flux. Orgaisatioal boudaries are reletlessly chagig through reorgaisatio, outsourcig ad off shorig. The workforce has become icreasigly footless facilitated by the icreased power of techology liked to the reductio i its cost. Thus, orgaisatios are rethikig their whole approach to the locatio ad timig of work, ad the office is o loger always the place where value is created. That meas strategies for huma resources, iformatio ad commuicatios techology ad property eed to be explicitly liked ad eve better, developed i uiso. So what does this mea for govermet? There is a uique opportuity to lik property to the wider chage ageda: the ability for govermet to step-chage ad do thigs differetly. The Gersho ad Lyos Reviews have set govermet departmets ad agecies ambitious targets. The key questio is what role ca property play? This report starts to address the possibilities helpig those at the most seior level thik differetly about how property could deliver some of the savigs. It also discusses the issue about whose property is it ayway. Numerous orgaisatios have grappled with the federal versus cetralised model ad may have foud that there are sigificat efficiecy gais from shared, cetrally maaged geeric space. This poses a key ideological challege for seior decisio makers: should govermet property, geeric at least, be maaged cetrally or should the devolved approach cotiue? I commed this report to seior decisio makers i govermet. It provides a visio of the possible. It will help to ope the debate, challege the status quo, ad esure that iovatio is possible. Ultimately, the goal is to deliver the right property, i the right place, at the right time, at the right cost. This will require asset maagemet strategies closely liked to the orgaisatio s capabilities i both ICT ad HR, ad aliged to the core orgaisatioal objectives. Property is ot special but it is a uique resource with particular attributes. Uderstadig the drivers, ad leveragig the opportuities created, is what superior property asset maagemet is about. Gettig the best from public sector office accommodatio

8 terms commoly used i this report terms commoly used i this report Break-out areas Campus Chur rate Cocierge service Core ad flexi space Cost per workstatio Flexible Maaged Office Hot desks or shared workstatios Hotel.Gov Net iteral area Occupacy level, occupacy desity Iformal meetig areas positioed to ecourage iteractio ad commuicatio betwee people. A group of buildigs built ear each other, ad their surroudig grouds, where a orgaisatio carries out its work. Measures of the amout of people moves over time. Oe hudred per cet aual chur meas that the equivalet of all staff move desk oce durig the year. A exteded receptio service that provides additioal fuctios icludig room ad desk bookig, busiess services ad persoal support services. Uder best practice estate maagemet priciples, orgaisatios idetify their core logterm holdigs (ad drive commercial discouts accordigly) ad their requiremets for short term flexible space to maage peaks ad troughs i the busiess cycle. The total cost of occupatio divided by the umber of workstatios i the buildig. Total costs iclude ret, rates, ladlord s service charge, facilities services (icludig caterig, cleaig, maiteace, receptio, security, telecoms, utilities). Occupiers requiremets for space, icludig facilities maagemet, are provided uder a sigle short-term cotract ad uitary charge. Desks that are shared, that allow a orgaisatio to icrease the umber of people supported by a give buildig. A term coied by the Natioal Audit Office meaig a bespoke Flexible Maaged Office solutio tued to the govermet s eeds, which provides the flexibility to expad ad cotract at short otice, to offer temporary space for idividuals or project teams ad to act as swig space eablig Departmets to move whe required. The area of a buildig which is the gross area less commo areas, lifts, fire escape routes ad other ladlord areas. A efficiecy measure ormally expressed as persos or desks per square metre of et iteral area. 2 Gettig the best from public sector office accommodatio

9 terms commoly used i this report Shared Service Cetre Swig space Touch-dow areas A Shared Service Cetre (SSC) is a facility that performs admiistrative ad trasactioal fuctios for multiple divisios or subsidiaries of the same orgaisatio, rather tha havig those trasactios coducted i separate operatig areas. A term used i the property sector to describe space that is used o short-term basis to facilitate a relocatio project or programme. It is ofte used as a stagig post withi the overall migratio, allowig the permaet space to be refitted or made ready. Shared desks, but ulike hot desks (see above) these are ot bookable. It is therefore available to everyoe i a orgaisatio icludig visitors. Gettig the best from public sector office accommodatio

10 executive summary executive summary This is ot a traditioal Natioal Audit Office report for Parliamet. It is istead a report to departmets, desiged to cotribute to curret thikig aroud how best to use, ad maage, public sector office space. Rather tha a foresic examiatio of the curret situatio it is forward lookig, explorig what it might be possible to achieve by drawig o examples of best practice i the public ad private sectors, as well as the latest developmets i the market. As such, it complemets our programme of work examiig ad supportig the drive towards improved public sector efficiecy. The Natioal Audit Office commissioed Cocerto Cosultig to carry out the work o this report, icludig presetig to us a volume cotaiig 15 case studies of best practice i property maagemet ad three case studies drawig out the property beefits of Shared Service Cetres. The case study volume plus a toolkit iteded to help seior maagers explore the potetial property optios ope to them are available alogside this report o the NAO website. 1 This report presets a series of recommedatios that are desiged to lead to sigificat value for moey improvemets i the way the public sector uses its office accommodatio. It has three mai themes: the may opportuities ad beefits of adoptig best practice; the eed for greater flexibility i the public sector property portfolio; ad the eed for cetral strategic plaig across the whole estate. 2 O the first theme, the report presets examples of best practice property maagemet. It challeges curret thikig, ad sets out recommedatios supported by a broad aalysis of the costs ad beefits of chage supported by illustrative case examples. It cosiders: the improvemets to efficiecy ad service delivery achievable through implemetatio of best practice property ad space solutios; ad the further beefits achievable through the use of Shared Service Cetres i tadem with best practice property solutios. We support our advice with recet case studies of best practice which, take together, show clearly the scale of the potetial beefits. The ideas, bechmarks, ad ways of workig would have bee groudbreakig a few years ago. With today s techology ad moder maagemet approaches, they are ow highly attaiable. 3 O the secod theme, the report examies recet developmets i the Flexible Maaged Office market. We cosider the beefits that icreased flexibility could brig to public sector operatios o both a sigle buildig basis as well as more widely across the govermet estate. 4 O the third theme, we recogise the good work that the Office of Govermet Commerce is already doig i plaig ad co-ordiatig parts of the public sector property portfolio, but also the limitatios i a regime of departmetal plaig with volutary coordiatio. To realise the opportuities for the efficiecy savigs we have idetified, ad to create flexible property solutios that respod to the eeds of moder public services, we believe there is a strog case for a cetral executive estates capability for the public sector, providig a more cetralised approach to strategic plaig across the govermet estate. We propose a approach that keeps accoutability for asset maagemet with departmets, but which also creates authoritative eablig machiery for cross-departmetal plaig ad challege. Gettig the best from public sector office accommodatio

11 executive summary 5 The Office of Govermet Commerce s remit was stregtheed i late 2005, with the Cabiet approvig a more itervetioist role where departmets may be departig from best practice. I additio, uder the Efficiecy Programme, the OGC has a more hads-o role i workig with departmets to improve efficiecy. These chages will create a climate where the trasformatio i property maagemet we outlie i this report is becomig more possible. I additio, the OGC is curretly developig a asset maagemet programme desiged to take forward the recommedatios of Sir Michael Lyos 1 ; this icludes developig a routemap to improved property asset maagemet with the aim that this will provide a framework withi which a more cetralised approach to strategic estates plaig ca take place. Fidigs o the implemetatio of best practice 6 Property ca be a catalyst for broader orgaisatioal ad cultural chage withi public sector bodies. Well-maaged property projects (whether i a cycle of cotiuous chage or as major oe-off evets) are eablers of, or catalysts for, wider corporate chage. Orgaisatios that put property solutios at the heart of their busiess thikig, combied with progressive huma resource policies ad moder techology support, ca improve their operatioal performace as well as staff satisfactio ad retetio. With may departmets presetly cosiderig relocatio projects, for example, because of the Lyos Relocatio iitiative, there is a stepchage opportuity ow ope to departmets to make material efficietly savigs ad process improvemets. 7 Better asset maagemet through more efficiet use of property could geerate very sigificat savigs each year, ad cotribute to the wider Govermet ageda of sustaiable solutios ad lower evirometal impact. Orgaisatios that see property, techology, ad huma resource policies as iter-related, ad implemet busiess trasformatio based o that isight, usually achieve substatial operatioal beefits ad productivity improvemets, better staff satisfactio, ad cost savigs. Our case studies show how orgaisatios, by implemetig good practice stadards i their estates plaig ad maagemet, have achieved major savigs. Better-plaed office layouts, desk-sharig policies, techology-eabled mobile workig outside the office ad flexible huma resource maagemet approaches offer great potetial for sigificat efficiecies. Several of the case study orgaisatios house their staff at desities of ie square metres per workstatio or less, while improvig staff satisfactio. The results of the first datagatherig phase of a recet bechmarkig study carried out for the Office of Govermet Commerce show occupacy desities of 15 square metres per perso, which idicates the scale of the potetial savig. 8 The govermet s total office area is more tha 12.5 millio square metres. If all public sector bodies ca achieve space usage of 13 square metres per perso, 2 there would be a sigificat fiacial savig of the order of 1.5 to 2 billio per aum i the medium term. To achieve this level of savigs would require additioal ivestmet of aroud 1 billio, phased over a five-year period to fit i with govermet plaig horizos (i other words a ivestmet of aroud 200 millio per year over a five-year period to trigger the release of 1.5 to 2 billio savigs year o year). The full potetial for savigs is greater tha this, ot least because i may circumstaces tighter occupacy desities could be achieved. To esure our estimates are realistic, however, we have scaled them back to reflect the fact that lease legths ad lease break timigs will costrai disposals o some properties, ad that some smaller properties may have to stay i their curret locatios i order to provide local access to services. Our view is that the cost savigs from adoptig best practice warrat cosideratio i ay evet, eve without the spur of a relocatio project. 9 Shared Service Cetres (SSCs) ca eable busiesses to simplify ad give more visibility to relatively hidde or dispersed admiistrative processes. The case studies show that SSCs ca save up to 30 per cet of the operatioal costs previously associated with the services provided. Some of the savigs come from simplified busiess processes, clearer measuremet ad maagemet, removig duplicatio of effort ad gaiig ecoomies of scale. Others come from a estates perspective, by locatig SSCs i areas with relatively low property ad labour costs, ad by adoptig best practice space stadards. As such, orgaisatios should cosider SSC solutios withi their overall itegrated estates strategy. 1 Towards Better Maagemet of Public Sector Assets, report to HMT by Sir Michael Lyos, HMSO Thirtee square meters per perso is the average performace of the case study orgaisatios (may of whom were ot tryig to achieve tighter occupacy desities). This is the et iteral area (NIA), which is the whole iteral area of a buildig mius the toilets, lift wells, stairways, ad service cores such as boiler rooms, tak rooms, fuel stores ad plat rooms. NIA icludes ope circulatio areas ad etrace halls, corridors, atria, ad kitches. Gettig the best from public sector office accommodatio 5

12 executive summary 10 O a wider ote, efficiet use of office space supported by flexible workig policies will cotribute sigificatly i reducig the adverse evirometal impacts associated with the creatio ad ruig of buildigs. People do ot travel as ofte or as far. More importatly, the office buildigs are more adaptable, thus improvig the potetial to avoid wastig materials, resources ad costs i recofigurig or creatig ad ruig ew buildigs. Fidigs o strategic estates maagemet ad the opportuities emergig i the Flexible Maaged Office market 11 The Property Services Agecy (PSA) used to be resposible for all aspects of the estate, but departmets took o resposibility for their ow estate plaig ad maagemet from the mid 1990s. This brought much greater clarity ad accoutability, but a atural cosequece was that it became much harder to achieve ecoomies of scale ad other syergies betwee departmets. The Property Advisor to the Civil Estate (PACE), established i 1996 was set up to provide oversight ad iformatio o the civil estate, but the cetralised strategic plaig rate oce held uder the PSA o loger existed ad over time there was a dimiutio i the extet ad quality of iformatio o the combied estate. 12 Recetly the Office of Govermet Commerce has bee addressig these issues, icreasigly providig cross-departmetal coordiatio ad directio. This has icluded establishig a cetral database about the estate o a atioal basis, the e-pims database. Sice July 2005, it has bee madatory for cetral govermet bodies to submit estates iformatio to e-pims. 3 The OGC also facilitates trasfers of space betwee departmets, typically achievig trasfers of aroud 50,000 square metres per year. It has also itroduced madated cotrols o property acquisitios i Lodo ad the South East, leadig to a release of some 87,000 square metres of accommodatio ad a reductio i the public sector ret bill by aroud 11.5 millio per year. The propertybechmarkig project OGC is curretly udertakig will also provide it with the basis for greater probig of departmets maagemet of their property ad use of their space. 13 The departmetal silo approach cotrasts with the estates strategies see i the case studies. There the approach was usually cetralised, eablig strategic estates plaig across ofte very fragmeted ad widely dispersed parts of the busiesses. As a result, the case study orgaisatios have itroduced ad delivered radical ad successful coordiated solutios. Several of the case studies cotai good examples of campus-based solutios, brigig substatial ecoomies of scale ad better facilities, ad atioal approaches to flexible or mobile workig, which are directly relevat to the govermet s situatio. However, it is hard to see how the curret dispersed plaig eviromet will eable similar levels of best practice performace i the public sector. 14 Flexible space solutios, similar to those already evidet i the commercial market, play oly a mior role i the govermet estate. However, such space greatly assists orgaisatios expadig, cotractig, or movig (for example i respose to the Lyos relocatio iitiative). It also supports project-based work ad greater staff mobility. Over short periods, flexible property costs are competitive with traditioal solutios. Their true value, however, comes from the operatioal flexibility they create, eablig orgaisatios to achieve savigs o a greater scale. 15 I our view the departmets should begi movig towards itegrated strategic estates plaig across the whole Govermet office portfolio (Figure 1), i which there is: A core of log-term stable property (freehold, or reegotiated log leases o ew discouted retal levels), supported by Shared Service Cetres as appropriate. The log-term arragemets, uder the directio of a ew cetral strategic plaig uit, would gravitate over time (as leases expire) towards itegrated campus-based arragemets thus yieldig further ecoomies of scale ad other beefits. A ew, deliberate, ad explicit use of flexible maaged office space, givig departmets the ability ot oly to expad or shrik their office portfolio but also to provide the catalyst for ew ways of workig ad trasformatioal chage. This would eable departmets to deploy people more easily to locatios where the work is actually required, to support project-based workig, to achieve ecoomies of scale betwee smaller uits who might otherwise require separate facilities maagemet services, ad 3 DAO(GEN)08/05 Recordig Property Iformatio o e-pims. 6 Gettig the best from public sector office accommodatio

13 executive summary to achieve greater physical resiliece. This priciple would apply both to stadard occupacy solutios ad to PFI parts of the estate. 16 There are sigificat barriers ad risks i implemetig the proposals outlied above. Cultural chage will most likely be a major barrier, ad the difficulties ad time eeded i overcomig this should ot be uderestimated. Departmets, ad idividuals to a lesser extet, are ot used to mobile workig i this way, eve though shared buildigs (occupied by two or more departmets or agecies) form about 16 per cet of the estate. Techology solutios will be required. The govermet as a whole will eed to be able to offer a geeric IT platform, i order for people to have mobility aroud the estate. Security stadards ad delivery will eed addressig. With regard to the ew cetral strategic plaig arragemets, which, with its recetly stregtheed remit to itervee, may well be best provided by the Office of Govermet Commerce decisiomakig roles, authority levels, ad procedures will eed to be developed afresh ad there may be asset owership resposibilities to clarify. The scale of the chages, added together, meas that there is a iheretly high level of risk, ad that i some parts of the public sector the chages we have idetified could ot happe quickly. However, from the case studies that we examied, ad from the workshops held with Departmets ad with suppliers of flexible office space, we believe that these risks ca be overcome ad maaged. 17 The flexible office market is relatively small, coverig less tha two per cet of the curret UK atioal office space. We doubt whether this market could cope with the potetial scale of the Govermet s potetial requiremets i this area, ad a ew solutio would probably be required, which we term Hotel.Gov. This would i effect be a bespoke flexible space offerig tailored to suit the volume, IT, security ad operatig requiremets of the Govermet s circumstaces. 1 How the govermet estate of the future might look Evolvig from local plaig to a cetrally determied strategy usig SSCs, log term space ad short term serviced space SSCs Core log term Short term Hotel.Gov Source: Natioal Audit Office workshops with suppliers, departmets ad OGC NOTE The placemet of properties is purely illustrative ad ot iteded to idicate ay preferece for locatio. Gettig the best from public sector office accommodatio

14 executive summary 2 Pre-coditios for a successful busiess trasformatio usig property as a catalyst Pre-coditio 1. Have a clearly stated busiess ageda Beefits to efficiecy ad service delivery Projects have clarity, relevace, ad focus, icreasig the prospects of successful delivery. Property becomes aliged to the busiess operatioal eeds ad is a maagemet priority. Creates operatioal efficiecies ad leads to savigs. Creates direct savigs from property efficiecies. 2. Adopt a coheret, explicit, chage maagemet approach, led from the top Places the trasformatio programme at the heart of a wider busiess chage ageda, ad gave it visible sposorship ad impetus. The property iitiatives act as catalysts to achieve a cultural chage or to improve workig practices. Staff take owership i what is usually a major chage programme. This fosters a wider sese of owership for other busiess chage activity. Improved morale, productivity, ad sese of shared visio. 3. Itegrate property, people, ad techology solutios from the outset The busiess plaig activities lik together across all three resource areas. Itegrates valuable resources ad cuts dow waste ad improves efficiecy. 4. Use best practice real estate maagemet techiques Ope pla eviromets supported by breakout spaces, web-eabled space bookig methods, cocierge support, state-of-the-art security access ad high quality facilities maagemet service provisio were commo features i all of the case studies. This results i more efficiet use of the physical space, thus savig direct costs. It usually also results i improved performace, by providig the right eviromet (e.g. break-out space) to suit moder workig patters. 5. Provide high levels of support for mobile or remote workig Staff receive excellet support, ragig from advaced techology ad commuicatio solutios to courier collectios ad off-site 24/7 admiistrative support. Helpig to maitai productivity for highly valuable people. The staff (regarded ow as customers) receive excellet support to maximise their productivity ad satisfactio. 6. Provide office services to a high stadard, ofte through outsourced arragemets uderpied by appropriate service level agreemets Reduced Facilities Maagemet costs plus explicit Facilities Maagemet performace data, eablig orgaisatios to maage more explicitly the trade-off betwee cost ad service level. Allows the orgaisatio to cocetrate o its core busiess process, out-sourcig property maagemet to others. 7. Cosider adoptig a evolutioary rather tha revolutioary approach May of the case study orgaisatios ow regard property trasformatio as a cotiuig o goig evolutioary process. Evolutioary processes suit orgaisatios that are budget costraied; are subject to regular operatioal chages; ad wat to create a sese of staff ivolvemet, learig ad owership. 8. Cosider the use of Shared Service Cetres, withi the overall property solutio SSCs ca brig operatioal ad fiacial beefits through process simplificatio ad ecoomies of scale. I additio, they ca form a itegrated part of a well-plaed property portfolio takig advatage of best practice space stadards ad lower retal costs i differet locatios. Gettig the best from public sector office accommodatio

15 executive summary Example Vodafoe s busiess ageda was to ratioalise its orgaisatio, processes ad estate after a sequece of Mergers ad Acquisitios activity. Its estate was iefficiet ad comprised 69 buildigs i ad aroud Newbury, which it reduced to seve buildigs o a attractive campus ad facilities i a earby busiess park. The busiess case for the chages made at the Adult Learig Ispectorate was based o the eed to achieve post-merger itegratio, ad to put their people i the right places, properly equipped for mobile workig i order to improve performace. Cambridgeshire Couty Coucil restructured their orgaisatio ad busiess processes, icreasig their customer-facig activities ad streamliig their support fuctios. This busiess chage programme cetred o a property trasformatio, ivolvig best practice stadards ad techiques. Operatioal pressures, together with the eed to reegieer busiess processes to meet chagig exteral requiremets led GCHQ to adopt a iovative accommodatio solutio. The resultig PFI facility ivolved major cultural chage drive by accommodatio, process, ad techology projects. Su s established worldwide iwork programme aligs Real Estate with ICT ad HR practices, allowig employees the freedom to choose whe ad where to work. BP s HR policies tie i closely with the accommodatio ad techology strategy, ad promote home workig ad ivolve radical policies such as ie day fortights (improvig buildig utilisatio). New hotel-style desk sharig, combied with techology support ad home workig practices, eabled Erst & Youg s busiess to support may more fee-earig staff per floor. At PricewaterhouseCoopers, a hotel-style space maagemet system allows staff to book a workspace via the iteret or telephoe. Touch screes at floor etraces eable staff to check ito ad out of the system. Scree displayed floor layouts show where workstatios are occupied while cocierge staff provide a Meet-ad-Greet receptio ad help desk service. Travellig ispectors at the Adult Learig Ispectorate have high-level remote support e.g. home courier services. For workig at home, they receive a allowace to purchase office furiture ad IT. Whe IBM exteded its flexible workig programmes, it supported staff makig the trasitio to the ew ways of workig. IBM also provided ehaced receptio services ad a post at home service. At Cambridgeshire Couty Coucil, Service Level Agreemets for ewly cetralised FM services achieved ecoomies of scale ad higher corporate stadards for the Coucil ad its teat parters. Allocatig space ad facilities to busiess teams o a cross-cuttig basis has improved cliet services at Suffolk Couty Coucil by locatig together people workig o commo issues from across differet departmets. Norfolk Couty Coucil used the opportuity of a pilot for flexible ope-pla workig to lear lessos for wider applicatio ad to resolve variability i estate performace ad stadards. By movig peoples mids rather tha walls, BAA s Uity pilot eabled ope-pla flexible workig, with ayoe workig from ay locatio, to replace the old me ad my desk culture. Trasport for Lodo cosolidated its HR services from multiple locatios ito oe cetre, savig costs, improvig staff satisfactio ad morale ad improvig performace. Gettig the best from public sector office accommodatio

16 executive summary Recommedatios 18 Our recommedatios are i two parts: to all departmets; ad to departmets with cetral strategic resposibility for public sector property. 19 Our recommedatios to all departmets are as follows. They should: Assess the advatages of adoptig flexible approaches to their estates ad operatios i lie with the good practices idetified i this report, ad establish clear plas for movig towards best practice performace (justified by robust busiess cases). Seek property efficieces from flexible maaged offices for the use of Agecies ad NDPBs that are withi the paret departmets' resposibility. Use ay property project as a opportuity to achieve wider trasformatioal or cultural chage, ad place the project at the heart of the maagemet ageda. Use Figure 2 to ehace the prospects of success whe carryig out property-related busiess trasformatio activity. The ideas i it are a distillatio of the good practice see i the case studies. Further detail o the good practices idetified is set out i the case study volume, published alogside this report, together with a simple decisio tool to help public sector bodies thik about how Flexible Maaged Office space might meet their requiremets (the latter is outlied i the Aex to this summary). Both these additioal products are available o the NAO web site. 20 Our recommedatios to departmets with cetral strategic resposibility for public sector property are as follows: Determie how best to embed a process of crossgovermet estates plaig ad challege desiged to stretch departmetal ambitios ad promulgate best practice; ad most importatly to idetify ad realise opportuities ad syergies betwee the estates strategies of multiple orgaisatios, uless there are very compellig ad fully justified operatioal ad commercial requiremets for adoptig departmetal-specific estates solutios. Determie the best ew maagemet ad orgaisatioal arragemets to support the ew cetral strategic plaig process. Give that there are over 50 departmets, aroud 130 executive agecies ad over 220 NDPBs, there should be a suitable coordiatig forum i place coverig the mai iterest areas ad user groups to help a strategic plaig process to succeed. The groupigs established uder the Shared Service Cetre ageda might provide a useful framework for such a forum. Whatever the shape of the forum, it would eed to be chaired by a perso who will have real ifluece with Govermet departmets ad the wider public sector. Determie how best to achieve a atioal crossdepartmetal itegrated estates solutio comprisig a core of space procured ad maaged o a loger-term basis, at ecoomic rates; ad a flexible elemet to the estate, eablig staff mobility ad orgaisatioal cotractio or expasio. To achieve this may require rethikig how departmets ow ad maage assets. Cosider the extet that Flexible Maaged Office solutios could support relocatios by offerig flexibility, or could create opportuities to geerate ecoomies of scale by cosolidatig smaller uits ito fewer buildigs. This could ivolve use of a pilot to evaluate the potetial of the flexible property model. The pilot would usefully cosist of two buildigs, oe i Lodo, ad oe i a Lyosrelocatio-destiatio tow or city. Build o the curret bechmarkig iitiative ad o the coclusios here to set ew, challegig, ad appropriate targets for govermet occupacy levels. 10 Gettig the best from public sector office accommodatio

17 aex to summary Aex to summary Flexible Maaged Office Space decisio tool The choice of a estate s strategy depeds o a large umber of iteractig factors. There is o prescriptive set of rules goverig a strategy s developmet. However, those orgaisatios udergoig chage, or that are too small to achieve ecoomies of scale, would probably beefit from flexible maaged space solutios. Larger orgaisatios would probably beefit from separatig out their estate ito core ad flexi space, with the former o highly competitive log-term commercial arragemets ad the latter used to maage peaks ad troughs. Shared Service Cetres eed to be cosidered as part of the overall busiess ad estates strategy. The diagram below shows the mai factors to cosider, whe strikig the balace betwee the amout of log term core space, campuses, Shared Service Cetres, ad short term flexible space i a orgaisatio. The web versio of this documet available o the NAO website cotais additioal checklists for each topic. Core estate, campuses, with supportig itegrated SSC solutios Able to locate ear other govermet departmets ad share commo facilities Able to separate out previously dispersed support activities ito SSC solutios Carryig out migratios Takig o ew projects Large estate, with a appreciable elemet that is stable Orgaisatio growig or shrikig Cross cuttig projects requirig space Nature ad locatio of the work is chagig Small orgaisatio, therefore ot able to achieve ecoomies of scale Flexible workspace ad mobile workig practice approaches Gettig the best from public sector office accommodatio 11

18 part oe Part oe Itroductio Well-maaged property is vital to efficiecy ad service delivery 1.1 The govermet estate (Figure 3) comprises some 10 per cet of the total UK office market. The portfolio is a mixture of frot-lie delivery properties (for example courts ad job cetres) ad admiistrative offices. The three areas with the most office property are Lodo, the North West, ad South East (Figure 4). 1.2 It is importat to alig the property strategy with that of the overarchig busiess. Property, plaed i tadem with progressive huma resource strategies, process egieerig ad techology solutios, ca drive out uecessary property costs (Case Example A). It ca also trasform service delivery operatios ad lead to efficiecies, ad orgaisatios icreasigly recogise that well desiged ad maaged work eviromets are importat to successful recruitmet ad retetio of skilled staff i competitive markets. 1.3 Coversely, without aligmet with the busiess strategy, property ca become a costrait holdig back improvemets to productivity, efficiecy, ad service delivery. Behid staff, property costs are usually the secod largest reveue costs for most orgaisatios. Poorly maaged ad uder utilised property assets ca lead to uecessary costs (for example, ret, utilities, repairs ad maiteace), reducig the resources available for frotlie service or busiess delivery. Potetially it also represets a urealised opportuity to geerate capital receipts from the release of spare capacity. 3 Overview of the govermet estate Cetral govermet occupies over 12.5 millio square metres of office space withi Eglad, Scotlad, ad Wales, accommodatig some 570,000 civil servats. Of the office space greater tha 1,500 square metres i area, approximately 40 per cet is freehold property, 37 per cet is owed by the private sector uder PFI/PPP arragemets, ad 23 per cet is leasehold property. I total, the Govermet has more tha 8,700 property iterests, allocated to over 260 cost cetres. The most sigificat occupier is the Departmet for Work ad Pesios, with more tha 1,700 holdigs, at just over 2.5 millio square metres. Source: Office of Natioal Statistics, Office of Govermet Commerce CAse example a Usig strategic property plaig to drive out savigs The Royal Mail has just less tha 3,000 operatioal buildigs across the UK. These are itesively used at groud level (for example for letters delivery ad sortig) but less so o the upper floors. Recogisig this, the Royal Mail Property Group developed a pla to make better use of the available free space across the operatioal portfolio. By fittig out the upper floors of operatioal buildigs as office space, the Royal Mail was able to shrik its portfolio of office admiistratio buildigs by a factor of 10, from 182 uits to 18, savig more tha 36 millio per year i o-goig costs. 12 Gettig the best from public sector office accommodatio

19 part oe The use of office property i the UK is chagig 1.4 I the UK, the past decade has see a quiet but radical revolutio i the procuremet, occupatio, ad use of office space i both the public ad private sectors. This has bee drive by cost pressures, icreasig competitio, skills shortages, legislative chages ad by chages i work-life prefereces. For example, ope pla offices are ow the orm, whereas 20 years ago persoal offices were far more commo (Case Example B). This tred arose as a respose to cost pressures iitially, but became embedded as maagemet realised the beefits of ope pla arragemets for team-based workig. A prime example i the public sector of a move from cellular to ope pla space is the move of the Office of the Treasury Solicitor to CAA house. This illustrates how ope pla workig ca succeed, eve i orgaisatios where cofidetiality is of prime importace. Further details are provided i the associated case study volume. 1.5 At the same time, advaces i iformatio ad commuicatios techologies are eablig ew ad more mobile ways of workig. Icreasigly people are workig from a selectio of office locatios ad from home. For example, the Adult Learig Ispectorate has give its field teams a high level of techology support CAse example B Usig ope pla space coupled with moder techology to drive dow costs BAA halved its Heathrow office property requiremet i oe part of its estate by cosolidatig ito ope pla ad flexible IT-eabled workspace. Aside from beig able to claim fiacial savigs ( 1.3m per aum reductio i ret) ad a 80 per cet reductio i chur costs, it is also able to poit to improvemets i staff iteractio, satisfactio, ad productivity. 4 The locatio of cetral govermet s civil estate¹ Property split betwee regios Area i square metres 000 3,000 2,500 2,000 1,500 1, Lodo East Midlads East of Eglad North East North West South East South West West Midlads Yorkshire & the Humber Scotlad Wales Govermet Offices for the Regios boudaries Source: Natioal Audit Office aalysis of e-pims database NOTE 1 e-pims holds iformatio about all the properties owed, cotrolled or used by cetral govermet departmets ad their sposored bodies. Bodies are resposible for eterig complete ad accurate iformatio about all the properties they use ad cotrol to the followig timetable: all office properties by 31 March 2006; ad all other properties, icludig lad, by 31 March The arragemets do ot apply to local authorities, the NHS (except for Special Health Authorities), public corporatios, privatised railway udertakigs, the Crow Estate or the Defece Estate (subject to some exceptios). Gettig the best from public sector office accommodatio 13

20 part oe ad admiistrative back up, eablig them to work from virtually ay locatio i the coutry. The implicatios for orgaisatios are profoud: the office is o loger essetial. Work ow takes place i other locatios ad at uorthodox times more suited to the worker s lifestyle, whether from a cliet s premises, home, a café, a hotel, or a busiess park. 4 Employers that recogise these possibilities are ow providig radically differet workig eviromets to their staff. 1.6 Icreasigly, govermet orgaisatios are takig up the opportuities provided by best practice estates plaig ad maagemet techiques, ad by moder techology supported by appropriate ways of workig ad huma resource policies to achieve sigificat cost savigs ad improve operatioal performace. The curret project beig udertake by the Learig ad Skills Coucil project (Case Example C) illustrates this very well. 1.7 O the supply side of the property market, the cocept of Flexible Maaged Offices (FMOs) i which occupiers requiremets for space, icludig facilities maagemet, are provided uder a sigle short-term cotract, is becomig more commoplace. Flexible offices give occupiers more flexibility tha traditioal retal or freehold arragemets, eablig orgaisatios to match better their property provisio to chagig eeds (Case Example D). 1.8 Eabled by the advaces i techology, ad by ew eablig huma resource policies, differet types of flexible workig patters have emerged i the last five years, for example: people work uder differet forms of cotract, ragig from beig a permaet employee, to havig a fixed term cotract, or to beig self-employed; people have more flexibility i the hours that they work, whether full time, part time, job sharig or uder a aual hours cotract; people work from a greater variety of places, icludig from home, from other exteral locatios, or by virtual team work withi a orgaisatio (behavig as a team, but ot beig co-located). 5 A recet YouGov survey illustrates these treds ad the beefits obtaied (Figure 5). CAse example C Usig best practice estates, techology ad huma resource solutios to achieve trasformatioal chage i the Learig ad Skills Coucil The Learig ad Skills Coucil for Eglad occupies 52 offices i each of the couties of Eglad. The Coucil is resposible for all post-16 educatio ad traiig i Eglad excludig Higher Educatio, with a aual budget i of 9 billio. The property portfolio was largely iherited from predecessor orgaisatios, ad over time has bee chaged as ad whe a opportuity arose, but is larger tha required for the eeds of the busiess. The LSC is udertakig a major busiess trasformatio programme ivolvig reorgaisig the structure of the busiess ad adoptio of differet ways of workig. This has preseted a opportuity to make major chage to the property portfolio to make it more fit for purpose. This programme ivolves creatio of a desig of a kit of parts from which each office will be recofigured with reduced umbers of desks, ad icreased use of touch dow ad collaborative space. It will also iclude a rage of other spaces withi each office to support differet types of work accordig to eed, major cultural chage, ad a more efficiet ad effective core busiess. The iterestig feature about this programme is that the Coucil is lookig to avoid the problems created by orgaisatios that acquired log leases thus creatig a log-term property liability for Govermet. The LSC is structurig its arragemets for its estate o shorter-term cotracts ad lookig to move towards a sigle maaged service arragemet. The programme has support from the Chief Executive ad Seior Maagemet, ad is expected to save approximately 16 millio per aum with a payback uder two years. The programme requires a sigificat ivestmet equivalet to the curret aual accommodatio ruig costs (maily o capital refurbishmet ad the buyig out of leases) to realise the regular aual savigs stream. It is expected that the ivestmet will have a two year payback. It will lead to a major reductio i log-term estate liabilities by providig a more flexible estate solutio that is free of log-term legal obligatios, as well as improved operatig efficiecies. It will provide the govermet with greater flexibility to hadle ay future re-orgaisatio of the Learig ad Skills Coucil or the post-16 sector. 4 Workig i the Twety-First Cetury Michael Moyagh ad Richard Worsley. Published by The Tomorrow Project ad Richard Worsley. ISBN , Uiversity of Readig, Flexible Workig i Cetral Govermet: Leveragig the Beefits, February 2004 (Report commissioed by the Office of Govermet Commerce). 14 Gettig the best from public sector office accommodatio

21 part oe Chages i the use ad maagemet of public sector space 1.9 Further chages have take place across the public sector (Figure 6 overleaf). The emergece of the Private Fiace Iitiative i the 1990s, for example, has resulted i the trasfer of owership ad maagemet of parts of the public sector estate to the private sector, rig fecig major parts of the public sector ito separate commercial eviromets. This brought may beefits, for example, clearer accoutability ad icreased competitive actio, but at the same time, flexibility may have reduced as departmets are tied ito loger-term cotracts More recetly, there has bee a emphasis o improvig efficiecy ad asset maagemet, ad relocatig civil service staff away from Lodo. The efficiet ad effective utilisatio of property is ow more of a operatioal imperative, ad a properly plaed ad executed estates strategy fits well with the wider cross-govermet drive for improved efficiecy ad service delivery Recetly there has bee a icreasig focus o asset maagemet across cetral ad local govermet, for example the Lyos Asset Maagemet iitiative 6, alogside sigificat iterest i the developmet of Shared Service Cetres (both withi departmets ad betwee them). Both of these areas of activity have cosiderable relevace to maagemet of the govermet estate, ad to the subject mater of this report The Office of Govermet Commerce 7 has resposibility for co-ordiatio of the civil estate, ad the provisio of guidace to departmets o, for example, property disposals. It does ot carry executive authority, but is proactively fillig importat gaps (Figure 7 o page 17) i plaig ad co-ordiatio withi the curret decetralised approach. CAse example d Usig flexible space to achieve cost reductios ad improved performace A major cetral Lodo isurace compay reduced cost ad improved staff satisfactio by eablig staff to work more ofte from home, ad makig use of a serviced office facility i Croydo whe they eeded meetig space ad ormal office services. The compay selected a serviced office close to Croydo statio. The office cotaied stadard workstatios, hot desk ad touch dow poits. The staff were give laptops, ad the compay also set up secure PCs for access to restricted areas of its itraet via the serviced office s cetral commuicatios room. The staff were provided with secure access usig swipe cards ad additioal office support, icludig prit, copy, fax, bidig, ad post ad courier services. The compay has bee able to claim a major cost savig: the aual cetral Lodo cost for the group of 25 people was previously 362,500. The cotract for the serviced office space, for 12 moths, is a fully iclusive occupacy cost of 65,000. At the ed of 12 moths the compay ca reew, ad expad if required. The staff have also beefited from a better work-life balace. Previously their average door-to-door commutig time was 80 miutes, or 53 hours a moth, ad the average rail ticket cost was 3,200. Staff feedback shows higher job satisfactio ad reduced stress. Source: Cocerto Cosultig YouGov survey of Compay Director views o flexible workig I a survey of 1,000 compay directors, 667 reported adoptig flexible workig policies ad raked the beefits as follows: improved staff motivatio (65%) icreased productivity (50%) improved cliet service (38%) reduced abseteeism (36%) improved resiliece agaist trasport problems (29%) better quality job applicats (26%) improved cadidate perceptio of the compay (20%) Source: YouGov survey, The Times, 2 May Towards Better Maagemet of Public Sector Assets, report to HMT by Sir Michael Lyos, HMSO The Office of Govermet Commerce is a idepedet Office of the Treasury reportig to the Chief Secretary of the Treasury. It is resposible for a wideragig programme, which focuses o improvig the efficiecy ad effectiveess of public sector procuremet. Gettig the best from public sector office accommodatio 15

22 part oe 6 Key chages i the maagemet of public sector office space Key chage 1990 Direct accoutability for estates maagemet devolved to Departmets. Property Services Agecy (PSA) sold ad Property Holdigs (PH) established, resposible for maagig the commo user estate which was evisaged to be a reusable core of office property that could be recycled from oe departmet to aother depedig o demad or sold if ecessary PACE (Property Advisors to the Civil Estate) set up uder DAO GEN 1/96 Implicatio for the maagemet of public sector property Departmets take o direct resposibility for their property. With the disposal of the PSA, the private sector became able to take resposibility for deliverig maiteace ad capital projects. The PH arragemet cotiued the priciple of havig a cetral pool of flexible office space across govermet. However, the model was ever fully implemeted i the evisaged format because a umber of major departmets opted out of the arragemet. PACE was created i order to fulfil three differet eeds. The Cetral Iformatio Uit offered best practice maagemet advice It offered a coordiatio role (although this was difficult for some departmets) It fulfilled the itelliget cliet role o projects Uder both the PH ad PACE models, the cetralised strategic plaig role oce held uder the PSA o loger existed. PFI, havig bee developed maily for ew assets (roads ad hospitals or example) emerges i the property sector i the mid 1990s Establishmet of the Office of Govermet Commerce (OGC) ad OGC.buyigsolutios The PRIME deal betwee Trillium ad the the Departmet of Health ad Social Security (the cliet is ow the Departmet of Work ad Pesios) ad the Mapeley deal with the Ilad Reveue ad HM Customs ad Excise (ow Her Majesty s Reveue & Customs) were ladmarks. The iovatio was the use of PFI cocepts for the maagemet ad improvemet of existig assets. At oe level creatig direct advatages for the Departmets cocered, this move also bega the process of separatig ad rig fecig major traches of the overall atioal estate ito separate commercial eviromets. Created to facilitate efficiecy savigs, by a combiatio of exteral moitorig ad highlightig best practice, the Office of Govermet Commerce has brought greater focus o property begiig to fill the void left by the dismatlig of the Property Services Agecy. OGC.buyigsolutios is a executive agecy, ad effectively the tradig arm, of the Office of Govermet Commerce. Its role is to deliver value for moey gais for cetral civil govermet ad the wider public sector through a dedicated, professioal procuremet service providig cetral purchasig cotracts ad catalogues. It offers a rage of services i the office accommodatio market, from simple call off cotracts for products or cosultacy services, through to maaged services i which there is a elemet of performace maagemet Work carried out by PACE (Property Advisors to the Civil Estate) becomes the resposibility of the OGC Itroductio of full Resource Accoutig ad Budgetig for departmets The Efficiecy Programme This brought together some of the previously fragmeted resposibility for coordiatig ad admiisterig the estate Property is o loger a free asset to Departmets who have to for the first time idetify ad accout for the full costs of owig assets. 1 Departmets had to idetify ad accout for the costs of owig their property assets sice the break-up of the civil estate i The itroductio of Resource Accoutig ad Budgetig moved this oto a more formalised, cosistet ad complete basis across all assets. I lie with the recommedatios of the Gersho Review, 2 the Govermet s Efficiecy Programme aims to deliver over 20 billio of efficiecy gais a year by ad embed efficiecy ito the culture of the public sector for the log term. The implicatio from the real estate perspective is greater focus o property costs ofte see as a first port of call whe seekig savigs. 16 Gettig the best from public sector office accommodatio