Resource Management Guide No Overview of the Commonwealth Property Management Framework

Transcription

1 Resource Management Guide No. 500 Management Framework SEPTEMBER 2015

2 Commonwealth of Australia 2015 ISBN: (Online) With the exception of the Commonwealth Coat of Arms and where otherwise noted, all material presented in this document is provided under a Creative Commons Attribution 3.0 Australia ( licence. The details of the relevant licence conditions are available on the Creative Commons website (accessible using the links provided) as is the full legal code for the CC BY 3 AU licence. Use of the Coat of Arms The terms under which the Coat of Arms can be used are detailed on the following website: Contact us Questions or comments about this guide should be directed to: Policy and Advice Branch Property and Construction Division Department of Finance John Gorton Building King Edward Terrace Parkes ACT propertyframework@finance.gov.au Internet: This guide contains material that has been prepared to assist Commonwealth entities and companies to apply the principles and requirements of the Public Governance, Performance and Accountability Act 2013 and associated rules, and any applicable policies. In this guide the: mandatory principles or requirements are set out as things entities and officials must do; and actions, or practices, that entities and officials are expected to take into account to give effect to those and principles and/or requirements are set out as things entities and officials should consider doing.

3 Contents AUDIENCE... 2 RESOURCES... 2 SUMMARY... 2 INTRODUCTION... 3 COMMONWEALTH PROPERTY MANAGEMENT... 3 Policy Principles... 3 Key legislation that interacts with property management... 3 COMMONWEALTH PROPERTY MANAGEMENT FRAMEWORK... 4 PLANNING AND REPORTING... 5 Property management planning... 5 Risk management... 5 INFORMATION SHARING AND COLLABORATION... 6 Commonwealth Property SES Band 1 Steering Committee... 6 Senior Property Officers Forum... 6 Govdex... 6 Co-location... 7 Machinery of Government (MoG) assistance... 7 BUDGETING AND FUNDING... 7 The case for investment... 7 Capital budgeting requirements... 8 The Budget Process Operational Rules... 8 Alternative funding models for Commonwealth property... 8 Special Purpose Properties... 8 DECISION MAKING... 9 Property decision making in the Commonwealth... 9 Cost-benefit analysis using whole-of-life costs... 9 The threshold for preparing a cost-benefit analysis Whole-of-life costing Final decision Contracts and leases Decision tracking and recording ACQUISITION AND DISPOSAL OF PROPERTY Acquiring and disposing of property Delegations The Commonwealth Property Disposal Policy Cost-benefit analysis of disposal options Due diligence APPROVALS The lease endorsement process Two Stage Capital Works Approval Process Thresholds First stage The Parliamentary Standing Committee on Public Works The Commonwealth Property Disposal Policy approval process DESIGN Office accommodation and fit-out design Flexible and Efficient Workplace Design Guidance OTHER PROPERTY MANAGEMENT CONSIDERATIONS Better practice approaches Contamination and hazardous building materials GLOSSARY OF TERMS Management Framework 1

4 Audience The Commonwealth Property Management Framework (Property Framework) establishes the broad policy environment within which Non-corporate Commonwealth entities (non-corporate entities) subject to the Public Governance, Performance and Accountability Act 2013 (PGPA Act) must govern and undertake their own property management activities in a transparent and informed manner. Resources This guide is available on the Department of Finance website at The Commonwealth Property Management series of guidance materials supports the Property Framework which facilitates informed decision-making processes and establishes the foundation for the efficient, effective, economical and ethical use of Commonwealth property resources. Accordingly, this document forms part of the guidance to non-corporate entities under the Property Framework. The published suite of documents form part of the Resource Management Guidance series issued by Finance including: RMG No. 500 RMG No. 501 RMG No. 502 RMG No. 503 RMG No. 504 RMG No. 505 RMG No. 506 Management Framework Property Management Planning Guidance Guidance for the Two Stage Capital Works Approval Process for Australian Government Construction Projects Whole-of-Life Costing for Australian Government Property Management Commonwealth Property Management Framework Lease Endorsement Process Funding arrangements for Commonwealth Property Flexible and Efficient Workplace Design Guidance Additional guidance is available from the Commonwealth Property Management Framework webpage at or by contacting propertyframework@finance.gov.au Summary 1. The Property Framework incorporates a range of policy, guidance and cooperative activities to support non-corporate entities to achieve efficient, effective, economical and ethical property outcomes in line with the requirements of the PGPA Act. In relation to the management of Commonwealth property, the Accountable Authority (or an official authorised by the Accountable Authority) mainly discharges this responsibility by ensuring that their entity has appropriate strategic planning, policies and procedures in place to achieve value for money in property management The purpose of the Property Framework is to establish an evidence base for property decision making across Government based on the Commonwealth Property Management Principles. The Property Framework evidence base is applied consistently during entity cost-benefit analysis, the lease endorsement process, review by the Expenditure Review Committee of Cabinet and scrutiny from the Public Works Committee (PWC). This allows for robust, equitable and informed decisions to be made on a repeatable basis. 1 See Commonwealth Procurement Rules for detailed discussion of what is required to achieve value for money in procurement Management Framework 2

5 Introduction 3. The Property Framework applies to property leased or owned within the Australian Government s property portfolio. Where a project falls outside the scope of the Property Framework, the principles contained in the Property Framework can be applied as a matter of best practice in managing Commonwealth property resources. 4. Corporate Commonwealth Entities (corporate entities) subject to the PGPA Act are not subject to the Property Framework. However, corporate entities may be directed by the Minister for Finance to apply policies of the Property Framework, and should have regard to other relevant policies such as the Financial Framework. Corporate entities should note that while the Property Framework does not apply to them in general, some aspects of the Property Framework such as the Commonwealth Property Disposal Policy do apply (unless specifically exempt). 5. The Department of Defence (Defence) is subject to the Property Framework but maintains a separate two stage approval process for Defence estate capital works. This process is similar to, and consistent with, the two stage capital works approval process, incorporating cost-benefit analysis and whole-of-life costing processes that are undertaken in consultation with Finance. 6. Property leased and owned by the Commonwealth that is located overseas is subject to the Property Framework. The Commonwealth s overseas owned property estate is managed by the Overseas Property Office (OPO) within the Department of Foreign Affairs and Trade. OPO, in consultation with Finance, is responsible for guidance in relation to the management of overseas property. Commonwealth Property Management Policy Principles 7. The Property Framework is based on the five Commonwealth Property Management Principles (Property Framework Principles) for efficient, effective, economical and ethical property management: 1. Value for money: ensure the best outcome of property decisions 2. Property management planning: support property planning and management 3. Efficient and effective design: encourage the best design solutions for organisational needs 4. Appropriate accountability measures: document property decision making 5. Cooperative Commonwealth property management measures: ensure property decisions consider whole-of-government outcomes. 8. Adherence to these principles is supported through the policies and guidance of the Property Framework. Key legislation that interacts with property management 9. There are many policies and legislative provisions outside the Property Framework that have implications for property management decisions that non-corporate entities should be aware of. Some key legislation includes: Australian Capital Territory Planning and Land Management Act 1988; Environment Protection and Biodiversity Conservation Act 1999; Lands Acquisition Act 1989; and Public Works Committee Act Management Framework 3

6 Commonwealth Property Management Framework Management Framework 4

7 Planning and Reporting Property management planning 10. Consistent with the Property Framework Principles, the Property Framework requires all non-corporate entities to have a property management plan in place to support the achievement of short, medium and long term property objectives. The property management plan must be approved by the entity s Accountable Authority (or an official authorised by the Accountable Authority). 11. A property management plan is an internal planning document which should be directly linked to an entity s broader strategic plans, including business and corporate plans. As a matter of best practice, this plan should be reviewed and updated on an annual basis or more regularly if circumstances require, so that the plan remains aligned with the objectives of the entity. 12. Documentation of the property management plan is a critical element of accountability and should be considered in accordance with the Property Framework Principles. A well planned and executed property management planning process that is supported by appropriate documentation is more likely to be executed and to withstand external scrutiny. 13. Finance has released Property Management Planning Guidance which is a better practice tool to support a structured approach to property planning. While the specific content of property management plans is largely determined by each entity to reflect their own property management practices, the Property Management Planning Guidance provides advice on the possible coverage and structure of property management plans. 14. For assistance with drafting property management plans, contact Finance at propertyframework@finance.gov.au. Risk management 15. Appropriate strategies to manage and mitigate risks should be at the heart of a structured property management plan. The Property Management Planning Guidance provides general guidance on typical risk analysis considerations. Non-corporate entities should have regard to the principles and guidance outlined in Comcover s Risk Management Better Practice Guide as well as the Risk Management Standard: Risk management Principles and Guidelines AS/NZS ISO 31000:2009. Comcover is also responsible for the whole-of-government risk management policy. The Australian Government Property Data Collection 16. The Australian Government Property Data Collection (PRODAC) has been established as an evidence base for the office space leased and owned by the Australian Government. This information helps non-corporate entities to identify opportunities for better practices, and progressively improve the management and use of office space while also informing whole-of-government property decision making. 17. Non-corporate entities are required to collect specific data relating to their properties in accordance with the data specifications issued by Finance, and report this information to Finance. PRODAC collects two files of data information: the PRODAC Property File contains information about the office space leased and owned by the Australian Government as of 30 September each year. The Property File includes area, workpoint and descriptive data; and Management Framework 5

8 the PRODAC Cost File contains information on expenses and revenue related to office space leased and owned by the Australian Government on a full financial year basis. The Cost File includes rent expense, revenue and administration expense data. 18. The PRODAC Specifications provide guidance for non-corporate entities to use when collecting and reporting PRODAC data. For further assistance on PRODAC contact propertyframework@finance.gov.au. The Commonwealth Real Property Audit 19. Non-corporate entities are required to report annually to Finance on land holdings including the size, location and brief description of each property, value and characteristics such as contamination and heritage. The Commonwealth Real Property Audit informs development of property policy and provides information to assist in Commonwealth decision making. Information Sharing and Collaboration Whole-of- Government approaches to property management 20. In accordance with the Property Framework Principles non-corporate entities should have regard to whole-of-government outcomes in their property decision making and property management processes. Achieving these outcomes requires a high level of cooperation within an entity, with Finance and with other non-corporate entities. 21. Information sharing across non-corporate entities facilitates the identification of opportunities for the best use of Commonwealth property resources. It avoids unnecessary competition occurring when non-corporate entities attempt to locate property at the same time in the same market, and may also strengthen the Commonwealth s negotiating position. Commonwealth Property SES Band 1 Steering Committee 22. The Commonwealth Property SES Band 1 Steering Committee includes self-nominated representatives from non-corporate entities. The Committee and designated working groups aim to facilitate collaboration and innovation when solving contemporary issues. Senior Property Officers Forum 23. The Senior Property Officers Forum (SPOF) promotes the sharing of good practice property management and enable non-corporate entities to contribute to the development of the Property Framework s policies and guidance materials. The SPOF also fosters the development of productive working relationships and information sharing across noncorporate entities. Govdex 24. Govdex ( supports collaboration across government. It is a secure, private, web-based space that helps non-corporate entities to manage projects, and share documents and information. 25. The Commonwealth Accommodation Register and further information on government property management is available on govdex. 26. To enquire about becoming registered as a member of the Commonwealth Property Management Community on govdex please contact propertyframework@finance.gov.au. Management Framework 6

9 Co-location 27. To streamline the process of setting up shared arrangements and transferring leased space between non-corporate entities, a suite of guidance documents has been developed by Finance. This guidance includes: 2 the Commonwealth National Lease which can reduce the time and costs associated with lease negotiations and improve the commercial office market s understanding of the Commonwealth s position in leasing transactions; guidance and Memoranda of Understanding for the assignment and subleasing of property between non-corporate entities which provides voluntary Memoranda of Understanding templates and guidance developed to support non-corporate entities when assigning and subleasing property to other non-corporate entities; the shared services schedule which assists non-corporate entities sharing a property to formalise the sharing of services such as the provision of security, communication and IT services; and an accommodation register - where non-corporate entities can advertise excess office accommodation and post notifications when office accommodation is required. Machinery of Government (MoG) assistance 28. Finance provides assistance with coordinating and aligning property availabilities and needs across the Commonwealth. To assist non-corporate entities in managing the impact of MoG changes on property, Finance has developed a number of tools including: the Commonwealth Accommodation Register on Govdex; and the property manager s checklist which provides property officers with general property management advice on dealing with MoG changes. 29. These tools are available by contacting propertyframework@finance.gov.au. Budgeting and Funding The case for investment 30. As a matter of best practice a business case should inform any property-related investment decisions. Property proposals subject to the Property Framework must have a business case to demonstrate that the proposal is an efficient, effective, economical and ethical use of Commonwealth resources, consistent with the Property Framework Principles. 31. The government decides what resources to allocate to the acquisition and ongoing use of property and other assets after considering proposals of non-corporate entities. In making these decisions, the government relies on Finance s agreed costings of capital funding proposals. 32. The costing of a capital funding proposal is generally based on a preferred option that has been presented in a business case provided by the entity. Business cases should be based on cost-benefit analysis of the different property options prepared in consultation with Finance and in accordance with the Property Framework. 2 These guidance documents are available from Govdex except for the Commonwealth National Lease which can be requested via at PropertyFramework@finance.gov.au Management Framework 7

10 Capital budgeting requirements 33. The Capital Budgeting Policy outlines the rules and requirements that non-corporate entities should be aware of when managing and reporting asset funding. The Capital Budgeting Policy includes guidance on the preparation of Capital Management Plans, New Policy Proposals (NPPs) and Capital Business Cases. 34. The Capital Budgeting Policy also requires non-corporate entities and Corporate Commonwealth entities (except for government business enterprises, and the Department of Defence) to complete Property Capital Expenditure Forecasts (PCEFs) which capture information on properties leased or owned within Australia. 35. For further information on the capital budgeting requirements, Commonwealth entities should contact For specific queries on the PCEFs Commonwealth entities should contact The Budget Process Operational Rules 36. The Budget Process Operational Rules (BPORs) set out the major administrative and operational arrangements that underlie the management of the Government s Budget process. The BPORs include clear guidelines on what constitutes new policy and how Commonwealth entities can bring forward NPPs. Finance s role in costing NPPs is articulated in subject-specific Estimates Memoranda. 37. For further information on the capital budgeting requirements, Commonwealth entities should contact budget_framework@finance.gov.au. Alternative funding models for Commonwealth property 38. While most property decisions will be funded directly through budget appropriations as part of a detailed cost-benefit analysis, non-corporate entities should also consider whether alternative funding models may be possible. Alternative funding models could include: entering into a lease commitment with a private developer to fund construction of office accommodation; and sharing funding responsibility and project risks with the private sector by leveraging private sector investment in infrastructure assets through government guarantee or equity investment. Special Purpose Properties 39. Most non-corporate entities subject to the PGPA Act are charged commercial rents for their office accommodation. 3 However, some Commonwealth-owned properties are used for special purposes and have specialised functional requirements resulting in higher operating and maintenance costs. 40. A principles-based approach has been established for classifying Commonwealth owned, non-defence properties as Special Purpose Properties (SPP) in cases where the specialised nature of the property prevents it from being managed and funded under normal commercial arrangements. Whether a property is categorised as special purpose should be assessed in close consultation with Finance. 3 Finance charges market equivalent rents to Commonwealth properties leased by entities Management Framework 8

11 41. Once a property has been classified as an SPP, the next step is to establish a new funding baseline that takes into account the whole-of-life cost to the Government of maintaining the property. Detailed criteria for SPP identification and establishing a new funding baseline can be found at: Decision Making Property decision making in the Commonwealth 42. In accordance with the Property Framework Principles, value for money underpins property management and all Australian Government procurement processes. Deciding on an accommodation solution should consider the current and emerging property pressures in an entity s property management plan, and evaluate opportunities through cost-benefit analysis. Proposed solutions should also be aligned with the entity s strategic plan and whole-of-government outcomes. 43. The complexities and the time-consuming nature of delivering property solutions means that lead times need to be identified early and timeframes should allow for the possibility of setbacks and reconsiderations along the way. The decision to own, lease or dispose of property may need to be considered five years or more prior to a lease end date or the end of the useful life of a Commonwealth owned building. A long lead time may be required to ensure that there is adequate time for several mandatory processes to occur including (but not limited to) the Two Stage Property Project Approval Process, PWC hearings, Government consideration and building construction and fit-out (if required). 44. To provide greater visibility and coordination of non-corporate entities operational expenditure on property, non-corporate entities may be required to seek endorsement by the Minister for Finance, or their nominee, prior to entering into a property lease (refer RMG 504, Lease Endorsement Process). Cost-benefit analysis using whole-of-life costs 45. The Property Framework requires non-corporate entities to undertake a cost-benefit analysis based on whole-of-life costs in consultation with Finance for property transaction decisions subject to the Property Framework. A cost-benefit analysis provides government with a more transparent understanding of the long-term commitment it is entering into. Once completed, the cost-benefit analysis can be used by the entity as part of a submission to the PWC or in seeking initial Two Stage Property Project Approval, should these processes be required (see the section below on Approvals). 46. Non-corporate entities should note that costs are not the only determining factor when assessing the merits of a property decision. The decision should also include analysis of other factors including: whole of government property priorities. Including best use of existing surplus space suitability of property potential for flexibility in design, use and management expected short, medium and long term outcomes of each option relative risks of the property proposal social and/or environment benefits including local impacts likely environmental and heritage impacts prevailing circumstances of the property market impact of any contract or lease options options for disposal budget impact. Management Framework 9

12 The threshold for preparing a cost-benefit analysis Cost-benefit analysis thresholds 47. The thresholds determining whether a property transaction is subject to the Property Framework cost-benefit analysis process are: Lease obligations: Non-Defence: greater than $30 million over whole-of-life (full term excluding fit out) Defence: greater than $100 million over whole-of-life (full term excluding fit out) Note that the Lease Endorsement Process (RMG 504) requires notification to Finance prior to undertaking any lease transaction where whole of life costs exceed $2 million. Capital Works projects: Non-Defence: greater than $30 million (excluding fit-out) Defence: greater than $100 million (excluding fit-out). Disposals: Non-Defence: greater than $30 million Defence: greater than $100 million. 48. For property transactions with a nominal value of less than the thresholds, cost benefit analysis should be undertaken as a matter of better practice. (Note that the Lease Endorsement Process (RMG 504) requires notification to Finance prior to undertaking any lease transaction where whole-of-life costs exceed $2 million). The analysis should be commensurate with the size, nature and risk profile of the project. Public Works Proposals 49. For public works undertaken for or on behalf of the Commonwealth greater than $15 million, the referral of the works should be supported by a cost-benefit analysis using whole-of-life costs (see the Approvals section below on the PWC). Cost-benefit analysis assistance from Finance 50. Finance has developed, in consultation with entities, a cost-benefit analysis model which facilitates the comparison of property options using whole-of-life cost estimates. The model and supporting templates have been designed to aid in standardising the methodology of comparison and costing assumptions. 51. Finance provides an ongoing support function to assist non-corporate entities with the application of the Property Framework, use of the cost-benefit analysis model and general guidance for undertaking property management. Non-corporate entities should engage with Finance early in their considerations to allow enough time for Finance to review and assist in meeting the Property Framework cost benefit analysis requirements. 52. To obtain copies of the cost-benefit analysis model or to seek further guidance contact propertyframework@finance.gov.au. Management Framework 10

13 Whole-of-life costing 53. Whole-of-life costing is a critical part of cost-benefit analysis and needs to be consistently applied to any Commonwealth property transaction, including a lease, capital work or disposal. 54. Whole-of-life costing for capital works should be consistent with the process described in the document, RMG No. 503 Whole-of-Life Costing for Australian Government Property Management. This guidance is intended to be a resource for non-corporate entities preparing capital works proposals. 55. For further advice and assistance in undertaking whole-of-life costing for capital works proposals contact inception@finance.gov.au. Final decision 56. Lease: The decision to lease an existing building, owned either privately or by the Commonwealth. This decision can include a pre-commitment lease with a private developer for a new building. Note that the Lease Endorsement Process (refer RMG 504) may apply in addition to the LAA, PWC and other Property Framework requirements. 57. Design build operate: The decision to construct a new building, to be owned and operated by the Commonwealth. The Budget Framework requires the Two Stage Capital Works Approval Process to apply to this option, including review by the PWC (over specific thresholds). The cost-benefit analysis and whole-of-life costing process undertaken in consultation with Finance will provide the foundation for the Two Stage Capital Works Approval Process and any subsequent review by the PWC. Finance can provide detailed assistance for these processes Dispose: The decision to dispose a property. Disposal of all Commonwealth property should be conducted in accordance with the Commonwealth Property Disposal Policy. Contracts and leases 59. The design and management of contracts and leases, and the subsequent negotiation of lease renewals and rent reviews related to property management have a significant impact on the value for money obtained by non-corporate entities. Agreements should be appropriately established with a view to maximising value for money, within a whole of government context 60. Non-corporate entities should implement appropriate systems and performance measures for the active management of contracts and leases, incorporating regular monitoring and review processes to ensure that terms and conditions are met and remain appropriate. Outsourced service providers may be required to comply with relevant government policies. Non-corporate entities are expected to reflect applicable obligations in relevant documentation and ensure appropriate clauses in Government contracts. 61. Non-corporate entities must ensure that contracts and leases are awarded with regard to achieving value for money as outlined in the Commonwealth Procurement Rules July 2014 and should have regard to the mandatory procurement procedures where appropriate to improve value for money outcomes. 62. To assist non-corporate entities with lease negotiations, Finance has developed The Commonwealth National Lease (National Lease). The National Lease can reduce the time 4 Note: As agreed by Cabinet on a case-by-case basis, Finance may be requested to undertake, on behalf of proponent entities, the delivery of those domestic, non-defence capital works (excluding fit-outs) Management Framework 11

14 and costs associated with lease negotiations and improve the commercial office market s understanding of the Commonwealth s position in leasing transactions. Contact propertyframework@finance.gov.au to request a copy of the Commonwealth National Lease. 63. Further information is available on Decision tracking and recording 64. In accordance with the Property Framework Principles, non-corporate entities need to ensure that property management is conducted soundly and that decisions are documented, defensible and substantiated in accordance with legislation and Government policy. The appropriate mix and level of documentation depends on the nature and risk of the activity being undertaken. 65. Officials should ensure that there is sufficient documentation to provide an understanding of the reasons for significant property related decisions. Acquisition and disposal of property Acquiring and disposing of property 66. The primary legislation governing the acquisition and disposal of interests in land by the Commonwealth is the Lands Acquisition Act 1989 (LAA). The LAA sets out the processes whereby the Commonwealth of Australia may acquire an interest in land (by agreement or by compulsory process), determines the amount of compensation payable for compulsory acquisitions, and authorises the disposal of an interest in land. 67. All Commonwealth entities are subject to the LAA, except a body politic, an incorporated association, society or company or a body of trustees. These processes are administered by the Department of Finance. 68. The LAA provides that all acquiring authorities (that is, the Commonwealth or a Commonwealth authority) shall not acquire an interest in land otherwise than in accordance with the LAA. The LAA further provides that an acquiring authority shall not dispose of an interest in land otherwise than in accordance with the LAA For further assistance contact propertyframework@finance.gov.au. Delegations 70. The Parliamentary Secretary to the Minister for Finance has responsibility for the LAA, some powers have been delegated to officials within the Department of Finance and to officials within other entities. The delegated powers are: the power to authorise the acquisition, by agreement, of an interest in land (other than land in a public park ), if the interest is available in the market; the power to dispose of an interest in land (other than to dispose of an interest in land by means of the grant of a leasehold interest that may exceed a period of 22 years in duration); the power to expunge an easement; and the power to acquire and dispose of a leasehold interest in overseas land relating to residential accommodation and / or office accommodation. 5 The steps in the acquisition of an interest in land by agreement are summarised in section 19 of the LAA. The steps in the acquisition of an interest in land by compulsory process are summarised in section 20 of the LAA. Management Framework 12

15 Notifications to Finance 71. Delegates with the powers under the LAA are required to report to Finance no later than 14 days after the exercise of a delegated power in the form of an approved written statement ( 72. Further information about LAA requirements can be found on Finance s website The Commonwealth Property Disposal Policy 73. The disposal of Commonwealth property that is surplus to the Commonwealth s requirements must be managed in accordance with the Commonwealth Property Disposal Policy (CPDP). 74. To seek further guidance or assistance, contact propertyframework@finance.gov.au. Cost-benefit analysis of disposal options 75. The decision for the Commonwealth to dispose of property with a value greater than $30 million (or $100 million for Defence) are required to be determined on a case-by-case basis, based on cost-benefit analysis using whole-of-life costs prepared in consultation with Finance. 76. For property transactions with a nominal value of less than the thresholds, cost-benefit analysis using whole-of-life costs should be undertaken as a matter of better practice. The analysis should be commensurate with the size, nature and risk profile of the project. 77. Disposal options analysis, a part of determining cost factors, should also include analysis of other relevant factors, including: options for future Commonwealth land use; Commonwealth post-sale risks and liabilities, related to site contamination; and biodiversity, heritage and community impacts of disposal options. 78. The decision to dispose of property, similar to other property options, should be considered at least five years prior to the end of a useful life of an owned building. 79. To seek further guidance on the Property Framework cost-benefit analysis process, contact propertyframework@finance.gov.au. Due diligence 80. Commonwealth entities considering acquiring or disposing of properties will have a number of issues to investigate. This information is required to understand the full extent of risks and costs of the proposed acquisition and disposal, which will inform the costbenefit analysis. The due diligence process of the Commonwealth will involve considering: engagement of required consultants; Land Title and Native Title issues; current zoning; property valuation and market interest; potential land use; environmental issues such as flora, fauna, and heritage values and associated obligations under the Environment Protection and Biodiversity Conservation Act 1999; site contamination and hazardous building materials, including asbestos; and community interests. Management Framework 13

16 Approvals The Lease Endorsement Process 81. RMG No. 504 Commonwealth Property Management Framework Lease Endorsement Process provides details of the requirement and guidance on the process. Two Stage Capital Works Approval Process 82. The purpose of the Two Stage Capital Works Approval Process is to support non-corporate entities to make financially sustainable investment decisions throughout the capital works lifecycle. It is intended to provide non-corporate entities with direction when seeking approval to undertake capital works, remediation, divestment of property assets, or acquire complex assets. Threshold 83. New Policy Proposals (NPPs) for property projects, excluding fit-outs, which are estimated to have a capital cost of $30 million or more and are undertaken in Australia, its external territories and overseas, are subject to the Two Stage Property Project Approval Process. 84. Defence maintains its own Two Stage approval process for their capital works over $100 million. First stage 85. Under the Two Stage Capital Works Approval Process, the First Stage involves the relevant portfolio Minister seeking the Government s in-principle agreement to a project. 86. The NPP is based on a business need, a broad order of costs and an elementary consideration of options. The NPP is supported by an initial business case that identifies the preferred option and alternatives, underpinned by a primary analysis of each option. 87. The purpose of First Stage Approval is to secure the authority and funds necessary to develop the project concept for further consideration by Government. It does not guarantee or constitute approval to proceed with the project. Second stage 88. At the Second Stage, the relevant portfolio Minister presents an NPP seeking the Government s agreement to proceed with a project, based on the project scope being developed to functional design brief standards. 89. Full costing of the project scope and analysis of project benefits, risks, timetable, contingencies and any offsets must be included in this proposal. A detailed business case supplements the Second Stage NPP with comprehensive analysis of all options and risks and an increased level of confidence that the cost and time estimates will not be exceeded. 90. Where a project falls outside of the scope of the Two Stage Property Project Approval Process, non-corporate entities may apply the due diligence principles contained within the process as a matter of best practice. 91. Further assistance, including the first and second stage business case templates, is available on the Finance website: Management Framework 14

17 The Parliamentary Standing Committee on Public Works 92. The Public Works Committee Act 1969 (the PWC Act) requires that any public works (with certain limited exceptions) with an estimated cost exceeding $15 million will not be commenced unless: it has been referred to PWC; and the House of Representatives has resolved, following examination and report by the PWC that it is expedient to proceed with the work. 93. Under an agreement between the PWC and successive Finance Ministers, works estimated to cost between $2 million and $15 million must be notified to the PWC as medium works, before the works have commenced. Tenders should not be called for until the PWC has agreed in writing for the work to proceed. 94. Finance undertakes a coordinating role in the PWC process, and is responsible for administering the PWC Act on behalf of the Minister for Finance. Finance is responsible for preparing referring motions, expediency exemptions and motions, and briefs to the Finance Minister on works requiring referral to the PWC. Referrals are made in the House of Representatives by the Finance Minister. 95. Prior to commencing any works, Commonwealth entities should consult the PWC Manual of Procedures for Departments and Entities (the PWC manual) that can be obtained from the Committee s website. The PWC manual outlines the expectations, functions, and responsibilities of the PWC, including the processes to be undertaken to refer works, and the content requirements for PWC submissions. 96. Further information and assistance is available through the Finance website: -works-committee/index.html. 97. The cost-benefit analysis of the whole-of-life costs undertaken by an entity in consultation with Finance greatly assists PWC in the referrals considerations. The Commonwealth Property Disposal Policy approval process 98. Commonwealth entities seeking to dispose of surplus property other than on the open market at full value must seek the approval of relevant Ministers as outlined in the CPDP. Disposals requiring Ministerial approval are listed as exceptions to the general policy and include: where surplus land is considered suitable for meeting community outcomes, including housing; and off-market (direct) sales, whether for agreed market value or a concessional price. Management Framework 15

18 Design Office accommodation and fit-out design 99. Office accommodation should provide the appropriate facilities and amenities to allow non-corporate entities to efficiently and effectively deliver their core business outputs in accordance with the Property Framework Principles In relation to space management, the Government has established the occupational density target of 14 square metres of usable office area per occupied workpoint. Non-corporate entities entering into a new lease, owning a building or undertaking a major fit-out for existing office accommodation should have regard to the occupational density target Office design should be sufficiently flexible to facilitate an efficient and cost effective response to changing organisational needs when they arise. This may be assisted by the use of standard modular fit-outs and adaptable meeting rooms and offices Improving the efficient use of space and achieving tighter occupational density is generally linked to scheduled opportunities to reconsider existing space arrangements. For leased tenancies, which make up the majority of Commonwealth office property, this generally occurs at lease expiry or as lease option dates arise. Finance can assist non-corporate entities in identifying possible government tenants to sublease or assign surplus space including where moving to a tighter occupational density generates surplus space. Flexible and Efficient Workplace Design Guidance 103. Finance has developed Flexible and Efficient Workplace Design Guidance (Flexibility Guidance) to assist Commonwealth entities with their accommodation planning. The Flexibility Guidance is a better practice guide designed to support Commonwealth entities in incorporating efficient and effective design into their accommodation planning and is available on the Finance website: Topics covered in the Flexibility Guidance include: different workspace styles and their advantages and disadvantages; traditional solutions in the design of accommodation; best practice advice on designing workplaces to support entity requirements and facilitate business delivery; using technology to create a more flexible and mobile workplace while working within tighter density fit-outs; detailed information on workstation types, design standards and a suggested structure for a fit-out manual; and case studies of different approaches to a successful workplace design The impact of office design and building quality on staff should be considered and staff should be consulted on proposed workplace design. Proper regard should also be given to the requirements of the Work Health and Safety Act 2011 (with expert advice as necessary). Management Framework 16

19 Other Property Management Considerations Better practice approaches 106. With a significant portion of Commonwealth Government staff located outside of capital cities, the Commonwealth has significant property interests (either owned or leased) in regional and remote areas. Property arrangements in regional and remote areas are often complex, with local market conditions and limited commercial office space impacting on Commonwealth property decisions and arrangements Typically, properties owned or leased by the Commonwealth in regional and remote Australia are smaller in scale than those in metropolitan areas. This means that some property falls outside the scope of the Australian Government Property Data Collection (PRODAC), with the result that information on property arrangements and opportunities to co-locate in regional areas is less easily sourced. The guidance in this document seeks to mitigate this through a focus on the inclusion of local knowledge in property management planning, good practice in information sharing and the use of co-location when appropriate. Collaboration 108. To support value for money in regional and remote locations which have small commercial property markets, entities should also consider options to co-locate with other Commonwealth entities or state and local government entities as appropriate. Entities property management plans should have sufficient flexibility to allow for short to medium term ad-hoc co-location arrangements at the local level Prior to signing contracts and leases in regional areas, entities should notify Finance (as set out in RMG 504) and consult with Finance and other government entities operating in that region to determine if alternative and more cost effective arrangements may be possible. Property management planning 110. Undergoing a MoG or business requirement change can be a major property management challenge. While non-corporate entities have no control over such changes, there are opportunities for planning to manage the impacts of such changes, and to deal with other major disruptions, for example: providing contingencies for the need to acquire additional accommodation at short notice to perform additional functions; coordinating with other non-corporate entities where functions are transferred; and incorporating flexible accommodation design to adapt to a range of requirements These aspects are particularly important in regional and remote locations where property markets are small, and the availability of suitable commercial property is limited, particularly at short notice. Contamination and hazardous building materials 112. When dealing with contaminated property and hazardous building materials, it is good practice to engage qualified and experienced practitioners to identify and prepare a current register of hazardous building materials, including asbestos. This register should inform an appropriate strategy for mitigating risks from these hazardous materials and ongoing Commonwealth liability via contractual disclosure and/or pre-divestment works Further assistance in contaminated site investigation can be found in the Guidance to the National Environment Protection Measures (Implementation) Act Management Framework 17

20 114. When there is a potential for site contamination, a desktop assessment is recommended to investigate historical site uses and possible contaminants that may have been associated with these site uses. Where the desktop assessment indicates potential contamination, a detailed site investigation consisting of soil and/or water sampling is recommended to clarify the likely levels and extent of any site contamination. In situations where disposing of Commonwealth ownership may be considered, an independent accredited site auditor should endorse sampling analysis and quality procedures prior to sampling, then subsequently endorse the findings of the detailed site investigation. Procurement of consultants to provide hazardous materials, contamination, environmental and heritage due diligence 115. Finance coordinates a non-exclusive Heritage, Environment and Sustainability Services Panel of expert services providers. This Panel is accessible to Commonwealth Government entities that elect to sign instruments of acceptance under the Panel Deed of Standing Offer. Management Framework 18

21 Glossary of Terms TERM Cost-benefit analysis (CBA) EXPLANATION A method of economic evaluation for projects, programs or policies that measures benefits and costs as far as possible in monetary terms. CPRs Commonwealth Procurement Rules, July 2014 Entities Fit-out Flexibility Guidance Govdex PGPA Act Non-Corporate Commonwealth Entities and those PGPA Act Corporate Commonwealth Entities who may wish to refer to the guidance as a tool. The design and delivery of the interior partitioning, floor, ceiling, mechanical, electrical, and environmental components to meet the requirements of the buildings occupants. The Flexible and Efficient Workplace Design Guidance, September An Australian Government website that supports collaboration across entities and provides a secure, private, web based space for entities to share documents and information. LAA Act Lands Acquisition Act 1989 Occupational Density Target NPP MoG PGPA Act Property Property Management Plan The Commonwealth Occupational Density Target New Policy Proposal Machinery of Government Public Governance, Performance and Accountability Act 2013 Infrastructure, land, buildings or heritage assets owned or leased by entities. A plan set out for an entity that details its proposed property management activity over a given period Management Framework 19

22 TERM Property Framework PWC EXPLANATION Commonwealth Property Management Framework Parliamentary Standing Committee on Public Works (Public Works Committee) PWC Act Public Works Committee Act 1969 SPP SPOF Two Stage Process Whole-of-life costs Special Purpose Property Senior Property Officer s Forum Two Stage Property Project Approval Process An estimate of all expected costs over the lifetime of the relevant lease or property, including costs of acquisition, operation and maintenance Management Framework 20