Government property is set to be squeezed. But Joshua Chambers finds that tough times may catalyse greater sharing of property across the public sector, producing benefits for services as well as cost savings.
Report after report has called for the public sector to use property more efficiently. There was Lord Gershon’s efficiency programme in 2004; Lord Carter of Coles’ property strand of the Treasury’s Operational Efficiency Programme in last year’s Budget; the 2010 Office of Government Commerce report about the government estate; and, just last week, Sir Philip Green took up the issue again with gusto in his efficiency review.
Green noted that the government spends £25bn a year on its estate, and that it isn’t managed in the same way as the private sector. He believes that there are easy property savings to be made as government seeks substantial cuts in public expenditure. “If this was a company and we found stuff like that we would be licking our lips. It is a big prize and must not be missed,” Sir Philip said.
Already, Cabinet Office minister Francis Maude has put in place a moratorium on new leases, preventing departments from even extending existing arrangements without Maude’s sign-off. But things need to be taken further, said Green, noting that there “needs to be a better dialogue and a more coordinated approach between the central Government Property Unit and all departments.”
Collaboration is the key to efficient property use. At the local level, councils have cooperated on property with other public and voluntary organisations through Local Strategic Partnerships, and more recently via the ‘Total Place’ pilots; these looked holistically at public spending in local areas, laying the groundwork for public services to collaborate more effectively.
These pilots found that one easy way to use property more efficiently is for public sector bodies to share offices, reducing the number of buildings they hold independently and moving in with other organisations. Green did not quantify the exact savings that property-sharing can bring, but was emphatic in suggesting that departments cut the number of buildings they own.
In 2009, Green noted, one department had 149 regional offices in 10 regions, with 27 in London. This could be reduced to 30 offices, he said, meaning that “119 of these properties are not needed”.
The case for property sharing is strengthened not only by yesterday’s Spending Review, but by the government’s “bonfire of the quangos” last week, according to the the deputy director of the Government Property Unit, Stuart Ladds. He leads the Cabinet Office team responsible for delivering property savings through the Efficiency and Reform Group, and believes the case for property sharing is now stronger than ever.
“The civil service has had a programme of improving the asset management of its estate for five years or so,” he notes; but Francis Maude’s announcement that 192 arms-length bodies are to be axed has brought about “a seismic shift in the number of properties that aren’t required. Consequently, the civil service needs to respond vigorously to ensure that costs are saved as quickly as possible.”
Cost is a key argument for sharing property. As Ladds points out, “having individual buildings with individual facilities-management contracts, security guards and restaurants is terrifically expensive”. Departments can rent out vacant space to other bodies and save on their total building costs (see case studies). Yet Ladds also highlights another key argument for property sharing: knowledge transfer.
Closer cooperation
Property sharing can encourage cross-departmental working, reducing the tendency for civil servants to work in silos focusing solely on their own projects. “Having civil servants working in their own areas, in isolation from what others are doing, does not make for an effective organisation,” Ladds says.
When civil servants move into close physical proximity, they can more easily collaborate and understand issues from another department’s perspective. People can also be seated with others in their profession rather than being organised into departments, and this may lead to further cross-departmental opportunities emerging. For example, says Ladds, he was recently working in another building and “someone overheard a discussion I was having. It dawned on them that I should be on their project board because, although we’re in different areas, we have complementary skills.”
In some cases, property sharing can also allow departments to cut back on duplication by, for example, pooling some back office functions. Local government already does so. Coventry City Council is one of a group of seven local authorities looking for opportunities to collaborate in managing their assets, as part of the West Midlands Property Alliance. Director of city services and development at Coventry’s council, Martin Yardley, explains that “I pay wages to my staff in exactly the same way that Warwickshire pay wages to their staff.” This creates an opportunity for his council to work with Warwickshire and share human resources management.
Property sharing has much to recommend it. However, the benefits are achieved over the long term – and in the short term, it requires public bodies to spend money in order to save money.
Short term investment
Finding the necessary capital to afford to move offices can be difficult, especially at a time of strained budgets. “One of the challenges is often finding the initial investment,” explains Andrew Rowson – the director of Local Partnerships, a body funded by the Treasury and the Local Government Association to advise and support local public services.
Rowson explains that this is because moving buildings costs money, as does investing in furniture and purchasing IT equipment. “There will be a payback, but it will take several years,” he says. “The perspective needs to be sufficiently long term so that all the benefits can be captured and set against costs.”
There is a significant cost to purchasing IT equipment when co-locating. “IT is currently the major obstacle to delivering estate savings,” Ladds explains, citing an example: “There was an opportunity to close two buildings and move the two occupiers in with somebody else close by, but the cost of moving the IT was £150,000 – which would have taken me years to recover in savings.”
The key issue is that, to realise all the benefits of co-locating, the computers run by the public agencies need to be compatible and work from the same IT platform. The Cabinet Office is working on this issue at the moment, Ladds says. “I am told that colleagues are working to a target to ensure that, within four years, 80 per cent of the civil service is working off the same [IT] platform, on the assumption that this makes co-locations a lot simpler and more cost effective.” Four years is a long time, though, given that the case for property sharing is immediate. IT could be a barrier to easy savings being achieved in property, rather than by cutting back on frontline services or public sector employment.
People problems
Employees aren’t always happy to move to new offices, and staff often protest about relocations. They may bring a change in how long it takes them to get to work or, if the dynamics change around issues such as car parking (see box), employees may have to commute on a different form of transport.
Ladds is clear on how staff can be persuaded to move: by putting the alternatives to them. “What we need to understand is that, if we can be smart with our property and save more money, services are not impacted upon and more staff can keep their jobs.” In many cases, Ladds says, “We’re not asking them to move towns; we’re not asking them to move house. We’re just asking them to be more flexible – but often the preferred option is status quo.”
Not only can moving create problems with individual employees; sometimes, organisations are deterred from moving offices because they believe it may affect their corporate reputation if they don’t have their own building. The Office of Budget Responsibility (OBR), for example, was concerned that remaining in the Treasury building would diminish its reputation for operational independence. However, new chairman Robert Chote has announced that instead of setting up its own headquarters, it has a provisional agreement to move into the office of the attorney general by December. In this case, property sharing keeps costs low while ensuring clarity over the organisation’s independence.
Sustainability
Property sharing can make a department more sustainable, reducing its carbon emissions by sharing the building’s CO2 footprint with other bodies. However, there is an issue over how sustainability is measured that could negatively affect this.
Rebecca Willis, the vice chair of the Sustainable Development Commission, explains that “moving more people into one building can have the effect of making its energy efficiency figures look worse, because more people generally means more computers and possibly more air conditioning to deal with added equipment.”
As government departments are considering their future carbon targets, this must be taken into account. Willis says that “to get a full and balanced picture, it’s important to make sure that there are a range of indicators in place to normalise the energy impacts – so instead of just looking at energy consumption per square metre, also take into account the energy consumption per employee.”
The case for co-location
So government must ensure that organisations are sufficiently encouraged to share property. This also means that finding vacant property must be as easy as possible – and the government has sought to simplify this by introducing a mandatory database for all government departments, called the Electronic Property Information Mapping Service (e-PIMS).
This database does cover non-departmental bodies, but currently doesn’t cover local authorities too. This is something that Yardley thinks has been overlooked: “We are talking quite a lot with [civil service] estates people,” he says, “but what would be better for us is to have more of an understanding of all [public sector] leases that are coming to an end.”
This may change. Rowson explains that his organisation is lobbying for the system’s introduction in local government. “Local government has a variety of systems, but we’re aiming to introduce e-PIMS to provide consistent data sets to compare one authority with another, to look across the civil estate,” he says.
As with many of the obstacles to property sharing, ensuring that all vacant space is advertised is an issue that is already being addressed. So there appears to be a critical mass of pressure, both from external reviews and from internal budgetary forces, that will push departments into property-sharing. Some have already reaped the benefits.