Delivering devolution through sustainable estate management

The Westminster Sustainable Business Forum’s Claudia Jaksch discusses how increasing the sustainability of local government estate can result in potential savings of £180-200 per m² per year.

In his Comprehensive Spending Review and Autumn Statement 2015, George Osborne, the Chancellor of the Exchequer, announced a reduction in central government funding to local government by 24 per cent in real terms over the next five years. At the same time measures to enable local governments to become self-sufficient by the end of this Parliament were promised. This so-called ‘devolution revolution’ offers local government new powers to determine parameters for growth; nevertheless, it also demands substantial efficiency savings from local authorities.

The Westminster Sustainable Business Forum (WSBF) has already been very active in lobbying for policy improvements in this area, arguing for managing public estates in a more sustainable way in order for local government to deliver considerable operational cost savings. The report’s ‘Leaner and Greener: Delivering effective estate management’ and ‘Leaner and Greener II: Putting buildings to work’ highlighted the extraordinary potential of efficiency savings within public sector property management, both in monetary and carbon terms.

Leaner and Greener
It is estimated that central and local government together own property worth £370 billion, with annual running costs of over £20 billion. At the same time, the public sector accounted for two per cent of UK greenhouse gas emissions in 2013 with the main chunk of emissions stemming from heating public buildings. One of the key aspects in successfully delivering the ‘devolution revolution’ and meeting the UK’s emissions reduction targets will be effectively combining the reduction of running costs of public sector buildings while also downsizing their carbon impact through better facilities management.

So how can local government can be ‘transformed’ in practice and deliver both economic and environmental savings, while maintaining the same quality of services? ‘Leaner and Greener’ highlighted key steps that local government and its public sector partners can take to achieve this and today, in the face of the ‘devolution revolution’, these recommendations are even more important.

Reducing space
The central government estate has already shrunk by over two million square metres since 2010, which has translated into an estimated £600 million savings in running costs each year. Nevertheless, there is evidence that the public sector as a whole and specifically local government could further improve the efficiency of its estate management and reduce the size of the public property portfolio, thereby lowering the associated operational costs. The ‘Leaner and Greener’ reports demonstrated that this kind of property rationalisation is one of the most effective ways to deliver a trinity of benefits: lower costs, lower carbon emissions, and better services.

Indeed, the efficiency gains achieved by reducing the space that local government services occupy should be a priority for their property teams across the UK by following best practice examples of low-cost and flexible working practices. A flexible work force means less desk space is needed in the office. Implementing technologies to facilitate remote working with the support of ‘drop in offices’ where staff from any agency can call in to use desks can also reduce the current space needs.

Furthermore, the introduction of sustainable measures for a typical administrative building, with staff on average public sector wages, can deliver financial savings in the range of £180-200 per m² per year from lower energy spending. Not only do these green measures save money, but they also deliver additional ‘soft benefits’, including improved productivity and reduced illness, all of which add to the quality of service and economic efficiency.

Working in partnership
Recently, local government has been supported by the One Public Estate programme, a partnership between the Local Government Association (LGA) and the Cabinet Office Government Property Unit (GPU) to deliver ambitious programmes to increase local efficiency savings and support economic growth by joining up councils to use their assets more effectively.

Although constraining financial and contractual arrangements have often hampered such co-operations in the past, these partnerships are set to become ever more crucial to local authorities operating with diminishing budgets. Sharing property by different public sector service providers enhances the extent of efficiency savings by enlarging the size of the managed estate; and co-location of front and back office services allows cost-effective working through widening the scope of property facilities management and procurement contracts.

For example, the standardisation of back office and support facilities enables cost savings through efficient property management and downsizing of the estate. Pooling capital resources also allows greater investment into joint property, improving the quality of public sector estate. Joint property management will then deliver operational cost savings through enhanced efficiency of its property use, which will contribute towards the improvement of frontline services and customer satisfaction.

‘Leaner and Greener’ described a variety of solutions for joint property management, ranging from a local public sector property management board to a Pooled Asset Vehicle for the estate of all local public service providers.

Establishing central control
Further, efficiency savings can be delivered by centralising control over property within single departments – for example a ‘Central Property Unit’. This can act as a corporate landlord for service departments by arranging accommodation requests, managing building improvements, procurement processes and the negotiation of property contracts.

At present the majority of local government, health, police and fire authorities rely on their own in-house property and facilities management services to plan and operate property portfolios. Whilst increased financial constraints have already driven the public sector to share certain services with their partners, there are few examples of sharing staff and property resources.

The creation of a corporate asset management service and facilities management function would enhance the economies of scale by uniting often fragmented local government property portfolios and removing the control over property from individual departments within local government can help establish efficient property management across all of the estate and strategically address target inefficient property use. The experience to-date shows that more centralised and consistent facilities management of buildings has the potential to deliver significant efficiency savings.

Data collection and sharing
The establishment of a central data pool can support strategic planning as well as practical project delivery objectives within public estate management. Strategic planning and engagement of partners could benefit data-driven approaches to generate an understanding of the scale of potential savings.

Cooperation in procurement could cover a county or city‑wide area, while the co-location of front-line facilities will be most effective at community level. In order to establish a clear understanding of how customers use and access public services, public sector organisations should partner to develop customer insight. This can be achieved by generating a snapshot of the way that the supply of services delivered from public sector assets is matched to the demand from the customer.

However, it is vital that planning informs the collection exercise and there are various intelligence-gathering tools that public sector organisations can utilise to map public service demand for certain services in an area. This approach enables public sector organisations to determine the future needs of their service and strategically develop their estate to support the service. Further, an essential element in building a strategic understanding of locality-based asset management is a comprehensive understanding of what property is held, what its value is, the contractual terms under which it is occupied, and its fitness for purpose in terms of physical condition, operational suitability and utilisation.

In order to ensure cost-effective data collection, public sector organisations should assume a pragmatic approach to how much data is required to inform strategic decisions. As argued in ‘Leaner and Greener’, collecting seven to ten key data types is a manageable aspiration that does not create too heavy a burden on resources. This data includes information about the property’s location, its use, size and space utilisation, condition and maintenance backlog, ownership status and contractual information linked to the property and valuation, as well as basic sustainability data, such as its Display Energy Certificate (DEC).

In particular with respect to sustainability data and efforts to reduce the carbon impact of public sector buildings, it will be interesting to see the outcome of the Department for Communities and Local Government (DCLG) consultation on the DEC regime for public buildings and actions that will be taken on its basis. The consultation included proposals that could see the removal of the legal requirement to display DECs for 54,000 public buildings throughout England and Wales. With DECs having helped public bodies reduce energy use and concomitantly to an extent that outweighs the cost stemming from their administration, their abolishment would send a fata signal and effectively counteract efforts to achieve efficiency savings within the public sector, both in financial and carbon terms.

Rather than abolishing DECs altogether, the government should use its position to help the market recognise the importance of high‑performance buildings more widely by proactively leading on a visible enforcement of DECs for all public buildings as we recommended in our report ‘Building Efficiency: Reducing energy demand in the commercial sector’. I am looking forward to working with the government and DCLG to help make DECs a useful benchmarking tool to improve public and commercial sector efficiency in the future.

Further Information
policyconnect.org.uk/wsbf