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Leaner and Greener II: Putting Buildings to Work
"I welcome the report. I don't want it just to be read, I want it to make things happen."
Rt.Hon Eric Pickles MP, Secretary of State for Communities and Local Government
“This work shows the vast scale of the prize when Councils and other public bodies like the police and fire services work together."
Matthew Hancock MP, Public Accounts Committee, Chair, Westminster Sustainable Business Forum research inquiry
"There should always be a definable benefit to taxpayers from any public sector property"
Cllr Tony Samuels, Cabinet Member for Assets and Regeneration, Surrey County Council
The report is sponsored by:
Public sector organisations currently face a range of efficiency drivers. The October 2010 Comprehensive Spending Review introduced budgetary pressures for the public sector. Equally, the third Carbon Budget which requires a 35% reduction in carbon emissions on 1990 levels by 2022 also drives the public sector to be more environmentally efficient.
Public sector buildings represent about 8% of total non-domestic carbon emissions and approximately one fifth of the sector’s day-to-day running costs. Making the best use of property therefore has the potential for economic and environmental efficiency savings as well as creating better spaces to increase work productivity for further financial benefits.
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Download the report
Public sector organisations need to become more efficient to meet economic and environmental challenges while continuing to improve service delivery. This report shows that much of this can be achieved by rationalising public sector property portfolios, working in partnerships and improving workplace conditions.
The report 'Leaner and Greener II: Putting Buildings to Work' builds on the ‘Leaner and Greener: Delivering Effective Estate Management’ report published in February 2011, which estimated that public sector organisations can also deliver £7 billion in savings from decreasing the space they occupy and through aggregation in property related procurement.
This report shows how financial benefits worth potentially £8 billion could be generated by improving workforce productivity. This can be achieved by improving workplace conditions and implementing more flexible ways of working, through reinvesting money saved in rationalising the property portfolio and improving the performance of the retained estate.
Building public sector property partnerships
Public sector organisations should join forces to enlarge the property pool available for strategically matching service delivery needs to property. A ‘one size fits all’ public sector property solution would fall short of being sensitive to local service delivery specificities and potentially be to the detriment of service quality. Partnership arrangements must therefore be sympathetic to the needs of different local communities.
To embark upon successful cooperation in property use within a locality, organisational buy-in at executive level is vital. Equally, central government should provide a single point of contact such as the Government Property Unit (GPU) for local property queries involving central government owned buildings.
Evidence suggests that the establishment of a local strategic property working group, such as a Local Strategic Property Forum, is an effective tool to generate common property and service strategies and build trust between partnering organisations. The Forum should be composed of as many public sector providers in the locality as possible and be guided by a common set of principles.
Benefits from aggregation in public sector property
Partnership working can deliver financial benefits through the sharing of both front and back office services, creating joint procurement strategies, lowering the operational costs of public estates and realising capital receipts from freed-up property.
As public sector property represents 8% of total non-domestic carbon emissions, there is great potential to reduce carbon emissions by improving space utilisation, reducing occupied space and improving the efficiency of the remaining property portfolio. The development of joint public sector investment solutions, resulting in larger economies of scale, could enable the cost-effective implementation of carbon reduction schemes.
Public sector organisations should consider all cost-effective options for carbon reduction available to them. In the long term, investing in renewables might offer insulation against rising energy costs and provide a potential long-term revenue stream as well as carbon reduction. In the short term however, improving the energy efficiency of their buildings offers public sector organisations the opportunity to significantly lower their energy cost and thereby both cut carbon emissions and receive a quicker return on their investment.
The rationalisation of the public sector’s property portfolio offers an opportunity to improve the physical characteristics of the workplace to maximise the productivity of the workforce and revolutionise the way services are delivered. Equally, introducing flexible working can also lower space requirements and thereby reduce property costs and carbon emissions. Flexible working is also associated with reduced sickness absence, lower employee turnover and an improved service through increasing contact time with customers from a wider range of working hours.
Our findings suggest that increased productivity of 5% to 15% can be generated by improving workplace standards and the flexibility of the workforce. Taking a 5% productivity increase, it is estimated that financial benefits of up to £8 billion annually could be generated.
Delivering property partnerships
The creation of a Local Strategic Property Forum will provide an effective first step for property partnership working. The Forum should aim to implement property rationalisation opportunities in a locality on a project-by-project basis. However, to deliver more extensive property efficiencies and service benefits for the local community, changes in the level of collaboration beyond the remit of the Forum are required. A range of possible property governance structures could be used to increase the efficiency of the use and management of public sector property portfolios.
The analysis shows that the establishment of a Pooled Property Partnership Board involving public sector organisations in a locality, empowered to exercise strategic asset management over a selected pool of cross-public sector assets would move property partnerships towards the more strategic end of the governance spectrum. While the legal ownership of assets could remain with partnering organisations, the Board would be able to strategically manage all earmarked public sector property as a quasi-single estate.
To obtain maximum efficiencies, public sector organisations could extend their commitment beyond the Board by pooling public property assets with the greatest common rationalisation potential within a single Property Company. Transferring control of ownership of certain assets into a single legal entity would enable a greater level of rationalisation at an increased speed and deliver greater financial and environmental benefits for local residents.
To mobilise the required resources to implement property rationalisation projects, public sector organisations could form a partnership with private sector organisations. This could enhance strategic property planning skills, increase capital resources to implement the desired changes and increase the speed at which property-related savings could be generated. By developing an incentivised strategic joint venture (JV) property partnership, public sector organisations could achieve better results from a wider skill set while deferring the costs incurred until the point at which real savings are being delivered. The rationalisation of an operational property portfolio will also create assets for disposal that can play an important role in generating local economic development.