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Less State Estate

08 June 2011

Nick Shaw

The move to rationalise the public sector estate provides a great opportunity for facilities service providers to demonstrate the strategic connection between FM and real estate. Nick Shaw explains the issues.

TAKING HIS LEAD FROM THE Coalition Government’s mission to manage the public purse more effectively, Frances Maude, Cabinet Office minister, is encouraging all aspects of government – central and local – to save money by managing their property portfolios more strategically.
It is a big challenge involving tiers of government and all of this work has to balance the current and future demands placed upon government facilities. At a central government level the Cabinet Office is seeking to find savings through the Efficiency & Reform Group (ERG), which has been set up to co-ordinate the centralisation of spending on key areas such as ICT, property and the use of consultants.
The catch is the provision of services cannot be interrupted and the delivery at the point of most need cannot be affected at all. It is not easy. The delivery of services has to be planned and predicted and decisions made about estates that are sustainable. So, is there a role for facilities management?
Well, the answer is a categorical YES. The drive for government to rationalise its estate provides the industry and the profession with an opportunity to demonstrate its strategic connection with commercial and public real estate. More importantly, facilities management is not just playing a key role, but its place in the hierarchy is higher than ever. Visit the Government Property Unit (GPU) web site and the first link is to the Facilities Management section.
The buzzword might be rationalisation, but whilst that might imply cuts and the possible closure of buildings, the answer to managing the problem and delivering real value is more complex. Indeed, the initial answer lies in understanding the thinking of government – in particular the workings of the ERG and its various sub-groups.
Targeted savings
Central to the process within central government is the Government Property Unit (GPU), which is the property function of ERG in the Cabinet Office. It leads Government’s property strategy across the public sector. It is responsible for delivering the targeted savings, as well improving the built environment and promoting economic growth where possible. The GPU sits in the Shareholder Executive (“ShEx”) in Business Innovation and Skills (BIS). It reports to the Minister for the Cabinet Office (Frances Maud) and the Chief Secretary to the Treasury on the core efficiency agenda and to BIS Ministers on its role in promoting economic growth.
Government figures state that its estate is worth approximately £370 bn and costs around £25 bn per annum to run, with the NHS and Ministry of Defence estates comprising over half of this annual running cost. There has to be room for improvement, especially as Government is clearly the UK’s largest landowner and largest tenant. But if savings are to be made then it is important that to know exactly what is expected from property so as to deliver the desired cost reductions and to be clear on how it is to be achieved.
Right now, the GPU is setting policy to centralise procurement – everything goes through them to control and monitor what is required – and the rationalisation of property is lead by them, not by individual departments or businesses. The goal is to create a portfolio of facilities that best suits the needs of government in the most efficient manner; parting from tradition and legacy. This approach is combined with a FM strategy based on how to use the space required most effectively.
There is a huge job to be done, and in many ways, one could argue that there is nothing new in the goal of the FM team. Their primary task is to ensure services are provided efficiently and effectively; to help with the process of government. Only now there is enormous pressure to deliver savings and the size of the challenge has increased because almost of every component has to be assessed and savings sought everywhere.
As this is so challenging, it could be easy to wait for others to make the decisions. However, in our roles in FM we need to support the central challenge by understanding the objectives, the strategy, and the policy makers by supporting this to the best of our ability. It is a real opportunity, not just Vinci, but the FM industry as a whole to demonstrate exactly what we do best and to support the challenge facing the UK economy as a whole.
Vinci is working with some of the UK’s major central government departments, which in turn is inherently co-ordinated with the work done by the GPU and the FM team. It is crucial that to demonstrate short, medium and long term savings, the FM agenda must be firmly aligned with the activity that the rest of the GPU are developing – that means that we have to understand the challenge, face up to it, provide some clear solutions and then demonstrate leadership by implementing the ideas successfully.
Organisations such as ours have all of the requisite technical skills to support the strategy including energy management, space management, change management etc. The key is to be flexible, because whilst this is a long term journey, there are short term challenges to overcome along the way. Crucially, we have to be sensitive because as many political and social commentators and the media have observed, this is a major social challenge. Rationalising anything will often demand controversial decisions to be made about which offices require refurbishing or in some cases closing or leasing out. It is further complicated by the location of many of the offices and the nature of the departments’ activities. People are going to be affected by the decisions that FM teams recommend and the private sector must support the public sector in developing the people strategy.
In a purely commercial situation a tenant will determine what they want from a building – it should be the occupiers that call the tune. For example, a company occupying four floors might decide to save its energy costs and use its space more efficiently and move to only two floors, sub-letting the remaining floors, or even shutting them altogether. Costs are saved either way.
This is the simplest form of rationalising an estate. So, one of the options that needs to be considered is the whole or partial closure of a building and relocation of its services. This might seem very straightforward and the obvious tactic but it can be more difficult than imagined.
To do this the client (be it HM Government or a local authority) must first consider how sustainable the decision to close a facility really is. By this, I don’t mean in terms of energy efficiency per se, but by building its strategy around the social, economic and environmental implications of rationalising its estate.
Is it for example, economically viable to close a building and relocate a department to either another property or perhaps redistribute the services managed within it to more than one location? The savings gained from the closure need to be offset against the movement of people, systems, equipment etc and then the likely requirement to upgrade whatever facility
the services and people are moving to.
The environmental arguments relating to the management of one building and the closure of another are simpler to gauge. Everyone is aware of the rising costs of energy bills and the growing demand to minimise carbon emissions.
Public sector and private commercial buildings, along with new built domestic buildings are obliged to come clean about their efficiency via the Display Energy Certificates that indicate their individual performance. A poor Occupational Rating (high energy consumption and CO2 emissions) means a building is expensive to run and environmentally damaging. For its future use either the energy performance needs to be improved or the usage reassessed. In the decision making process, the role of the FM is key to both options.
However, just because it performs poorly based on environmental criteria it might not pass on economic criteria. It might be more economically viable to refurbish and upgrade the building control systems within it; perhaps educate the actual users of the space to be more energy efficient.
Crucially, one of the most sensitive criteria on which to base any decision
about rationalising estate is the social aspect. For central government departments this can be very complex. For example, think of a major government department that has decided in the 1980s and 1990s to set up many of its major call centres or administrative bases in a particular region. If that department reaches the conclusion that one or more of these offices must close the social impact upon that area might be huge.
Regardless of how difficult the decisions are to take, the process begun by Frances Maud and his team is building momentum. At Vinci we advocate that FM should be much higher up the decision making process than it might be normally. The decisions taken by the ERG to move its FM team to the department of Business Innovation and Skills means what Vinci and other service providers can offer is going to be better understood. So, in Whitehall at least, FM is in a position to help deliver value.
However, whilst the public sector braces itself for the implementation of saving measures demanded by Whitehall and Westminster, there needs to be a clear and robust model for the rest of the public sector to adopt and help take the decisions needs to about rationalise property portfolios across the country. Right now, many key decision makers in local government are still planning, indeed, in many authorities much of the detail about how the cuts are to be made has not been clarified. This is where facilities management organisations like ours, and many smaller players as well, can play a strategic role offering advice and then delivering practical cost effective solutions.
● Nick Shaw is director of Vinci Facilities

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