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Asset Management Solutions for Local Government and the role of Strategic Property Partnerships

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Asset Management Solutions for Local Government and the role of Strategic Property Partnerships Dr Connel Bottom MRICS FRSA PwC Real Estate Advisory – PowerPoint PPT presentation

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Title: Asset Management Solutions for Local Government and the role of Strategic Property Partnerships


1
Asset Management Solutions for Local Government
and the role of Strategic Property Partnerships
  • Dr Connel Bottom MRICS FRSA
  • PwC Real Estate Advisory
  • 26th April 2006
  • Sheffield Hallam University
  • Local Government FM Network



2
The context and the problem
Shoddy, ill-conceived or run-down buildings
lower the morale of everyone that has to use them
and undermine confidence in our public services.
Beautiful, open, efficient, long-lasting public
buildings, by contrast, have been shown not just
to save on running costs, but to boost
productivity and well-being. ODPM
  • Public sector buildings have suffered from under
    investment.
  • Much Public Sector property is inefficient,
    expensive, inaccessible, non-compliant and in
    some cases dangerous
  • It inhibits service improvement and
    transformation because of poor specification,
    location, layout, etc.

3
Is property important to my organisation?
  • How is property linked to good public services?

4
Is property important to my organisation?
  • How is property linked to business transformation?

5
Is property important to my organisation?
  • How is property linked to the Comprehensive
    Performance Assessment?

6
What are the Challenges ?
7
What are the Trends ?
  • Asset Management Plans but good score does
    mean good buildings and services.
  • The Efficiency Agenda
  • Partnering
  • Prudential borrowing
  • Need for flexible space
  • Input into CPA

8
Likely Developments in the Sector
  • Partnership working across authorities
  • Aggregation of demand
  • Greater use of framework contracts
  • Off the shelf service contracts
  • Strategic property and service partnerships
  • Private sector investment in ownership of
    property assets.

9
Options for improvement
Broadly 3 options, firstly consider two common
approaches
  • (1) In-House Options
  • centralising the property and FM function
  • reconfiguring portfolios
  • exploring joint working arrangements with
    neighbouring public bodies.
  • use of Prudential Funding
  • difficult to drive through change ?
  • (2) Best of Breed Contracting
  • plays to specialisms of the supply market
  • allows maintenance of a competitive supply
  • potentially easier to manage suppliers
  • requires strong client side to co-ordinate
  • synergies identified on the client side

10
Options for improvement
(3) Strategic Property Partnerships (SPPs)
  • Ongoing and long term relationship - not a
    one-off transaction
  • Mutually beneficial
  • Common aims and shared responsibilities
  • Co-operative, not confrontational
  • Scope for improvement, innovation and change
  • Underpinned by openness and sharing in a
    contractual structure
  • They are continuing to evolve

11
Spectrum of SPP options
Complexity and implementation duration
Political sensitivity
12
A benchmark SPP model
Private Sector
Private Sector
Strategic Partnering Agreement
Strategic Partnering Agreement
Responsibility
Responsibility
Council
Council
Responsibility
Responsibility
Area where
Strategic Asset Management Services
Area where
Strategic Asset Management Services
incremental
incremental
framework
framework
arrangements
arrangements
Private
Private
are required
are required
Investment
Sector
Funding
Transfer of the
Transfer of the
Retained
Retained
Investment
Investment
City Centre
Investment
Office and Commercial Estate
Estate
Estate
Agreement to purchase commercial estate
Offices
Commercial developer
FM and Related Services
FM and Related Services
13
Property Partnerships Pros and Cons
  • Advantages
  • Incorporates scope for improvement and innovation
  • The partners work jointly, pooling resources and
    skills
  • Mechanism for managing risk
  • Access to scarce skills
  • Economies of scale and synergies captured
  • Incentive to manage the portfolio strategically
  • Opportunities to obtain a front-end capital
    payment
  • Disadvantages
  • Not a quick or easy fix
  • Need quality information
  • Appetite to work in partnership and to rely upon
    a partner?
  • Need to assess change readiness
  • Complex and expensive to procure
  • Need to manage Industrial Relations
  • Attitude to control/flexibility
  • Need to understand new costs

14
Assessment of constraints and drivers
SPP attractive option
POTENTIAL CONSTRAINTS
  • The Council does not need to exert control over
    how buildings and other infrastructure are
    supplied.
  • Continued asset ownership is not important.
  • Responsibility for ensuring that the facilities
    are in good condition, and are fully operational
    (e.g. clean, secure and compliant with
    legislation) does not need to be with the Council
    (not to be confused with front-line service
    operation).
  • Private funding to deliver new assets is
    required.
  • Limited capacity in-house to support complex
    business case and programme planning and
    delivery. Private sector skills and capacity
    required.
  • Private sector better placed to manage many
    property-related risks.

POTENTIAL DRIVERS
15
Where do efficiencies come from?
  • Integrated teams 3
  • Efficient processes and systems 6
  • Service bundling / consolidation 5
  • Multi-skilling 3
  • Potentially more if strategic management/
    planning taken into account

16
Delivering the Benefits
17
Managing the Change
Transition management Set up transition teams comprising the strategic partner and client representatives but do not disband on execution of contract. When we disbanded the transition teams, knowledge of the deal was lost and a lack of clarity around responsibilities emerged.
Relationship management Give responsibility to customer departments to manage first line dispute resolution. This will accelerate familiarity, help build trust and remove barriers to joint working.
Stakeholder management Dont under-estimate the time that it takes to bed down the strategic partner into your organisation. Customers thought that services would improve immeasurably and immediately this led to some initial dissatisfaction.
Contract management In all outsourcing there is a tendency for suppliers not to actively take on as much risk as the client might like them to. Suppliers tend to be reactive rather than tackling problems head on where a financial commitment is required. The public sector needs to guard against risk creep through robust contract management.
18
Conclusions
  • The goal is to provide an estate that
  • boosts public confidence, staff morale and
    productivity
  • supports redevelopment and regeneration
    opportunities
  • maximises value and opportunities and reduces
    waste
  • Partnerships may provide this through
  • creating value
  • co-ordinating development
  • providing skills and capacity
  • better managing risk uncertainty
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