By Jane Lowrie |10 February 2014
It’s a daunting task having to manage large property portfolios in the public sector. Adopting a centralised approach permits both financial savings and organisational efficiences, as Jane Lowrie explains
The public sector has faced severe fiscal pressures for some years. Dealing with budget reductions and cuts to services has encouraged innovation to deliver savings and provide efficiencies through changing working practices.
It is often stated that property is the second highest cost to a business after staffing. The government’s operational efficiency programme in 2009 referred to a total book value of £370bn and annual running costs of £25bn – so delivering even small percentage savings can yield significant sums.
Property management and use is a strategic issue for any business, and the public sector should be no different. No business would knowingly make decisions about such a valuable resource without fully understanding the costs and implications, yet this happens in many public bodies.
The spotlight is on public property assets – challenging how much is held, how it is being used, how much it is worth and how much is it costing to run. While a knee-jerk response to financial pressures may be to sell assets to reduce the size of the portfolio and release immediate savings, the lack of a strategic approach could cost an organisation dearly over time.
All public organisations are different, and the way that property services are provided and portfolios managed will differ. Some organisations operate in a coordinated and centralised way, whereas others are more fragmented. Those in this latter category run the higher risks and offer the greatest opportunities to deliver efficiencies through more corporate working practices.
Because organisations are structured, governed and work differently, there is no single model that can be adopted universally to best effect. The following top 10 tips will help you manage the property assets more effectively, efficiently and in the best interests of the organisation as a whole.
1. Embed a corporate culture
Centralised property management (aka the corporate landlord approach) can require a cultural change in public organisations where service areas have traditionally operated autonomously. It is essential that senior officers and elected members buy in to this change, ensuring the message is spread, understood and effectively embedded across the whole organisation.
2. Establish robust governance and clear responsibilities
It is vital to set up clear, strong and high-level governance arrangements. These must be consistently communicated across the whole organisation, and enforced if necessary. If property-related activities are centralised and roles change, there needs to be clarity about the new structures to avoid grey areas. Gaps in the management of property functions, such as statutory compliance, can have catastrophic as well as financial consequences.
3. Promote strategic asset management
Strategic asset management must have a voice at the highest level. The public sector primarily holds property for the purpose of delivering services to communities, and any changes in how services are provided have to be understood and reflected in the organisation’s asset strategy. Property is a relatively illiquid resource, so active engagement in developing the vision for the organisation is essential if the property estate is sustainably to support the organisational needs.
4. Know who is involved
Map out all property-related activity across the organisation. It is often surprising how many non-property staff in service directorates have some property-related involvement. This includes tasks such as ordering cleaning supplies, arranging repairs, negotiating terms of occupation or even project managing delivery of a new building. Whilst this may have come about through custom and practice, if left unchecked it can result in duplication, inefficient use of skills and organisational risks.
5. Know how much is being spent
Find out how much money is spent on all property assets. Unravelling budgets and expenditure on property can be a significant task but, until there is clarity about what is being spent and by whom, it is not possible to prioritise and focus that spend. The use of clear and consistently used cost centres is fundamental to enable clarity of expenditure on property. Expenditure should also include the time spent in managing each asset. Often minor assets take up a disproportionate amount of staff management time, but this is
rarely recorded.
6. Know how much is coming in
Record all income from assets. This may seem relatively straightforward for investment assets or assets being managed as part of a clear estate strategy. But what about assets that are let to community groups or are used through other service-based arrangements? Income from all assets needs to be considered as part of the strategic planning of the portfolio and balanced against the costs and other non-financial benefits derived from that occupation.
7. Know what data is held
Ensure all property-related data is in place and that holding systems can ‘talk’ to each other. Ideally, the data should be held on a single system, but this is rarely the case in practice. Financial and asset management data may well be held in different IT systems, but what is important is that there is awareness of what is held where, and that systems are linked to ensure consistency and to avoid duplication.
8. Introduce property standards and controls
Developing corporate standards and controls for property will not only ensure transparency and consistency in the way property is used and managed, but will also enable efficiencies through better coordinated procurement and use of budgets. Effective introduction and implementation of standards and controls may present cultural challenges but results will only be seen if a strong corporate direction is robustly enforced.
9. Prioritise spend corporately – capital and revenue
Maintaining and investing in assets is extremely costly. Decisions about such expenditure must be made in the context of a full understanding of the condition of each asset and the wider strategy for the estate together with how it will support corporate priorities and objectives. Piecemeal or isolated decisions involving property assets often happen, but fully coordinated decision making will avoid abortive costs or works, ensure that precious resources are spent on corporate rather than service priorities, and support the embedding of a centralised approach.
10. Coordinate property-related procurement
Fragmented procurement of property-related functions and services raises concerns in a number of areas – inconsistency in levels of service, waste of staff resources in managing procurement and missed opportunities to deliver financial efficiencies. Detailed spending analysis should be used to inform decisions about procurement involving the property assets as well as the provision of professional property services.
Jane Lowrie is property advisor at CIPFA Business
This feature was first published in the January/February edition of Public Finance magazine
