Government is being transformed through changes ranging from digital delivery to downsizing and devolution. To match new delivery approaches, buildings need modernisation, organisations need to be co-located, and appealing locations should help to attract the necessary skills. In response, government property is undergoing a revolution, with regional “Hubs” and an integrated public sector estate. But […]
Posted on September 29, 2017 by Paul Wright-Anderson
Government is being transformed through changes ranging from digital delivery to downsizing and devolution. To match new delivery approaches, buildings need modernisation, organisations need to be co-located, and appealing locations should help to attract the necessary skills. In response, government property is undergoing a revolution, with regional “Hubs” and an integrated public sector estate. But there are big challenges to be addressed. Can the public sector work together to achieve the expected benefits?
A revolutionary new approach to property
In 2014, the Cabinet Office’s Government Property Unit (GPU) published an ambitious Estate strategy to use government office space much more efficiently.
Subsequently, government launched the “Hubs” programme, in which large numbers of departments’ staff will be moved into between 18 and 22 regional centres. Outside these main hubs, departments will increasingly share offices with the wider public sector (“One Public Estate”). Leases have already been signed for a number of locations including Canary Wharf, Bristol, Croydon and Edinburgh.
The GPU is working with departments to determine the best locations, to be managed by three regional programme boards, as shown on the map. (Note: All information was correct as at April 2017, but may be subject to alteration. Some locations are not yet decided.)
The GPU is also setting up a new Government Property Agency to own and manage centrally offices and other types of property. There are potentially big benefits:
Cost reduction: The GPU believes that the Hubs programme will help central government save around £1.8 billion over the next 20 years, which although less than the previous estimate is still a significant saving.
Better buildings: Older buildings are in need of modernisation or redevelopment; the new buildings will be more efficient and fit-for-purpose.
Greater co-location: There are many benefits from co-location with others, enabling better working within and between organisations. Hubs enable a lot more organisations to co-locate.
Better use of space: The buildings are designed to be used to full capacity, as only six square metres per person in a new-build is envisaged. Hubs will also give greater flexibility for organisations to increase or decrease the size of their office space as needed, without breaking long commercial leases.
Improving civil servants’ career prospects by making it easier to move between organisations and business units without relocating.
Making it easier for public sector bodies to attract the skills they need, as the property Hubs will be close to main transport hubs, and offer better career prospects.
The GPU believes that the new Agency will help to make the Hubs a success. But there are downsides to be managed. Some office closures have not been well-received by staff, unions, the general public or MPs. Moving work to a distant location (or even to another part of the same city) will mean some staff are either unable to remain in the public sector or be inconvenienced in their travel. And more flexible working arrangements, such hot-desking and working from home, may not suit everyone.
Lessons from the early stages
The NAO has published a number of reports on property estate management and blogged previously on: Our defence estate – right size, right condition, right price?. The overwhelming messages from our reports are: these changes are complex, full of uncertainties and successful implementation requires strong cross-government buy-in and collaboration. Major property change requires careful planning, a lot of time and flexibility; they should not be rushed and the costs should not be under-estimated.
Progress on the government estate strategy: In April 2017, the NAO review team I led found that departments have individually made good progress in reducing the size of their estates since 2012 and produced large savings on running costs. But less progress has been made towards achieving a more shared, flexible and integrated government estate.
Cross-government commitment is needed: We concluded that there are similarities with other recent government attempts to implement shared services, which failed because too many stakeholders saw it as against their interest to make them work (see our 2016 report Shared service centres).
Allow sufficient time and take a gradual approach: We recommended that the GPU should take stock and, if necessary, delay, redesign or consider phasing its major programmes over a longer timescale, and that it consider adopting a more gradual approach to centralised management.
Managing the HMRC Estate: In January 2017, the NAO examined HM Revenue & Customs’ (HMRC’s) plans to amalgamate its numerous property holdings into 13 regional centres, plus four specialist sites and a headquarters in central London.
Allow sufficient time: By the time of our report, HMRC had recognised that its original plan was unrealistic and it has since made changes intended to reduce cost and risk.
Ensure actions will lead to the intended outcomes: HMRC must manage its actions to deliver this significant change in a manner that does not compromise its objectives to improve engagement, morale and productivity. It should also be clear how it will establish whether it is achieving the benefits it expects from its regional centres once they become operational, and at what cost.
Delivering the defence estate: The Ministry of Defence (MoD) has a target to reduce its built estate by 30% by 2040 and to raise £1 billion from disposals between 2016-17 and 2020-21. Our November 2016 report found that the MoD had started to improve its estate management and had developed a strategy that recognised the significant funding constraints and that cutting costs can represent poor long-term value for money and put military capability at risk.
Estate strategies need to be comprehensive, aligning budget, actions, benefits, outcomes, wider organisational strategy and property needs: We concluded that the success of the MoD’s strategy was uncertain, that it had not yet set out how it would address all the challenges and, therefore, that there was a risk to both the achievement of the anticipated financial benefits and to military capability.
Ensure that contract arrangements are strong and that roles, responsibilities and governance arrangements are clear: MoD created the Defence Infrastructure Organisation (DIO) to centralise estate management with the aim of to cutting costs, rationalizing further and creating commercial opportunities. It then contracted the running of DIO to a private sector consortium. But there were weaknesses in the contracting arrangements and performance. The MoD is now undertaking a fundamental review of how its estate is managed and the role the private sector will play.
Incentivise for long-term estate value for money: For many years the MoD hasn’t had a clear plan regarding the future size and shape of its estate. The resulting lack of certainty about where to invest its limited funding, combined with general under-investment, means that the condition of much of the estate is poor and deteriorating. We recommended that the MoD put in place strong safeguards, prior to delegating estate budgets, to avoid the risk of under-investment in the estate as funds are spent on other urgent priorities.
Key challenges to GPU’s estate strategy
Large, complex relocations are highly challenging
Managing change is always difficult and the Hubs programme team can learn much from HMRC’s experience, as it is most advanced in its regionalisation plans. HMRC realised how time-consuming it is to create 13 regional hubs while maintaining its service to taxpayers and its ability to collect tax revenue. Suitable property is not necessarily available in chosen locations within a specified time-frame. Staff will be lost as a result of the moves, necessitating recruitment and training of new staff, while managing redundancies and moving existing employees and operations.
The all-essential collaboration isn’t in place
The Hubs programme is all about organisations sharing and collaborating; so ensuring departments’ full engagement is essential. There have been some successes. Since 2012, the GPU has launched significant initiatives to improve working together, alignment of interests and promote best practice, including The Way We Work to help departments create more agile ways of working. And some clusters have been formed, combining estate teams and sharing buildings across organisations.
However, by December 2016, only HMRC and four other departments had committed to leasing significant space in any of the strategic Hubs. Given that the central timetable doesn’t necessarily align well with departments’ plans, it’s not surprising that many departments had not by that time committed to the programme. Since then, the GPU reports that it has received sufficient commitments from departments to be able to sign leases for the first nine Hubs.
Uncertain plans and, therefore, costs and savings
There are many uncertainties for the Government’s estates strategy at present:
Most departments’ transformation and workforce plans are at their early stages, making it difficult to estimate costs and savings.
The scale of property savings is uncertain, some strategic hubs may cost more than their existing locations, particularly where staff aren’t currently based in central London.
It is not certain that the new strategic hubs will be able to reduce the average space per person to the Estate Strategy’s target of six square metres per person; doing so will require a substantial increase in flexible working arrangements, such as working from home.
With many departments not yet in a position to plan for regional Hubs, it is difficult for the GPU to create a realistic time frame for their creation
Making it work
In the midst of all the major changes happening within government at present, a lot needs to be done to overcome the challenges to the ambitious estates strategy. Not least is the fundamental issue of shared services – the need for the key stakeholders to see the value and commit to making it happen.
We would welcome your comments on how the centre of government can best help departments deliver the best possible estate and invite you to contact us if you would like to discuss the NAO’s work on this issue.
About the author: Paul Wright-Anderson is an Audit Manager who has produced many cross-government and other VFM studies over the last 20 years, including the ‘Progress on the government estate strategy’ report.
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