Hampshire County Council

Buildings, Land and Procurement Panel Item

4 April 2006

Strategy for the Built Estate

Report by the Director of Property, Business and Regulatory Services

How the conclusion in this report fits with the Corporate Strategy

This scheme will impact on the delivery of the following Corporate Aims

Aim 1 - maximising life opportunities - by providing a good quality and well

maintained built estate for the community to enjoy

Aim 2 - stewardship of the environment - by ensuring the built estate is well

maintained and provides an environment in which people want to live

Aim 5 - improving services - by providing good quality buildings that enable

improved service delivery

1

Summary

1.1

The purpose of this report is to identify the key objectives against the Strategy for the Built Estate for the coming financial year and against this framework to set out the proposals for the revenue allocation of maintenance, capital repairs and NDS funds, which are detailed in separate reports elsewhere on the agenda. This report also considers the implementation of a Strategic Property Review, which was approved by Cabinet on 27 February 2006.

1.2

The scale of the built estate is significant extending to 4,300 buildings on 1,200 sites with an estimated capital value of £2 billion and maintenance liabilities of over £300 m.

2

Strategy for the Built Estate

2.1

It is customary at the start of the financial year to review and confirm the Council's Strategy for the built estate. The strategy establishes the framework by which the County Council manages its priorities with regard to asset and maintenance liabilities. The key objectives remain relevant over the course of the next twelve months and beyond, with strengthening of budget strategies to make the most effective use of resources and a focus on ensuring the SLA with schools remains the principal means by which schools access a corporate repair and maintenance service.

· To direct resources to the highest and most significant liabilities in

the permanent built estate, and to develop long-term strategies to

address the backlog of maintenance liabilities;

· To maximise the opportunities for planned maintenance regimes as opposed to reactive `patch and mend'.

· To ensure that the buildings are accessible and safe to occupy and a robust corporate Health and Safety Strategy and Corporate Risk Assessment exists.

· To maximise the value of particular levels of investment through effective procurement regimes and longer term planning;

· To maintain effective management partnership arrangements with all schools leading to continued 100% buy-back through the SLA and to maximise the opportunities to integrate government, local and school funding; and

· To ensure that sustainability is at the heart of property management policies.

2.2

The strategic objective remains that of developing a comprehensive strategy, planned and delivered across all sectors, with value for money. The biggest challenge remains the liabilities allocated with the non-education sector. The breadth and focus of the strategy remain the most potent responses to an aging and increasing liability in the estate.

3

Strategy and Planning

3.1

Over the course of the next 12 months the Panel will receive reports on liabilities in the estate, particularly those associated with the non-education sector, together with the consideration of a plan to deal with maintenance liabilities across the estate. This will be a major report to the Panel's June meeting and will respond to the Audit Commission's recommendations in its Annual Audit letter that the Council should have a specific strategy for dealing with the backlog of maintenance liabilities.

3.2

In addition to the usual financial reports, Members will also receive reports on:

· review of progress against the Corporate Risk Assessment and order of priority

· procurement and value for money initiatives

· sustainability and energy conservation

· outcomes from the Strategic Property review

· development of services to schools and the renewal of the Service Level Agreement

4

Programme Management

4.1

The papers that follow on the agenda set out the proposed budget distribution for 2006/07. The total resources available over the next three years are summarised below together with last year's allocations for comparison purposes.

2005/06

2006/07

2007/08

2008/09

Capital Repairs (incl DSG)

12,271

15,552

18,491

16,573

1. Revenue Maintenance

13,226

14,130

14,130

14,130

NDS Condition

11,341

12,601

12,784

-

2. Devolved Capital

16,574

20,800

20,688

21,824

(Schools)

53,412

63,083

66,093

52,527

1. At current rates and does not include passporting or inflation uplift.

2. These sums are delegated directly to schools although the majority of the funding is used to undertake building work.

4.2

From the start of the financial year Government funding for schools will be provided by a separate grant, the Dedicated Schools Grant (DSG). The differential in inflation allocations between schools capital repairs, at 7%, and non-schools, at 2.5%, widens the gap in available funding still further.

4.3

Capital Expenditure

4.3.1

Capital expenditure was managed tightly during 2005/06 in order to build sufficient capacity to meet the major repair liabilities on Ashburton Court which will be undertaken as part of the major refurbishment. Contributions of £1m in 2008/9 and a further £2m in 2009/10 are planned.

4.3.2

The allocation in 2006/07 is £15.55m and will be targeted at continuing to reduce maintenance liabilities, particularly in areas such as major engineering replacements, re-cladding and external decoration, to address the priorities identified in the Corporate Risk Assessment and to contribute to major projects and policy initiatives. Once again the Panel has the challenging task of balancing the distribution of resources across an increasing number of work streams together with the need to address outstanding maintenance liabilities at a time of declining budget provision.

4.4

Revenue

The bulk of the budget, over 60%, is committed to planned engineering servicing and maintenance and forms the most significant part of the Service Level Agreement with schools. The contracts, through which these services are delivered, will be re-tendered in the spring in order to ensure continuity of service at the commencement of the new SLA in April 2007. Less than 30% is spent on reactive maintenance such as roof leaks and vandalism. The continuation of major capital programmes such as the SCOLA re-cladding is having the impact of reducing maintenance liabilities, specifically external redecoration and repairs, where it is estimated that costs have reduced by around £750,000.

4.5

The implementation of NDS Condition work (some £77 million so far) is aimed exclusively at permanent school buildings with the largest liabilities. The investment in major repairs and replacements has had a positive impact on recurring maintenance costs and the appearance of school buildings. Inspite of the recent unprecedented levels of funding however, maintenance liabilities continue to rise due to the increasing cost of work and the continuing deterioration of buildings, particularly those of SCOLA construction. Beyond 2007/08 there is no certainty that NDS funding will continue, and the position will not be confirmed until after the Government's Comprehensive Spending Review in 2007. The table below summarises the impact planned NDS programmes have had over the last four years:

Priority Area

£'000

SCOLA Re-cladding

16,628

Flat Roofing/window replacement

13,497

Boilers/Mechanical System replacements 20,417

Fire Precautions/Electrical Safety

External Works & Drainage

1,541

External redecoration

9,120

General building engineering and structural repairs

11,825

Other work including temporary classroom replacement and contingencies

4,421

77,449

5

Policy Management and Improvement

5.1

Procurement Initiatives

5.1.1

Over the last 12 months procurement of construction work has continued at a very high level, with £120m committed (£10m more than in 2004/05), £53m of this through best value forms of procurement. Against a set of key performance indicators the average score for all forms of best value procurement have increased by 4% to 85%. The average score for competively tendered projects has fallen by 7% to 65%.

5.1.2

Work in the next 12 months will be focused on developing second tier framework arrangements (small and medium size projects) through pilots with five contractors. The pilot frameworks are already in place and outcomes will be reported to a future meeting of the Panel. Following on from the success of the flat roofing framework, established some three years ago, it is now proposed to pilot a reactive roof repair arrangement and to tender a comprehensive maintenance and improvement service for work at the Winchester HQ buildings.

5.1.3

A full progress report on procurement appears later on the agenda and a review of performance together with building cost trends and efficiencies will be presented to the next meeting of the Panel.

5.2

Corporate Risk Assessment

5.2.1

The Panel will receive a detailed report on progress against the implementation of the Corporate Risk Assessment and an update on current performance in June. This review of performance and progress is key to establishing the relative priority for the future action and resource allocation. Whilst the report on the proposed distribution of Capital Repairs allocates resources to specific CRA categories of work, as in previous years in order not to anticipate the outcome of the review, it is proposed to retain a contingency within capital repairs. Proposals relating to the distribution of the contingency will be brought forward to the 6 June Panel meeting. New budget pressures are arising as a direct consequence of the installation of sprinkler systems which require regular inspection and servicing at a estimated cost of £100,000. The cost will increase in this and future financial years.

5.3

Developing Services to Schools

5.3.1

Members will know that all community schools, and an increasing number of foundation schools, access landlord's services through a comprehensive SLA. The SLA was established over seven years ago to support schools with a wide range of responsibilities delegated to them under Fair Funding. The current SLA has a further twelve months to run and work to develop an enhanced service from 1 April 2007 has been captured in an improvement plan informed through comprehensive research.

5.3.2

The new SLA will be presented to schools in October this year and will comprise a number of new services, most notably accessibility workshops together with model documentation, a project warranty scheme and practical support for managing building related health and safety risks. In addition the engineering term contracts, as already noted, are being re-tendered with a greater focus on performance and capacity to undertake minor school-funded projects.

5.3.3

Recent discussions with Voluntary Aided (VA) Schools representatives has led to the view that VA schools should be offered the full service, as opposed to the partial engineering service currently on offer, in order to improve the quality and level of support available to them on building related matters. It is similarly expected that the number of foundation schools buying-back the full service will increase. Whilst community schools remain very positive about the service they receive it remains a key objective to ensure that the high levels of buy-back achieved in the past are maintained. Progress on this area of work will be reported at the next meeting.

5.4

Strategic Property Review

5.4.1

Cabinet, at its meeting on 27 February 2006, approved a programme of property reviews commencing with a service review of Recreation and Heritage and a thematic review of office accommodation and agreed that the process and outcomes be reported to this Panel and Executive Member for Policy and Resources on a six-monthly basis. This will enable the Panel to establish, on an annual basis, phased and targeted landlords programmes at the core building stock.

5.4.2

The reviews will focus on efficiency, improving utilisation and corporate working, reducing the costs of occupancy and the number of buildings held for operational purposes and bring forward disposals that will generate further capital receipts. Further reports will be brought to each meeting of the Panel.

Recommendation(s)

That the Buildings, Land and Procurement Panel advises the Executive Member for Policy and Resources that approval is given to:

1

adoption of the strategy and objectives for 2006/7;

2

a further report being presented to the Panel on 6 June 2006 on how to address the maintenance liabilities across the estate, particularly those associated with the non-education sector;

3

proposals relating to the distribution of the capital repairs contingency towards Corporate Risk Assessment areas of work being presented to the Panel on 6 June 2006;

4

progress on the new Service Level Agreement with schools due to be presented in October being presented to the Panel on 6 June 2006;

5

Further reports on the Strategic Property Review being presented to future BLPP meetings.