Appendix 1

Hampshire County Council

Capital Strategy 2008

1 Introduction

1.1 This Capital Strategy has been approved by the County Council and the Corporate Management Team. It brings together the Council's key policies for managing all its capital assets, including land, buildings and roads, by:

· focusing attention on the most effective and efficient use of the Council's capital assets

· linking directly to the Council's Corporate Strategy and business plan, to the Hampshire Sustainable Community Strategy and the priorities in the Hampshire Local Area Agreement

· improving the management, utilisation and efficiency of the use of capital assets alongside the Council's policy and service objectives

· providing the strategy for the preparation of an updated corporate Asset Management Plan (AMP) and capital programme.

· developing a procurement strategy and creating long-term relationships to ensure value for money and continuous improvement.

1.2 As well as linking policies on asset management, the Capital Strategy is one of the key statements that underpins the Council's Medium Term Financial Strategy, which is currently undergoing a public consultation. The Medium Term Financial Strategy requires that the Capital Strategy is reviewed annually.

1.3 Core data on the background to the County Council's Capital Strategy are attached as Annex 1.

2 Corporate policy and strategy

2.1 The Capital Strategy has been prepared within the:

· Corporate Strategy

· Corporate Business Plan

· Corporate Management Plan (especially resources following priorities and value for money)

· Medium Term Financial Strategy

· Sustainable Community Strategies developed at both county and district level

· priorities identified in the Hampshire Local Area Agreement.

2.2 The County Council is a full partner in the eleven district level Local Strategic Partnerships (LSPs), which have published community strategies for each district area. The county-level Hampshire Strategic Partnership has developed a Sustainable Community Strategy for Hampshire, which is complementary to the district strategies. The priorities identified at the county level, along with those from the district LSPs, are reflected in the Capital Strategy.

2.3 The County Council and its partners signed a Local Area Agreement in 2006 with the Government identifying eight key priorities for the area. This agreement included the targets agreed with Government in the second Local Public Service Agreement. A Local Area Agreement for the period 2008-2011 is currently being finalised.

2.4 The key themes identified in the Hampshire Local Area Agreement for the period 2008-2011 are:

· children and young people

· employment skills and business support

· accessibility and transport

· housing and accommodation

· safer communities

· health and well-being

· environment

· strong communities

2.5 The Corporate Strategy represents the direction for the County Council over the next three years and is a response to these priorities and a way of ensuring service transformation. There is one over-arching and two supporting priorities for the County Council which provide the focus for all the Council's activities:

· Hampshire safer and more secure for all

· maximising well-being

· enhancing our quality of place.

2.6 These priorities have implications for the Council's capital assets. Schemes are not included in the capital programme unless they contribute to meeting one or more of the priorities. For example, during the current financial year, the Council will:

· continue work with partners to develop projects which will increase the supply of high quality extra-care housing throughout the County through a combination of remodelling existing sheltered housing schemes and new build developments

· further develop plans to bring together services and partner agencies within shared accommodation

· complete the refurbishment of Ashburton Court offices in Winchester

· complete work on a new primary school in Hedge End, two amalgamated primary schools in Holbury and Romsey, a new pupil referral unit in Havant and 44 children's centres

· open the first purpose-built `well-being centre' to be developed in the County

· implement one of the largest capital repair programmes in schools with local and New Deal for Schools funding

· start work on a new primary school in Hedge End and two major extensions to existing primary schools in Basingstoke and Elvetham Heath to cater for population growth

· complete the construction of a £26m programme to provide new early years facilities, mainly through phase 2 of the national children's centres programme, and start design work on a further third phase of £9m

· undertake major condition repairs at over 100 service units ranging from resurfacing playgrounds to major structural repairs of timber-framed buildings

· complete feasibility design work on Discovery Centre projects in Basingstoke, Aldershot and Andover, to follow on from the successful opening of Winchester Discovery Centre in the Autumn of 2007

· invest in over 60 local transport schemes to improve safety, traffic management and accessibility including use by cyclists and pedestrians

· implement over £10m of work to improve safety and use of Council assets.

2.7 The County Council has begun a major change management project named Hampshire Workstyle. Related to the refurbishment of Ashburton Court, this project will modernise the way all staff work in offices by introducing flexible working. This will significantly reduce the number and floor area of offices required to deliver the same services. It will also lead to closer integration of departments, sharing central facilities management services and use technology positively to enable staff to work more flexibly reducing travel costs and time.

3 Framework for managing assets and the capital programme

3.1 The County Council approves the Capital Strategy and the capital programme following consideration by the Cabinet. These documents are subject to scrutiny by the Council's Select committees. Responsibility for asset management within the Cabinet is allocated to the Executive Member for Policy and Resources. The Buildings, Land and Procurement Panel advises the Executive Member on buildings, land and contracts issues.

3.2 At officer level, senior representatives of service departments, as well as the officers responsible for preparing the Council's Community Strategy, make sure that all the strategies are fully integrated in the preparation of the Capital Strategy.

3.3 The Acting Director of Property, Business and Regulatory Services (PBRS) manages and monitors the implementation of the capital programme for building works, together with service chief officers, in line with the Council's financial regulations, standing orders on contracts and the conditions agreed by the Council when the capital programme is approved. Project appraisals are prepared for major schemes at feasibility and design stages, before contracts are let. Revised approval arrangements for appraisals were agreed by the County Council in May 2007 following a comprehensive review. Regular reports monitoring the capital programme are considered by the Executive Member for each service. The overall progress on implementing the programme, including the resources to finance it, is reported to the Corporate Management Team and the Executive Member for Policy and Resources. Regular updates on major projects are routinely reported to the Buildings, Land and Procurement Panel.

3.4 Chief officers responsible for individual capital schemes work with colleagues from other services and disciplines to maximise the benefit for all services from capital investment. The involvement of other departments is a key part of the project appraisal process for capital schemes. This makes sure that solutions that cut across the boundaries between services are identified at an early stage.

3.5 Significant developments have taken place over recent years to establish integrated working teams through new procurement arrangements and creating long-term partnerships with consultants and contractors, which continue to be monitored against formal Key Performance Indicators. This year will see the renewal of a number of consultant framework arrangements, together with further new frameworks to cover services which will benefit from efficiencies associated with longer term relationships.

3.6 Action has also been taken to improve the Council's rating against the measures on asset management in the Audit Commission's Use of Resources assessment. Progress has been made on improving the reconciliation of the Council's asset register and a new `Palms' property database is now live. Work is ongoing to develop asset management plan (AMP) information regarding the condition of the County Council's property portfolio. The AMP for the schools estate is 100% complete and information is available for 60% of the Corporate estate. Plans for developing the AMP information for the Corporate estate are in hand. A new project has been initiated to benchmark property asset performance through the Institute of Public Finance and the National Property Performance Management Initiative. A Strategic Property asset review is taking place that looks at integrating asset management with service planning and more efficient use of resources. Hampshire Workstyles is one of the major outputs of this review which is leading the way on new ways of working and greater utilisation of office accommodation. A new Facilities Management programme is also under development that will generate efficiencies in the way buildings are serviced. Further work is planned to integrate asset management data and financial information.

4 Other linked strategies on capital matters

4.1 The County Council's approach to managing its assets and planning the capital programme recognises the corporate and integrated nature of asset management, with a framework based on a `corporate landlord'. The Executive Member for Policy and Resources is responsible as landlord for the Council's land and buildings. Users and occupants similarly have responsibilities as `tenants'. The Capital Strategy builds on this existing platform to provide high quality and effective assets, in support of the delivery of services, that are safe and fully accessible for all users and the public.

4.2 The Council considers that maintaining its existing assets is very important. Under its Strategy for the Built Estate, the Council identifies properties for which there is a long-term need and then invests in their maintenance to make sure they are maintained to appropriate standards. Planned programmes are then carried out to maintain their condition and deal with outstanding maintenance liabilities. Budgets for all the Council's repairs and maintenance of buildings, both capital and revenue, are controlled centrally as part of the Strategy. All community schools and an increasing number of foundation schools buy-back a comprehensive revenue property management service through a service level agreement. A particular issue at present is the repair and refurbishment of system-built buildings which are nearing the end of their life. The Council has approved a medium-term strategy for re-cladding, re-roofing and structural repairs to the earliest marks of these buildings.

4.3 In June 2006, the Buildings, Land and Procurement Panel undertook a detailed review of the Council's management of the backlog of repairs and maintenance in the built estate. With the liability over the next five years estimated to stand at £449m, as set out in Annex 1, the Executive Member for Policy and Resources has agreed the Panel's recommendations that approval should be given to:

· the existing strategies for repair and maintenance of buildings, summarised in this Capital Strategy

· continuing the current levels of funding for repairs and maintenance for school buildings at least until the Government's Building Schools for the Future programme for secondary schools starts for Hampshire in 2011 and the outcome of the Government's initiatives for Primary Capital Programmes

· identifying future levels of funding for capital repairs for the non-education sector to alleviate the repair and maintenance pressures.

4.4 A planned approach is also adopted for the structural maintenance of highways assets within the context of the Council's local transport plan as set out in paragraph 5.5.

4.5 The Council has clear objectives for holding land and property and these provide the context for a rolling programme of property reviews. This systematic review started in the mid 1990s and the current evolution of this process is the Strategic Property Review launched in 2006. It will cover all the Council's land and buildings over the period to 2009. At the centre of the review is the need to achieve significant efficiencies in the operating costs of the Council in relation to its office accommodation and to identify land and buildings that can be promoted for disposal and development after 2009. As the capital receipts from the Council's development land at Merton Rise in Basingstoke reach their maximum, the Council will then be in a position to bring into play other major land holdings that can be prepared for the market and subsequent disposal.

4.6 The Strategic Property Review involves a series of reviews to consider the core attributes of the estate, linked to current and future usage and alongside new models of delivery. In addition, a range of thematic reviews of particular uses (for example, office accommodation) is now underway, together with a range of area-based reviews. As always, opportunities for the re-use or disposal of surplus properties, rationalisations and issues regarding the suitability of premises for future service delivery are priorities, taking account of fitness for purpose and maximising efficiency. Where disposals are possible, sale proceeds are reinvested in the core building stock or other corporate priorities. The Council continues to give incentives to services to encourage them to recycle assets by allowing them to retain part of the proceeds for reinvestment including up to 100% for in/out schemes. This makes sure that assets are suitable for their purpose, meet corporate and service objectives and are used efficiently and effectively.

4.7 From 2007/08, the County Council has adopted a revised approach to using borrowing allocations from the Government following changes to the way that the Government calculates its revenue grant support. Previously Government borrowing allocations had been used in full by the Council on the understanding that the Government would provide revenue grant support to meet the annual loan charges. From 2006/07, there is now no marginal benefit in terms of revenue grant from additional borrowing allocations for local authorities such as the County Council that are subject to the Government's floor mechanism for distributing its revenue grant. As representations to the Government to reverse this change were unsuccessful, the Council has restricted its use of Government borrowing allocations from 2007/08 onwards to a level that will limit the growth in annual loan charges to an affordable level. As a result, £12.5m of the £44.5m of Government borrowing allocations for 2007/08 have not been used, and it is planned that £34.8m of the Government's allocations of £142.5m for 2008/09 to 2010/11 will not be taken up. This has a particular impact on the capital programmes for local transport and schools including capital repairs.

5 Service plans

5.1 The strategic approaches adopted within each of the County Council's service areas for capital investment and asset management are derived from the Council's Corporate Strategy and this Capital Strategy. The level of investment planned over the next three years for the main service areas is summarised in Annex 1.

Children's services

5.2 An asset management plan has been prepared, working closely with schools and governing bodies under the Council's Management Partnership arrangements. The key aims are to:

· contribute to meeting the aims of the Children Act, raising educational standards, including new provision for early years education with private and voluntary sector partners

· optimise the use of capital and other financial resources

· reflect the current and anticipated future needs of the curriculum

· underpin the County Council's strategy for the maintenance, repair and improvement of school buildings

· address the capital funding implications of falling school rolls and localised increases in population in areas of new housing development.

5.3 The children's services capital programme also includes provision for capital schemes at children's homes and early years facilities including children's centres.

5.4 The County Council is a pilot authority for the Government's Primary Capital Programme and is about to start work on a range of projects, including a replacement primary school, to which Primary Capital Programme funding is contributing. Confirmation has recently been received of the County Council's inclusion in the Department for Children, Schools and Families' 0-19 capital project, intended to review opportunities to secure better integration of the use of capital at local level.

Transport

5.5 The County Council's second full local transport plan was awarded `excellent' status by the Department for Transport in December 2006. The plan sets out the County Council's targets and proposed investment plan for the period 2006 to 2011. It explains how the proposals fit within wider and longer term policy objectives as well as demonstrating how the proposed programme, together with other interventions, will enable the Council to make progress on key objectives. These include congestion, accessibility, safety and highway maintenance, reflecting County Council and Local Area Agreement priorities and sound asset management practice.

5.6 Major transport infrastructure schemes are being developed in support of economic growth agendas with bids being made for support from national and regional funding streams. Capital investment in transport projects is also funded through developers' contributions.

5.7 Just over 76% of the Government's support for local transport projects is in the form of borrowing allocations. As a result, the programme has been affected by the County Council's decision to reduce the take-up of Government borrowing allocations, referred to in paragraph 4.7. However, it has been possible to offset some of this reduction by the use of other funding.

Adult services

5.8 The priorities for the Council's adult services assets are:

· making sure that all facilities comply with the requirements of the Care Standards Act 2000

· the development of high quality extra-care housing throughout the County

· modernising services for people with learning disabilities in line with the objectives of the White Paper `Valuing People' and its subsequent updates

· meeting the requirements of health and safety, disability discrimination, equality and other legislation

· refurbishing existing older persons homes to provide better for residents suffering from dementia

· replacing poor quality residential provision which cannot be cost effectively brought up to standard with a range of alternative options including extra-care housing.

Other services

5.9 Other significant schemes in the Council's capital programme include:

· provision of infrastructure for the Council's development land at Merton Rise, Basingstoke, which will be financed by capital receipts released by the development

· remodelling and refurbishing the Council's headquarters, as described in paragraph 2.6, including the use of capital receipts from Merton Rise

· development of a discovery centre in Basingstoke.

Information Technology

5.10 Investment in information technology systems underpins the delivery of services. The Council's financial and business systems have been replaced in recent years using SAP technology in a major capital investment known as the Enterprise Project. The construction procurement system was replaced within SAP during 2004 and the next phase of integrating land and building information is well under way.

5.11 SWIFT, the core social care system used by Adult and Children's Services will continue to be improved by upgrading to a new platform and improving `usability'. It provides the platform for implementation of the Electronic Social Care Record (ESCR) as required by the Department of Health and the Integrated Children's system (ICS) which is a Department for Children, Schools and Families requirement. Both of these systems will be implemented this year. SWIFT is also being further developed to support improvements to business processes and enable integration with the corporate contact centre Hantsdirect.

5.12 The internet facilities for the public in Hantsweb for Adult Services will continue to be developed to support independence and choice. These facilities will not only provide information that enables people to make informed choices but also will provide another way of requesting services from the Council that could reduce processing costs and response times. A key development will be a website for people who arrange their own support, in line with the overall move towards personalisation of social care.

6 Cross service plans

6.1 Equally important are county-wide strategies including:

· the emerging South East Plan, which identifies areas of significant growth in new housing over the next ten years. Schools, transport and community facilities will be needed and included in future capital programmes and bids. Substantial levels of additional resources will be required

· the Aalborg Commitments, which promote actions to achieve sustainable development and underpin the Council's actions and services, including capital investment. In addition, the regeneration of older urban areas and country towns supports the Council's policies for long-term land use and travel, improving the quality of life in those areas

· the Corporate Equalities Plan and Race Equality Scheme, including access to services and facilities

· the Council's `Transforming Through Technology' strategy, a corporate business strategy for the exploitation of information technology for service improvement and efficiency

· the office accommodation strategy, which makes sure that all offices are fully used

· the land disposal strategy, investing in roads and other infrastructure where these advance works will maximise returns. The Council also retains control over developments through the quality of the design and the use of planning policies to fulfil its environmental stewardship aims.

7 Links to performance reviews and efficiency statements

7.1 The County Council's Corporate Review Programme for 2008/09 includes a review of corporate and central services focusing on achieving budget efficiencies whilst improving or maintaining service performance. This builds on the Council's ever increasing emphasis on providing value for money. The County Council applies the principles of Best Value covered by the four Cs of Challenge, Consult, Compare and Compete. Relevant outcomes from the review programme will be fed back to the Capital Strategy and the capital programme, along with recommendations from audit and other independent inspections.

7.2 In meeting its efficiency targets, the Council has reviewed its capital plans in identifying the potential for efficiencies. The scope for ongoing efficiencies in procurement of capital schemes is covered below in section 12.

8 Working with partners

8.1 The County Council works closely with all partner organisations on service matters that affect capital issues. These include district councils, neighbouring local authorities, the police and fire authorities, school governing bodies, the diocese, community and voluntary bodies, the health service including the newly formed coterminous Primary Care Trust, the lottery boards, national organisations such as Sport England, as well as the business sector including developers.

8.2 The joint working with district councils and others to develop and implement the Sustainable Community Strategy and to move towards delivery of the Local Area Agreement reinforces the wide range of existing partnership arrangements concerning capital schemes. The Council's close links with district councils and the neighbouring unitary authorities in Portsmouth and Southampton include the provision of community and leisure facilities in schools, local area transport strategies, a joint office strategy, the regeneration of older urban areas, integrated waste management facilities, coast protection, museums, special needs housing, community safety and disability discrimination. All involve capital investment or the use of assets.

8.3 As an example of community planning in practice, the relocation of the John Hunt of Everest Community School in Basingstoke is being implemented in close co-operation with the local district council to make the redevelopment of the area of Merton Rise more viable, sustainable and inclusive, as well as providing extra housing to meet existing targets. The concept of Discovery Centres has been developed with partners and is now being implemented to provide library services, adult learning and community use in one building, leading to wider service use of existing assets for longer hours.

8.4 The partnership between the Council's Adult Services and the health service over the use of assets is long established. Current examples include:

· the recently completed joint initiative to provide 500 new nursing care beds

· development of information systems to support partnership working with the Hampshire Primary Care Trust and joint mental health and learning disabilities services across Hampshire

· provision of an enhanced integrated community equipment service

· the establishment of joint mental health and learning disability team bases

· a pilot project involving co-locating and integrating Adult Services and Primary Care Trust staff serving the borough of Fareham.

8.5 The voluntary and community sector continues to play a key role in many of the Council's capital projects. The "One Compact for Hampshire", developed with voluntary and community bodies, sets a protocol for joint working and includes other statutory bodies such as the Primary Care Trust and district councils. Examples of the voluntary sector's involvement include community and leisure facilities, village halls, local transport and running adult services day care facilities. The Council is also working with voluntary and private sector partners to provide early years education and, in particular, in the development of phase 3 of the national children's centres programme, which is currently being planned.

8.6 Quality Partnerships with bus and rail operators are improving public transport in the County. The Council also plays a leading role in the Hampshire Economic Partnership, which brings together local government, central government and training organisations to promote key economic development.

8.7 Another important partnership is with central Government itself, and many of the Council's capital schemes result from close working with Whitehall departments and the Government Office for the South East (GOSE), as well as the European Union.

9 Consultation with the public and partners

9.1 The County Council consults widely with the public, its partner organisations, the business community, the voluntary sector and the Council's staff as part of the process of developing the Community Strategy, Corporate Strategy and Local Area Agreement. This includes focus groups, opinion surveys, Citizens' Panel and engagement through the Council's magazine for the public, `Hampshire Now'. The Council also consults residents' groups, trade unions and the business sector about the budget, including the capital programme. Following discussions with representatives of the business community in July 2001, it was agreed that the key objectives in the business plans of the Chambers of Commerce should be matched with the Council's Corporate Strategy. The priorities for business are skills, employment, transport, infrastructure, housing and the constraints of planning on enterprise.

9.2 An important part of the Council's consultation processes are the extensive and innovative discussions held at the planning and feasibility stage of each capital proposal with all partners and stakeholders. From these detailed, ground-level consultations, and from those on service plans, vital and practical information is drawn together to build up the Capital Strategy, supplementing the more broadly-based `top-down' consultations.

9.3 All these consultation processes are ongoing. The Council will continue to analyse the results and they will influence the content of future strategies.

10 The capital programme

10.1 The County Council prepares and publishes a rolling three-year capital programme within limits set by Government borrowing allocations and the Council's assessment of available local resources and the revenue implications of the proposed programme. The Council uses the later years of the programme to plan and prepare schemes. This includes work on design, land acquisition, and obtaining planning approvals and Government support.

10.2 The Council has refined its techniques for assessing priorities between schemes, evaluating options for capital investment that make the best use of its assets in terms of the benefits for services and financial returns. All schemes are developed to meet needs identified in the Capital Strategy, and must contribute to meeting the Council's key priorities as set out in the Corporate Strategy. If necessary, the Council top-slices resources to protect essential parts of the capital programme. Final judgement on political priorities, in the light of public consultation, are made by the County Council. This process has been applied to all schemes in the current programme as well as those currently being considered for inclusion. Full details of the process for assessing priorities are set out in the corporate AMP, which is updated in the autumn of each year.

10.3 Linked to the three-year capital programme, the Council has incorporated the key financial elements of the Capital Strategy in its Financial Management Policy. It has also revised its financial control procedures, including project appraisals and progress monitoring. This makes sure that the need for each major capital scheme and its links to the Corporate Strategy and Best Value are fully considered by members of the Council before approval is given.

10.4 The Council has also adopted the best practice advice in the development of its investment appraisal of capital schemes to make sure that whole life costing is used where appropriate. This brings together best value appraisal techniques before the contract is let and best practice procurement arrangements post-contract.

10.5 The Council's existing capital assets are reviewed during the preparation of the corporate AMP to see if they are still appropriate and give value for money, taking account of the investment necessary to maintain those assets.

11 Resources for capital

11.1 The Council will maximise the use of capital resources from other bodies, provided that the proposed schemes are compatible with the Capital Strategy and the Council's Medium Term Financial Strategy. This will include submitting bids to central Government, the European Union, health authorities and the national lottery. The Council will encourage partner organisations to reflect their involvement in capital schemes by contributing to the costs, where appropriate.

11.2 The Council will continue to make full use of its own resources to finance the capital programme. This includes using capital receipts and revenue finance primarily for capital repairs and structural highway maintenance. The rolling programme of land reviews will continue to identify land and buildings no longer required which can be sold to provide resources for reinvestment. However, the current outlook for the economy following the credit crisis suggests that sales to house builders will become increasingly difficult and some agreed offers may be at risk. The Council was successful in achieving a major disposal programme in 2007/08 but it may be some time before developers are in the position to resume buying land. The Council will closely monitor the impact of the credit crisis on the property market and will review its capital investment plans in the light of the prospects for obtaining capital receipts over the next few years.

11.3 Where appropriate, the Council will undertake invest-to-save projects, especially in new IT technology. Following the Government's reforms of its capital control system to allow additional borrowing within prudential limits, the Council will use such loans for suitable invest-to-save and in/out projects, subject to appropriate business cases and revenue costs being contained within cash limits. A detailed strategy for the use of `unsupported' borrowing was agreed by Cabinet in November 2003 and updated in February 2006.

11.4 The County Council's decision not to use in full Government borrowing allocations has been described in paragraph 4.7. Changes in the calculation of revenue grant in 2006/07 mean that the Government no longer provides full revenue grant towards the repayment and interest borrowing costs. Over the three years from 2008/09 to 2010/11, just under 25% of the Government's borrowing approvals of £142m will not be taken up.

11.5 As part of its culture of partnership, the Council works closely with other organisations to maximise benefits from their capital investment. This includes joint transport investment by the Highways Agency, bus companies and Network Rail. For example, the Council has improved the infrastructure for the A3 road, in conjunction with Portsmouth City Council and a bus company has provided new buses and services for the route. The joint schemes listed in paragraph 8.4 reflect the close working of health authorities and Adult Services.

11.6 The County Council will be looking for substantial additional resources from the Government over the next ten years to help provide the facilities required for the significant growth proposed in the emerging South East Plan.

11.7 As outlined in paragraph 4.3, the Council has recently undertaken a significant review of its management of backlog repairs and maintenance in the built estate. The liability over the next five years is estimated to stand at £449m. In order to reduce the backlog liability at schools, it is essential that the Council continues to receive Government grant funding under the New Deals for Schools modernisation programme, together with new funding at the earliest opportunity from the Government programmes for Building Schools for the Future for secondary schools. The County Council has begun preparation for entry to the BSF programme, which is currently scheduled for 2011. Revenue resources to support project planning, development of an education vision and changes to school organisation have been identified for the current and subsequent financial years. A shadow Project Board and Member reporting arrangements have been established and consultations have begun in the Havant area, which is the County Council's highest priority for BSF investment.

12 Procurement

12.1 The Council will consider all methods of procuring and financing its capital programme. It may adopt a public-private partnership (PPP) approach, including the private finance initiative (PFI), if this can be shown to be the best value for money and consistent with the Capital Strategy. This could include larger schemes that generate an income stream. A PFI procurement for the replacement of street lighting columns in Hampshire, West Sussex and Southampton is underway, which will deliver capital investment of £114m in Hampshire during the core investment period.

12.2 The Council has continued to develop its procurement strategy in line with the Government's policy set out in the National Procurement Strategy for Local Government and is the construction lead for the Improvement and Efficiency South East (IESE) formerly the South East Centre of Excellence (SECE).

12.3 The key elements of the current procurement strategies are:

· collaborative working arrangements with contractors leading to earlier identification of all project risks and enabling more effective management and predictable outcomes. Partnership working also removes the adversarial approach by giving the team common objectives which, in turn, reduces or eliminates claims and disputes

· greater involvement of the supply chain in the design process to allow identification of best value solutions and longer term relationships with supply chains, allowing them to deliver more predictable products with associated quality and value gains. This also preserves learning and potentially opens up further opportunities

· combining individual projects into programmes of work reducing the number of bespoke components, reducing design times and providing opportunities to generate volume discounts from the supply chain.

12.4 As the lead on the construction workstream for the IESE, the Council has established a major framework for IESE which replaces the framework for major schemes established in 2003. The IESE framework will not be in place until after 2012 and has the potential to create significant efficiency savings. These arrangements can be accessed by any of the seven county, twelve unitary and fifty-five district councils in the South East region as well as any local public service provider. The Council is leading the development of these arrangements with over £1 billion of construction projects already being progressed through the framework. The IESE Major Framework is a national demonstration project of a scale not previously attempted.

12.5 The Hampshire Procurement Model has been further developed to allow broader collaboration through:

· second tier frameworks for projects up to £2.5m

· third tier frameworks for projects up to £0.5m

· collaborative arrangements for planned and reactive building work

· renewal and improvement of term engineering contracts

· specialist frameworks for landscaping and roofing

· specialist arrangements for work such as asbestos removal

· specialist supply chains and strategic sourcing initiatives

· long term consultancy partnerships in all disciplines.

12.6 The second and third tier frameworks have been developed through the IESE and will be available to other local authorities in Hampshire and neighbouring unitary authorities.

12.7 Evidence of greater efficiency in construction procurement is demonstrated through a range of performance indicators which capture data on the underlying trends. The results for projects completed during 2007/08 demonstrate that significant improvements continue to be achieved for projects procured through best value routes, compared with those procured through traditional competitive tendering.

12.8 New forms of procurement now account for approximately 70% of overall activity. With the introduction of the new second and third tier frameworks together with additional specialist arrangements it is proposed to review whether the proportion of best value procurement should be increased. Greater efficiency will be generated through the increased early contractor involvement linked to a process of continuous improvement across all services.

12.9 Long-term efficiencies should also accrue through the Council's work in leading the construction workstream for IESE:

· collaborative frameworks across councils

· establishing and sharing good practice across councils

· alignment of supplier capacity with long-term regional and sub-regional demand

· common processes and procedures to minimize progressive costs and maximise the benefits of greater standardisation

· the provision of strategic and high level design and operational advice.

12.10 Major supply chains are vital to the success of capital projects, as most of the physical work on site is undertaken by them. On many Hampshire schemes such as Enhance nursing care homes, as well as involving the Major Framework contractors with design development work, key supply chains have been appointed early in the design process. Integrated teams are then formed who deliver:

· better design co-ordination - fewer changes during construction (improved cost predictability)

· more effective programming and planning (time saved)

· added value (improved product)

· simplified processes (time saved)

· improved management through better understanding (more effective risk management).

12.11 In supporting the Kyoto accord, the Council has additionally pledged support for a reduction in carbon emissions. The Council also signed up to Aalborg Commitments in 2004, which unites the Council with European local governments in a campaign to achieve European Sustainable Cities and Towns. In November 2007 the County Council has set a series of targets and actions endeavouring to reduce its carbon footprint to zero.

12.12 In March of this year the Cabinet approved a strategy and policy report in connection with government proposals to introduce a Carbon Reduction Commitment (CRC - carbon trading scheme), in respect of buildings and street lighting. In so doing the Cabinet agreed to the development of three corporate work streams (Changing the Culture, Medium Scale Capital Investment, Strategic Capital Investment) aimed at reducing primary energy consumption and CO₂ emissions. These will be developed in consultation with the County Council's buildings, Land and procurement Panel (BLaPP) and in conjunction with the Carbon Trust.

13 Performance measurement

13.1 The County Council has continued to publish the results for its own local property performance indicators (PIs), which include user satisfaction, contractor performance, energy and water use, asset performance and, as described in section 12, procurement. These local PIs are used in conjunction with the national PIs for benchmarking with other providers including those existing relating to construction and procurement. The local performance framework has been reviewed for 2007/08 and beyond, with new performance targets established. PI information continues to be shared with SECAMP, the South East County Asset Management Plan network, enabling comparisons to be made with other county councils in the South East. Specialist consultants are commissioned as appropriate to undertake benchmarking exercises prior to letting contracts.

13.2 The results for all property PIs are reported regularly to members, service managers and partners as appropriate. Once completed and in operation, capital schemes are evaluated with users and lessons fed back to the preparation of future schemes.

13.3 The latest phase of information technology system integrating land and building information went live early in 2007/08. For the first time, detailed information about land, buildings, and legal agreements relating to them are held in one place. It has integrated the existing SAP functions of the new procurement system, including the asset register, accounts payable and receivable, and the energy management system. As well as better quality information, accessibility has been greatly improved by the Geographic Information Systems (GIS) user interface. This provides a new platform to embrace further the strategy for integrated land and building information by replacing other systems and supporting the Strategic Property Review.

Annex 1

Capital Strategy - Core Data

1 Revenue budget 2008/09

	£m
Gross revenue expenditure	1,656
Net expenditure after income, specific and area grants	656
Budget requirement	643

2 Assets

	Number	Gross Floor	Value
		Area (GIA)	31 Mar 2008
		sq m	£m
Operational assets
Children's services
Schools	465	1,060,000	2,616
Residential homes and day centres	51	25,900	38
Adult services
Residential homes and day centres	76	80,500	169
Offices and administrative buildings	79	78,200	86
Libraries	55	35,300	75
Museums and art galleries	27	32,800	27
Other land and buildings	40	57,500	59
	-------------	-------------	--------
Land and buildings	793	1,370,200	3,070
Vehicles, plants and equipment	-	-	57
Infrastructure - roads and bridges	-	-	396
Community assets - parks etc	27	28,900	11
	-------------	-------------	--------
	820	1,399,100	3,534
Non-operational assets	130	115,000	67
Work in progress	-	-	60
	-------------	-------------	--------
Totals	950	1,514,100	3,661
	-------------	-------------	--------

3 Maintenance liabilities - land and buildings

	Total	Priority levels
	Cost	1	2	3
		Urgent	Essential	Desirable
		to prevent	within	In
		closure	2 years	3-5 years
	£m	£m	£m	£m
Children's services	327.8	0.2	181.2	146.4
Libraries	6.1	0.1	3.7	2.3
Adult services	16.0	0.1	8.0	7.9
Offices	35.1	0.1	18.6	16.4
Other services	63.6	0.1	38.4	25.1
	----------	----------	----------	----------
Total	448.6	0.6	249.9	198.1
	----------	----------	----------	----------

Maintenance liabilities - roads and bridges

	£m
Roads	169		see note below
Footways	25
Highway drainage	67
Street lighting column replacement	50
Bridges	7
Road signs and markings	3
	--------
Total	321
	--------
This is an assessment of the amount that would need to be spent to eliminate the backlog of maintenance work that has reached critical `intervention' level of deterioration, i.e. where failure to carry out maintenance works will result in disproportionate increases in future maintenance costs. The information used to make this assessment is based on local condition information and locally determined compound rates from approximately four years ago. New methods for estimating the value of the assets and depreciation are being progressed in a national project. It is anticipated that these new methods could be used to recalculate the liability to a national standard.

4 Capital programme

4.1 The County Council's three-year capital programme for 2008/09 to 2010/11 is summarised below. Full details of the programme are published in the Council's Budget Book for 2008/09. The estimated capital payments on the programme and on schemes already in progress are also shown together with details of how the Council expects to finance them.

Capital programme - value of schemes in 2008/09 to 2010/11
	2008/09	2009/10	2010/11
	£m	£m	£m
Children's services	93.5	85.0	88.5
Local transport	34.6	46.4	42.0
Libraries, museums, arts, countryside, sport etc	6.0	0.8	0.7
Adult services	2.6	1.3	1.0
Capital repairs of buildings funded from the
County Council's own resources	8.9	6.0	6.0
Regeneration of older urban areas, household
waste recycling centres and other schemes	11.4	5.8	5.4
	----------	----------	----------
Total programme	157.0	145.3	143.6
	----------	----------	----------
	2008/09	2009/10	2010/11
	£m	£m	£m
Payments on the programmes for 2008/09 to
2010/11 and works in progress	197.3	172.5	159.9
	----------	----------	----------
Financed by:
Loans	52.1	31.0	40.8
Capital receipts	46.6	44.4	20.5
Grants and contributions	69.4	64.2	67.3
Contributions from revenue and reserves	29.2	32.9	31.3
	----------	----------	----------
Total financing	197.3	17.2.5	159.9
	----------	----------	----------

5 Prudential borrowing

5.1 The Government introduced a new prudential capital control system from April 2004 that allows local authorities to raise additional loans for capital purposes, unsupported by Government grant. The County Council has agreed that prudential borrowing may be used to finance invest-to-save projects that generate ongoing savings to cover the additional costs of borrowing and reinvestment or in/out projects for which the replacement asset is required in advance of the capital receipt.

5.2 Major schemes using unsupported borrowing approved so far include:

· provision for early years children with special needs at Nightingale Primary School, Eastleigh, to be repaid from the sale of part of the school site

· the replacement of the John Hunt of Everest Community School in Basingstoke and the development of land at Merton Rise, to be repaid from sale proceeds

· a new sports hall and associated facilities at Crestwood Community School in Eastleigh, repaid from the sale of part of the school site

· the amalgamation of infant and junior schools in the Buckskin area of Basingstoke to form Chiltern Primary School, repaid from the sale of the former infant school site

· the amalgamation of two pairs of infant and junior schools in the Waterside area to form two primary schools

· a contribution to the costs of providing a new special school in Havant

· a number of schemes at primary schools in the Hedge End, Romsey, Tadley, Basingstoke, Winchester and Andover areas in advance of capital receipts and developers' contributions

· an improvement project at the Swanwick Lodge secure unit in Fareham, to be repaid from the sale of part of the site

· the refurbishment of Winchester library to create a new Discovery Centre, to be repaid from the sale of a site elsewhere in Winchester

· the refurbishment of Ashburton Court, Winchester, to be funded from savings as a result of vacating leased offices, capital receipts from Merton Rise and the disposal after the refurbishment scheme of vacant properties in Winchester, and a reduction in future capital repairs

· the funding of schemes which would otherwise be financed from local resources in order to release revenue funding for the set-up costs of the County Council's contact centre, Hantsdirect

· investment in IT infrastructure, to be repaid from charges to IT Services' users.

5.3 Unsupported borrowing of £20m was also used as part of the overall funding arrangements associated with the Enhance scheme to provide additional nursing care beds.

6 Hampshire - profile

6.1 Hampshire is a large county of 367,900 hectares with a mixture of significant urban and extensive rural areas. Although less than 15% of the county is classified as urban, 77% of the population lives in urban areas.

6.2 Hampshire's population of 1,265,900 (at 2007) ranks as the third largest for shire counties in England. The age-profile shows slightly fewer young adults (15-29) and slightly more middle aged people (45-64) than England and Wales.

6.3 Between 2007 and 2011, the population is forecast to grow by 3.0%, assuming rates of development consistent with the proposals in the draft South East Plan. Older age groups are increasing more rapidly, however, with the numbers of over 65s growing by 10% and the number aged over 85 by 18% whilst the population aged under 16 will decline by 3.0%. The number of households in Hampshire is forecast to increase by 5% between 2007 and 2011, nearly twice the projected increase in population.

6.4 Further details of Hampshire can be found in the following reports published by the County Council - "A Profile of Hampshire" published in May 2005, "The Demographic Future of Hampshire" published in July 2007 and "Quality of Life" report published in November 2007.