Meeting documents

Corporate Asset Management Plan

2006 - 2007

July 2006

CONTENTS

The ODPM first introduced the concept of Asset Management Planning in 1999 and for the subsequent few years Asset Management Plans (AMP) were submitted in accordance with the then requirements.

Since 2002 Councils have been free to develop AMPs in a way that is more relevant to the individual Authority.

This is therefore a live and dedicated document, updated on a regular basis where situations change and develop. In this way this Council believes that it should not only keep abreast of current issues, but take a lead where its practices are of most benefit to all stakeholders.

1.2. Key Activities

The following key activities inform the Asset Management Planning process and are considered fully in individual sections of the plan.

Data

The management of data is a constantly improving and developing aspect of this plan. Data improvements take 2 forms, firstly the general development of data and systems to reflect improving technologies and secondly improvements reflecting additional requirements to implement individual aspects of the plan.

Property Policy

The need for an overall policy for the management of the Council's property assets is a key development in the Property Services Division Service Plan. The Policy is in the course of being rolled out and contains 4 main elements

A7 Clarification of the Roles and Responsibilities of occupiers, Property Services and others.

A7 Allocation of properties to relevant Service Heads.

A7 Introduction of an overall revenue charge to cover the costs of occupation of all property.

A7 Implementation of a Property Performance Model which will inform both the Service Planning and Property Review processes.

Land Registration

A project to register at the Land Registry all the Council's property interests is underway. Registration improves quality of data and aides disposals and other identified actions.

Condition Surveys

The Council has a 5 year rolling programme of Condition Surveys to record the condition of all elements of Council land and buildings.

Consultation

The occupier's perspective is important and this is reflected in a number of ways by consulting on a regular basis.

1.3. Corporate Context

The Asset Management Plan brings the property dimension into the Service Planning process and reflects the requirements of the Comprehensive Performance Assessment (CPA). The CPA for 2005 has already introduced the `harder test' and the section on the best use of resources included a mandatory requirement for the preparation and maintenance of an Asset Management Plan.

The Asset Management Plan should also be considered alongside the Corporate and Financial Plans and reflect the Council's Corporate Aims and Objectives and the Improvement Priorities. See Appendix 4.

1.4. The Property Portfolios

The council's property portfolio is currently held within two separate estates

This Asset Management Plan is concerned with the Council's Corporate Estate.

The Commercial Estate is subject to its own separate plan, the Active Management Strategy, and is also currently the subject of an independently procured assessment from which recommendations are planned to be presented during autumn 2006. The Commercial Estate is therefore not included within this Asset Management Plan.

1.5. Executive summary / Action Plan

An Executive summary is provided at Appendix 7 to this document. Individual actions are scheduled in section 12 and these actions are subject to regular review.

The Corporate Estate is the collective name for the operational property portfolio of the Council. Corporate estate properties are those identified for the provision of front line service delivery. These mainly include:

Schools and other Educational Establishments

Social Services Buildings

Council Occupied Offices

Car Parks

Heritage Buildings

Depots

Libraries

The estate comprises some 600K sq m Gross Internal Area (GIA) and has a current asset value (29 September 2005) of c£300m, of which just over half relates to schools.

The following link takes you to the Asset Register which gives an indication of properties and their usage. Such usage has not been subject to detailed scrutiny; allocations of property are currently under consideration as part of the roll out of the property policy - see below. Click here to go to the Asset Register.

The Property Services Division Service Plan identifies the need for an overall policy for the management of the Council's property assets. This policy has been drafted and has been approved by Director's Group and Heads of Service group and is subject to ratification at the same time as this plan. It will be rolled out during financial year 2006/2007. Click here to go to the consultation draft of the policy.

The policy is intended to

A7 clarify the roles and responsibilities of Property Services, occupiers and others

A7 confirm the allocation of properties to Service Heads

A7 provide for a robust yet simple mechanism for accounting for the cost of occupation of property.

Roles and responsibilities are clarified by means of a notional lease (SLA) which sets out in very easy language who does what and who pays for what. At present the budgetary provision for property related expenditure is inconsistent particularly across the Facilities Management (FM) and Utility fields.

The proposed charging mechanism will provide for all property related costs to be the responsibility of Property Services and for these costs to be expressed as an overall revenue charge thus identifying the cost of occupation of property as part of service delivery.

These arrangements are intended to be put in place for the Financial Year 2006/07. Initially the arrangements will be budget neutral by asset rents being devolved to occupiers; however subsequent rationalisations or new requirements will involve a real revenue effect.

As part of the implementation all property assets are being allocated to one or other Heads of Service with any assets not immediately identified as supporting service delivery being declared surplus with a view to being considered for disposal.

Once the allocations referred to above have been settled it will be necessary to follow this up by confirming the land holding powers for each asset. This reflects the specific piece of legislation under which the land was originally acquired or to which the asset has been transferred by means of appropriation. An appropriation describes the process by which an asset is moved from one holding power to another and will generally be required where the usage of the asset has altered.

The possibility of an asset being declared surplus will be considered in the context of the surplus land procedure in the property policy. In the event that a property is declared surplus then it will become available for reallocation or sale. Bids for alternative use will be invited from all departments and in the event that no interest is expressed then the value of the asset will generally then be realised.

Generally all disposals are to be at full market value in order to achieve best consideration; any proposal to deviate from this requires approval from the Council Executive or Council itself and the Secretary of State.

As part of the overall review of the capital strategy and programme the Council resolved that generally all capital receipts from property developments should be ring-fenced to the risk contingency within the capital programme. There are provisions within the budget management scheme for receipts to be earmarked to a specific reinvestment purpose however this is subject to detailed rules set out in the scheme itself.

The Asset Management Planning Group within Property Services is the primary point of contact regarding this plan.

Members of the Group that have been involved in its preparation are set out below. For details of the whole of Property Services please refer to the Division's page on CIS.

Head of Service and Chief Property Officer is Tom McBain.

Northgate House

Upper Borough Walls

BATH BA1 1RG

The Client Services Group within Property Services is also involved in the implementation of the PPM and the Property Review process.

Northgate House

Upper Borough Walls

BATH BA1 1RG

The current Corporate Property Officer for AMP purposes is

Richard Long, Estates Manager details as above.

The Capital Strategy and Asset Management Group is presently being reconstituted and the terms of reference are reproduced at Appendix 5.

Accurate and robust information in relation to the Council's property holdings is pivotal to all aspects of asset management. Since the preparation of the original AMP a considerable amount of work has been undertaken in this area and the quality of data improved significantly. These improvements and aspirations for further work are set out in the following section. The Council as a whole is currently consulting on a draft records management policy and the work within Property Services supplements this corporate initiative.

Property Services has recently published a strategy for management of property records within the Division. This strategy centres on the core data systems comprising ECS, Evolut1on and GIS. See below for further explanation of these systems. These core data systems include common referencing and interact with the Council's main financial management system (Agresso) and will, in due course, react with the emerging Corporate GIS.

The strategy document is reproduced as part of Appendix 3 below.

Where there is a need to store additional information or calculate and analyse the core data then this is undertaken using data from the core systems and any resultant answers either imported or stored using structured methodology.

The Division has constituted a Property Information Group with responsibility to oversee the management of data and report to the Management Team on the subject. The terms of reference for this group are reproduced as part of Appendix 3.

The constant improvement of data is given a high priority through the Property Information Group and the current key improvements are dealt with under the section Programmed Improvements below.

The overall Property Policy provides for all properties to be allocated to a Head of Service and for there to be a real charge for such occupation. At the present time these allocations are the subject of a confirmatory exercise which will not only confirm the allocations where appropriate but also identify surplus property for disposal.

Beyond this exercise to allocate all property interests it is necessary to record accurately the powers under which land is acquired and held and such an exercise will follow agreement of allocations and result in a series of appropriations where required.

As indicated above the core systems within the Division comprise the following, full details of which are explained in Appendix 3

Within the core systems described above core data is stored including the following

The reference and PSRN at the top of the list provide the fundamental links between systems. In due course with the introduction of corporate GIS and in accordance with the requirements of BS7666 these references will be supplemented by the UPRN (Unique Property Reference Number) derived from the Local Land and Property Gazetteer (LLPG). This will allow more effective data sharing of property data with other parts of the Council and external organisations.

It is recognised that not all data requirements can be accommodated in the core systems and the IT Strategy allows for this by the creation of satellite systems to deal with particular requirements. Full details of this process are set out in Appendix 3

The Property Information Group is responsible for improvements and developments and at the current time a number of developments have been identified and programmed. These are set out in detail in Appendix 3 below. A number of future needs have also been identified and these are also set out in the Appendix. At the present time these needs have not been programmed.

Training on core IT systems is an integral part of the induction process for new members of staff. A user-training programme is constantly being developed and maintained to take into account system upgrades and changing requirements. Modular training on the core ECS property management database is provided together with similar Powerpoint presentations on the use of GIS.

The recently approved Property Services IT strategy is currently subject to roll out through team meetings and other targeted sessions to key staff as a method of increasing awareness of the extent of data and the importance of accurate and timely updating and maintenance.

Responsibility for improvement in this respect rests with the Information Team.

Property Services undertake a programme of condition surveys to identify the condition of all elements of buildings and the extent of outstanding maintenance required.

These involve a full survey of the individual property by an experienced building surveyor. The primary intention is to record the condition, state of repair and structural integrity of all elements of each building, identify specific areas of the building which are in need of repair and record an estimated cost of remedying that repair. The surveys are carried out in full consultation and liaison with the occupier through the building manager.

A five year cycle of surveys has been developed and the vast majority of buildings have now been inspected. The 5 yearly surveys are reviewed during an annual structured site visit, an important part of which is a discussion with the building manager on the Service priorities in relation to the maintenance of the building and how these aspirations can be reflected in the Repairs & Maintenance (R&M) programme.

Completed surveys provide information which feeds into the Property Performance Model and form part of the Property Review process either geographically, by Service or other category.

The Repairs and Maintenance budget provides responsive repairs to all Council properties. Planned maintenance is funded by an allocation from the Capital Programme. The budget is inevitably less than the total requirement and the difference represents the maintenance backlog details of which are recorded by means of the Condition Survey programme. The total R&M backlog is then prioritised by reference to properties that are fit for purpose.

The best use of resources needs to compliment where possible service delivery and reflect occupiers aspirations as part of the service planning process. Active and ongoing consultation is a key element of this. The existing arrangements and planned developments are set out below. This presently comprises three distinct areas:

a) Building Suitability

b) Property Division Performance

c) Project Performance

In addition to ensuring that the AMP is informed by and supports other corporate and service objectives it is necessary to develop further processes of consultation. The Capital Strategy and Asset Management Group (CS&AMG) is to be reformed with key internal stakeholders in its membership and this group will act as the forum for the advancement of improved capital prioritisation throughout the authority. Consultation must include stakeholders and users to ensure that future requirements from assets are identified.

A corporate wide survey on property suitability is undertaken at regular intervals. The survey requests all Council services to consider the suitability of the property in terms of eg location; service delivery; occupier satisfaction; overcrowding; under-use and accessibility. The survey also invited Services to consider future accommodation needs and current or future potential sharing arrangements in relation to occupation. The latest survey was issued to all Buildings Officers in March 2006 and the results are currently being evaluated with a view to publication as part of this plan. This survey will inform the Property Performance Model and additionally will provide valuable information for the system of proposed Option Appraisals. To raise an awareness of the importance and to encourage participation, as response is often low, it is intended to have on going dialogue and one to one meetings with building users/managers to advise them of the importance of these surveys.

Property Services has for the past four years implemented an annual questionnaire to assess customer feedback from clients and stakeholders of all its services. The results are analysed and aggregated to arrive at an overall level of customer satisfaction. This forms a local performance indicator. The primary aim is to achieve continuous improvement in the level of satisfaction with quality and the level of service given by both the Estates and Building Consultancy elements of Property Services.

This will also feed into the service planning process. The results will highlight problem areas which will lead to one to one meetings with the relevant stakeholder / user bodies where any identified problems can be addressed.

For all building projects with a capital value in excess of £50,000, three months after practical completion a Post Project Review (PPR) is carried out. This comprises a meeting with all parties to the project i.e. client, end user, contractor, consultants together with the Property Services project team. The format of the meeting is a root and branch review of the whole project from inception to completion, using previously circulated questionnaires. An action list is produced to address all outstanding issues. A report is produced from each PPR which together with the questionnaire information contains performance data which is used to improve the future performance of the Building Consultancy.

The items of consultation set out above aim to record levels of satisfaction with the performance of buildings and form the important element of the informed decisions concerning the prioritisation of repair and maintenance and for rationalisation of the estate as a whole. This is considered fully in the sections below on Property Performance Model and the Property Review process.

The previous 2 sections concerning condition surveys and consultation together with service planning generally provide a lot of information concerning the way in which property contributes to service delivery. This information needs to be analysed to prepare an objective assessment of the various factors leading to an overall score by which properties can be compared. To address this, a performance model has been developed as described below.

The factors which need to be considered fall into the 2 main headings, Quantitative and Qualitative. Within these 2 large areas the model has been developed into 4 main areas as under:

a) Statutory Compliance

b) Policy Compliance

c) Cost/Benefit

d) Suitability and Sufficiency

These 4 areas include detailed elements that are scored individually. An individual weighting is applied to each element and this ranks the building against the criteria allowing comparison by geographical area, property type or factor. Click here to go to the model itself.

The model will produce a straightforward score per property however the results also contribute to informed decisions based upon the scores embellished by service needs and any other relevant factors.

As indicated above the elements of the model fall into qualitative and quantitative factors

A7 Quantitative - examples of this would be the condition, standard of services and utilities and any other physical factors.

A7 Qualitative - this would cover many aspects of the users assessment of the property such as location, access and size.

The scores for each property divided as above inform and guide decisions in relation to retention, disposal and/or management action. The matrix in this respect is illustrated by the attached diagram.

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The Property Review process takes the results from the Model and includes this within a more detailed examination of properties or groups of properties. The purpose of this is to ensure that a full picture of asset performance properly challenges overall performance. This stage becomes increasingly subjective when combined with the Service delivery process at HoS level.

Such reviews will comprise a joint exercise involving occupiers and the Client Services team in Property Services. Properties and/or groups of properties will be identified from the results of the PPM by highlighting poorly performing properties and, in consultation with occupiers, by taking into account Service aspirations. Groups of properties are selected mainly by geographical or service criteria.

a) A closer examination of areas of weak performance.

b) An assessment of the property to ensure that it is not contributing to other financial or corporate objectives that is not apparent from the above evaluation.

c) An assessment of the property against the council's wider objectives.

d) Further consultation with the building users and relevant service heads.

e) Any political sensitivities.

An indicative flow chart through the whole process is included at Appendix 8.

At the completion of any review the options will present themselves as a combination of the results from the model as explained above tempered by more overall considerations regarding the properties under review

a) Retain as existing - do nothing

b) Invest/improve

c) Amalgamate service areas or properties

d) Reallocate or rehouse

e) Dispose of property

Such options may well also include

a) Political implications

b) Service implications

c) Cost implications

d) Timing implications

e) Service delivery implications

Completed reviews may feed back into the service planning process and progress on all reviews will be monitored as one of the actions from the Action Plan.

Progress generally will be reviewed as this Plan is updated and a programme developed for subsequent reviews.

The preceding sections explain the background and process of AMP. This section identifies some current examples of AMP projects and techniques and the practical way in which these influence the best use of Resources. This part of the Plan will be updated on a regular basis to include both future and retrospective analysis of projects to inform the development of the AMP process generally.

The Council currently occupies a wide-range of office accommodation of varying quality and suitability, some of which is unsuitable for modern public service.

The accommodation strategy will consider advances in communications and technology leading to a reassessment of methods of working within the Council. The adoption of flexible methods of working such as hot-desking and home working might lead to a reduction in the amount of office space required if such methods are shown to be acceptable to staff and lead to better provision of services. This is the main thrust of the WorkSMART project.

Key areas underpinning the accommodation strategy include:

Property Services is in the process of developing a system of Option Appraisals. When adopted this will allow the Council to take informed investment decisions when dealing with alternative project scenarios. It will ensure that all decisions are justified and the reasons for making them supported by evidence.

The development of Option Appraisal is the responsibility of the Capital Strategy and Asset Management Group however as indicated above the implementation of the technique is currently being handled by Property Services. A proposed methodology has been drafted and will be introduced following full consultation with all Stakeholders. The current draft can be found at Appendix 6

The option appraisal will be informed by the Property Performance Model. The information obtained from the model will enable us to identify a business need and a strategic context for a particular building and a project. The various options will then be identified. These will range from a `'do nothing `' to major capital investment in order to achieve objectives.

These options will then be costed using a system of Whole Life Costing.

Whole Life Costing is an important feature of Option Appraisal in that it is a consideration of all relevant discounted costs and revenues associated with the acquisition, ownership and disposal of an asset through its entire life. Whole Life Costs are particularly used to identify where higher initial costs are justified by reduced future running costs and the life of the asset and/or its residual value.

By using the techniques set out in this Plan and information from the PPM the total R&M backlog can be prioritised and any backlog directed towards properties which are identified as suitable and fit for purpose. R&M should not be targeted at properties which do not satisfy this criterion.

The possibility of an asset being declared surplus will be considered in the context of the surplus land procedure in the property policy. Where an asset is identified and available for sale it will contribute to the overall target for capital receipts from the sale of property.

Generally all disposals are to be at full market value in order to achieve best consideration; any proposal to deviate from this requires approval from the Council Executive or Council itself and the Secretary of State. As part of the allocation of properties under the property policy a number of properties have been identified for consideration under the surplus land procedure and possible disposal.

Monitoring of capital receipts and how this fits into the overall capital programme is the responsibility of the Project Programme Board (PPB). Property Services provide input to this process as part of the emerging project initiation and value for money criteria. This will provide the principle method for monitoring capital receipts.

The key reason for establishing a system of Performance Monitoring through a network of Key Performance Indicators (KPI'S) is that the information collected within the KPI'S shows evidence of how Property Services is achieving the objectives outlined within the AMP.

During such time as the ODPM specified the content of National Performance Indicators these were produced as specified and the latest indicators for the financial year 2004/2005 are reproduced in Appendix 2.

Over the past year or so work has been done to bring these indicators up to date and to make them more relevant. Proposals have been put forward by the Association of Chief Corporate Property Officers in Local Government (COPROP) to do this and phase 1 of a consultation exercise has been completed, as a result of which the proposals have received positive endorsement from ODPM and DfES. Phase 2 of the consultation closes 2 June and subject to agreement of the detail it is planned to use the complete set of indicators when they are formally adopted.

The most up to date position has been replicated in Appendix 1 including both the adopted and proposed indicators.

The Council also uses a balanced scorecard approach to corporate reporting and the indicators dovetail with this. Also by reference to the Action Plan in section 12 a number of specific indicators are being developed to monitor progress on individual items within the Action Plan.

The indicators will be used for assessing and reporting on performance improvement, identifying areas of weakness, and for benchmarking against other local authorities and where possible service providers as well as progress on the Plan itself.

Also as members of the Institute of Public Finance (IPF) Asset Management Group the Council will be reporting our KPI'S into the IPF database which will give us access to benchmarking graphs from other Authorities. Other benchmarking initiatives include the possibility of sharing information between the Councils that administer the former Avon County Council area.

This AMP introduces the property perspective into the best use of Resources and the service planning process.

The CPA for 2005 included a mandatory requirement to have an up to date AMP, and for such plan to detail existing asset management arrangements and outcomes, and planned action to improve corporate asset use.

A need has been identified to improve management of the Capital programme and the establishment of a Capital Strategy and Asset Management Group is imminent.

The Council has developed a Property Performance Model to bring together assessments of the various aspects of the performance of properties.

It is further introducing a programme of Property Reviews to take the results from the Model and apply these to selected properties or groups of properties.

A detailed action plan sets out key activities to be put in hand during the life of this Plan and performance against these actions will be carefully monitored throughout. These actions will be reassessed and reprioritised on a regular basis, no less frequently than once a quarter.

Progress against these items will be reported to the Executive on an annual basis, the first of these with effect from 31^st March 2007.

See section 12 below for the Action Plan.

Key to initials and abbreviations

Appendix 1

Corporate Asset

Management Plan

2006 - 2007

Current Key Performance Indicators 2005/2006

Note all the following indicators refer to quarters 1, 2 & 3.

The indicators will be updated as soon as quarter 4 is available and the full year's figures reported as soon as possible but certainly by the end of July 2006.

A number of additions and enhancements are currently proposed by COPROP and consultation closed 2 June. This Appendix includes the proposed indicators and it will be finalised once the results of the consultation are published.

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Indicator:

% gross internal floor-space in condition categories A-D

Indicator:

Required maintenance by cost expressed:

i) as total cost in priority levels 1 - 3

ii) as a % in priority levels 1 - 3

iii) overall cost per square metre GIA

Indicator:

Annual percentage change to total required maintenance figure over previous year

Note : In order to compare with previous reporting the above is for corporate buildings only and excludes major capital and revenue planned maintainance to Elderly Persons Homes.

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Indicator:

i) total spend on maintenance in previous financial year

ii) total spend on maintenance per square metre GIA

iii) Percentage split of total spend on maintenance between planned and responsive maintenance

Indicator:

Energy Costs/ Consumption

Indicator:

Water Costs/ Consumption

Indicator:

CO₂ Emissions

At present this information is not collected. However with a review of energy management pending it is expected that this information will be available in the future

Indicator:

% of Portfolio by GIA sq.m., for which a Suitability Survey has been undertaken over the last 5 years.

Indicator:

Number of properties, for which a Suitability Survey has been undertaken over the last 5 years.

i) % of properties graded as good or satisfactory

ii) % of properties for which grading has improved since the

last suitability survey was carried out at the property.

COP

Performance

Management Initiative

Questions for Consultees:-

1. Should Housing be included for this indicator?

2. Are any parts difficult to collect?

3. Should it be Net or Gross revenue budget?

4. Should fixtures and Fittings and/or Income from lettings be included?

5. We have not included repairs and maintenance because the cyclical nature of such work

makes it a distorting influence for an annual indicator. Is this the correct choice?

Comments

The COPROP PMI Group believes that:-

· Different organisations currently define "Commit to Invest" as being at various points between the beginning of RIBA Stage C (i.e. OGC Gateway 2) and the end of RIBA Stage D (i.e. OGC Gateway 3.1 / Decision Point 1).

· We believe that this reflects two conflicting approaches to the measure:-

o a wish on the part of some to measure predictability at "whole authority" level (embracing both client and service provider responsibilities), encompassing as much as possible of the design process, in contrast to

o a wish on the part of others to measure the performance of service providers - who can only have limited control over time and cost predictability until the client confirms a settled brief with a confirmed budget and a clear timescale

These proposals envisage the introduction of a further key stage to allow authorities to

measure predictability for either or both of these purposes.

Questions for Consultees

1. Does our proposal address the issue in an appropriate and effective manner?

2. Should this measure be used for Schools projects? For Housing? (The COPROP PMI Group recommends "yes" for Schools, "no" for Housing)

3. Should the margins for variation in 7A, B, C, D, E and F be set at 5%, at 10%, or at some other figure? (The COPROP PMI Group recommends 5%, assuming that its recommendations at item 3, below, are adopted - otherwise,a higher figure should be used for 7C and 7F )

4. Should the measures of predictability for the post-contract period (indicators 7C and 7F) relate to the dates agreed at Commit to Design, or at Commit to Construct? (The COPROP PMI Group recommends using "Commit to Construct")

5. Should the margins for variation be different for different forms of procurement? (The COPROP PMI Group recommends "no")

6. Should 7A start at Inception (RIBA Stage A / Gateway 1)? (The COPROP PMI Group has some sympathy with this, but believes that variations at Inception and Feasibility stages are subject to so many causes that a report on this basis would be of limited value)

7. Should the post-project measure of cost predictability run from Commit to Construct to Final Account? (The COPROP PMI Group has some sympathy with this, but believes that it is more practical to work with the figures as at Available for Use)

8. Should we include single "end-to-end" measures for Time and Cost Predictability, as well as measures for each of the stages?

9. Should we map the key stages against Prince II, as well as the RIBA Plan of Work and OGC Construction Gateways?

10. Is the minimum project value correct (see "Good Practice")? If not, what should it be?

Appendix 2

Corporate Asset

Management Plan

2006 - 2007

Key Performance Indicators 2004/2005

Note - these indicators are reproduced for information only. See Appendix 1 for the current indicators and section 10 for an explanation of the proposals in this area.

Objective:

A7 To measure the condition of the property asset for its current use

A7 To show the severity and extent to which maintenance problems affect the property portfolio

A7 To show year-on-year changes in maintenance backlog

A7 To provide information on the overall condition of the Local Authority estate

Indicator:

% gross internal floor-space in condition categories A-D

All Property:

Operational (Other Land and Buildings)

Non-operational (General)

Non-operational (Surplus)

Overall

Corporate Property:

Operational (Other Land and Buildings)

Non-operational (General)

Non-operational (Surplus)

Commercial Property:

Non-operational (General)

Non-operational (Surplus)

Indicator:

Backlog of maintenance by cost expressed i) as total value and ii) as a % in priority levels 1-4

Overall Figures:

Total value of backlog of maintenance in all three priority levels:£11,878,184

Suitability for use: From the surveys already undertaken no property is unsuitable for use in terms of its condition.

Corporate Estate:

Operational (Other Land and Buildings)

The reported backlog for the Corporate Estate excludes any planned maintenance works to Housing, Schools, Commercial Estate properties; grant funded capital works on VA schools and all revenue repairs.

The figures above show the maintenance backlog for all work costing more than£2,000 for the Corporate Estate.

A programme of surveys of all council properties is progressing and repairs are prioritised according to the above criteria. Although to date not all properties have been fully surveyed, under the five-year rolling programme, existing data on properties not yet surveyed has been assessed and re-designated to fit in with the above standard definitions.

Recent surveys have been carried out of all Social Services and library buildings. Most Heritage properties have also been surveyed. Whilst full condition surveys have been carried out on other Corporate properties some smaller premises remain outstanding, In these circumstances an assessment of the backlog has been made based on historic information and surveyors / engineers knowledge of the properties. Surveys of these properties are planned to ensure completion of the five-year rolling programme. As further surveys are carried out, inevitably some unexpected works may be identified. As a result the total backlog is likely to further increase until surveys have been carried out on all properties.

The table above includes work in this years approved programme but yet to be carried out (the backlog will be adjusted for completed work at the end of the financial year).

Commercial Estate:

Non-operational (General)

The commercial estate in the Bath & NE Somerset area has suffered for many years due a lack of investment into planned maintenance. Only responsive day to day repairs have been carried out as and when required.

Last year Property Services set up a 5-year programme of planned maintenance funded from within the commercial estate itself. It was intended that this would help to maximise the life of its assets and over a period of time reduce the amount of expenditure needed particularly after the first phase of the programme is complete.

A responsive maintenance budget will continue to be required at the present level to deal with general day to day calls and assist with service delivery to the valuation team.

Much of the estate is Listed and alterations and improvements require approval and advice from the Heritage team. Given the age of the structures and poor original design and construction the properties will continue to need a regular round of planned works to prevent major failure occurring.

The programme is broken down into various categories comprising a general description of the works split into 4 main elements i.e.: Roofing and associated works, External works, Internal common areas and Services installations. Other sections provide an estimated year for the work along a priority and condition rating linked to budget figures - all drawn from historical data from a previous condition survey. The final sections show a breakdown of the 4 main areas of financial responsibility as dictated by the leases in place at the time in order that any relevant recharges can be made.

The programme has been set up in a form that will hopefully allow ease of updating and adjustment/modification by being accessible to all relevant parties.

It was anticipated that the real impact of implementing a 5-year planned cycle of works would be seen when the second round of maintenance was carried out. Much of the backlog from years of neglect should have been dealt with in the first round of works. However, this is proving overly ambitious. As a result of limited funding only limited works are being carried out each year. This has disrupted and fragmented the programme, resulting in the requirement for an annual review and alteration.

The programme excludes the following:

Void properties;

Properties likely to be the subject of major development;

Criteria Adopted for Compiling Indicator 1A & 1B

Backlog is defined as 93The cost to bring the building from its present state up to the state reasonably required by the authority to deliver the service or to meet statutory or contact obligations.94

The indicator will include all Freehold and Leasehold property where the authority has a direct repairing obligation.

The indicator will, however, exclude Housing and Schools

It is to be reported by main CIPFA category (Operational [other land and buildings], Non-operational general, non-operational surplus).

It is to be calculated for buildings only. Land will also be included where it lies within the site curtilage and is an integral element of the building (e.g. parking necessary for office use). In these circumstances, the condition of the land should only be taken into account in assessing the condition of the building and the backlog maintenance cost, its area should not be included. Floor space to be calculated as the gross internal area (GIA) in accordance with the RICS Code of Measuring Practice.

Definition of condition categories and priority levels:-

Objective:

A7 To demonstrate the justification, in financial terms, for retaining a non-operational - investment portfolio.

A7 To illustrate the financial advantages and disadvantages of holding or disposing of assets within the portfolio.

Indicator:

Overall average internal rate of return (IRR) for each of the following portfolios: (a) Industrial, (b) Retail, (c) Agricultural, (d) Licensed, (e) Offices, (f) Miscellaneous investment property.

September 2000

September 2001

September 2002

Definition:

The Internal Rate of Return (IRR) has been calculated in accordance with Discounted Cashflow (DCF) Techniques based upon a 10 year projected cashflow period or the remainder of the existing property interest, whichever is the shorter.

The calculation has excluded investment properties let on leases with terms exceeding 21 years where there is either no provision for the review of rent or the reviews are at intervals of 25 years or more.

It must be acknowledged that non-investment property is held for social as well as investment use and regard should be given to the objectives for holding the Commercial Estate set out in the Corporate Active Management Strategy.

Notes:

This exercise has been undertaken in accordance with DTLR instructions contained in Part 1 Guidance for 2003, which is set out in the above definition.

This information is being used as part of the property performance model contained within the Commercial Estate Active Management Strategy.

The IRR exercise has been undertaken using data held within ECS data management system and Portfolio Manager Valuation Software developed by System's Link.

The exercise to assess the IRR for the entire portfolio by sector is undertaken annually. The effective date for the IRR analysis is 29^th September of each year.

Objective:

To measure the cost and efficiency of property services provision.

Indicator:

Total annual management costs per sq. m for operational property.

Definition:

The indicator covers the strategic management of the portfolio including:

Corporate preparation of the Corporate Asset Management Plan

Preparation of other property related programmes and strategies

Corporate management of property related programmes

Management of the condition & suitability survey programmes

Data management

Option appraisal and prioritisation of projects and capital programmes

Input into service reviews

Corporate property reviews

Notes:

These figures were obtained via reports from the Council's Financial Management System (FMS). FMS is a set of integrated software packages that record the financial transactions of the Council. It is a continually evolving system with upgrades and improvements on a regular basis.

For the purposes of this indicator, a Council-wide survey was carried out requesting that all Departmental heads provide Property Services with costs of any staff within their Service who spend more than 25% of their time on any of the issues set out in the above definition.

These figures do not include management of highways.

Objective:

To encourage efficient use of assets over time and year-on-year improvements in energy efficiency.

Indicator:

Repair & maintenance costs per sq. m GIA

Definition:

This indicator relates to operational buildings occupied by Bath & North East Somerset, but excludes all Housing and Schools premises.

Repair and maintenance is the total maintenance programme (responsive and programmed works) and includes associated fees for the works undertaken.

Indicator:

Energy Costs per sq. m GIA

Definition:

This indicator is reported for all operational buildings occupied by Bath & North East Somerset, excluding Housing and schools premises.

Indicator:

Water costs per sq. m GIA

Definition:

This indicator is reported for all operational buildings occupied by Bath & North East Somerset, excluding Housing and schools premises.

Notes:

The figures for Performance Indicators 4A, 4B and 4C were taken from the Council's Financial Management System (FMS). Costs are entered into the system against specific codes, one, which identifies the property, and another, which identifies the nature of the expenditure. There are separate codes for energy costs, which can be broken down into the particular forms of energy used.

The buildings occupied by Bath & North East Somerset Council vary from the newly-constructed Plymouth House to the historic Pump Rooms/Roman Baths. The inclusion of such an exceptional and ancient building can distort the figures considerably. Several of the Council offices within Bath are Grade I or II listed buildings and due to restrictions on the work which can be carried out on listed buildings the energy costs are always going to be relatively high. In the more modern offices, energy saving measures have been put in place.

Indicator:

CO2 emissions in tonnes of carbon dioxide per sq. m within Bath & North East Somerset Council's local authority occupied buildings.

Definition:

This indicator focuses on energy consumption rather than spend and is reported for operational properties occupied by Bath & North East Somerset excluding Housing and Schools premises.

Notes:

This is an improvement on last year's figure of 0.0888 tonnes.

This information has been taken from a report prepared by Wessex Energy Associates on CO2 emissions for buildings within the Corporate estate which are occupied by the local authority. The figures were then subjected to the industry standard calculations for CO2 emissions which have been obtained from the Government's Energy Efficiency Best Practice programme.

Steps have been taken over the years, particularly with office accommodation, to reduce CO2 emissions. However, the city of Bath is a World Heritage Site, which causes difficulties with CO2 management. Many of the Local Authority occupied buildings within the centre of Bath itself are listed, and the Roman Bath/Pump Room museum is an ancient monument. Building restrictions on such properties mean that standard energy efficiency measures such as double glazing cannot be carried out and as a result overall CO2 emissions are always likely to be higher than that of a Council which occupies only relatively modern buildings.

Objective:

A7 To measure and monitor the performance of the authority in the delivery of capital projects in terms of cost and time predictability

A7 To impact on the prioritising process for projects and the associated local performance measures and monitoring systems put in place

Indicator: Cost Predictability

Definition:

This indicator applies to all new single capital projects where the LA is the sole or majority partner (excluding highways and IT) over£50,000.

This indicator is a comparison of estimated outturn projects costs at 93commit to invest94 with the actual outturn cost at the end of the defects liability period.

Cost Predictability

93Outturn projected costs94 = final cost of construction work (including value of contractual claims, inflation etc) + cost of professional fees and statutory costs.

93Commit to Invest94 = as Construction Best Practice definition, 94The point at which the client decided in principle to invest in a project, sets out the requirements in business terms (programme and costs) and authorises the project team to proceed with the

design94 (Commencement of RIBA work stage C).

Indicator: Time Predictability

Definition:

This indicator applies to all new single capital projects where the LA is the sole or majority partner (excluding highways and IT) over£50,000

This indicator is a comparison of estimated timescale against actual timescale

Time Predictability

93Time Predictability94 = measure difference between `A' and `B' where, `A' = the Duration from 93Commit to Invest94 to Practical completion as estimated at 93Commit to Invest94. `B' = actual duration from 93Commit to Invest94 Practical completion.

93Commit to Invest94 = as for Cost predictability

Notes:

Of the seventeen projects suitable for this indicator, six fell within +/- 5% of the estimated timescale. A further project was extremely close, at 5.82% .

DATA MANAGEMENT AND RECORDS - APPENDIX 3

Within the core systems described above core data is stored including the following

The reference and PSRN at the top of the list provide the fundamental link between systems. In due course with the introduction of corporate GIS and in accordance with the requirements of BS7666 these references will be supplemented by the UPRN (Unique Property Reference Number) derived from the Local Land and Property Gazetteer (LLPG). This will allow more effective data sharing of property data with other parts of the Council and external organisations.

It is recognized that not all data requirements can be accommodated in the core systems and the IT Strategy allows for this by the creation of satellite systems to deal with particular requirements. These draw information from core data and can be used to manipulate data or represent it in a customer focused way. Answers are generally returned to core systems but can be held within the file structure in a structured way. Property Information Group is responsible for monitoring and development of such systems and maintains a schedule of all systems and data. The production of files generally goes through the following stages

The Property Information Group is responsible for improvements and developments and at the current time the following projects are underway.

Evolut1on - As indicated above Evolut1on is being developed to become part of the group of core systems and will hold information on condition of buildings as well as energy consumption, repairs & maintenance and terrier information.

Corporate GIS - A corporate GIS project has recently received approval that will result in all Council staff eventually having web access to a wide variety of spatial data including property ownership and asset information. GDC Planweb has been selected which uses MapInfo technology and has been successfully deployed by many public bodies to provide intranet and internet access to mapped data. This will be combined with secure storage utilizing an Oracle based spatial database in which all map data together with the LLPG will be stored on a dedicated map server. Property Services is currently working to enable data to be migrated to the new system for integration with other datasets throughout the Council.

Positional Accuracy Improvement (PAI) & the Digital National Framework (DNF) - PROPERTY SERVICES map data is currently mapped to a pre-PAI Ordnance Survey Landline base. As part of the migration to Planweb the Division needs to consolidate & recapture (where necessary) mapped extents to rectified base mapping. At the same time the process of linking Property Services records to the OS MasterMap database (which will be adopted as base mapping on Planweb in response to the Government's DNF initiative) will need to be managed.

Local Land & Property Gazetteer Data Matching - The Council now has a Status 1 LLPG which sends weekly updates to the NLPG hub. This is currently mapped to point data and Property Services is initiating a data matching exercise with Property Asset records which will obtain UPRNs for use within Property Services, whilst enabling property extents eventually to be transferred into the Gazetteer Management System thereby enhancing the LLPG.

Land Registration - In 2003 the Council approved a proposal to register all the Council's land ownerships at the Land Registry. This is a long term project which is approaching 50% completion. Registration of title has a number of advantages in particular certainty when dealing with future developments, disposals etc as well as being a guaranteed record of ownership in the public domain. The Council is now well ahead of the Government's target of achieving total land registration nationally by 2012.

As indicated above the Property Information Group is responsible for the IT strategy and provides the focal point for consideration of requests for development of data solutions. Proposals for improvements will generally be customer generated and prioritised for action by Property Information Group. At the present time the following projects are identified for consideration and possible implementation.

PROPERTY SERVICES DIVISION

DATA STRATEGY

The following sets out the principles of the Division's approach to data management. This strategy is to be read in conjunction with published corporate standards on the subject.

Data management is the primary responsibility of the Property Information Group (PIG) and all proposals are to be specified and submitted to PIG for consideration in the first instance. Appendix 2 provides a form for this purpose.

Solutions are to be developed around the principle of the diagram in Appendix 1 overleaf in particular

Core data held within core systems will be split between property and occupation level where there are multiple occupations,

All other data solutions must follow this convention.

APPENDIX 1

PROPERTY SERVICES DIVISION

DATA STRATEGY - ILLUSTRATIVE DIAGRAM

APPENDIX 2

New Database/Software application form

To: Property Information Group

Terms of Reference for Property Information Group (PIG)

1. Monitor, evaluate and promote the effective use of Property Information within Property Services.

2. Consider continuous improvements to data standards within Property Services.

3. Receive, consider, approve and monitor proposals for data development in accordance with the overriding principles of the Division's data strategy.

4. Ensure that all data is held centrally in a format which ensures compliance with Corporate data standards e.g.BS7666 Avoid duplication of data across systems.

5. Identify and seek to resolve problems with the use and storage of property Information.

6. Consider and monitor progress on all significant IT proposals and issues within Property & Legal Services.

7. Look at Council-wide IT developments and identify any that would be appropriate for Property Services.

8. Participate in cross-Service IT initiatives to ensure that Property Services interests are represented and safeguarded.

9. Provide an effective forum for communication between the different groups holding responsibility for property data, information & records in order to plan & co-ordinate workloads.

10. Establish sub groups to consider detailed arrangements for specific data requirements.

11. Report to PCG the policies and principles of managing property information and report currently outstanding issues.

12. Raise awareness of significance of appropriate information sharing within Property Services.

13. Promote the improvement of standards of IT competence by Training and other means.

Membership, quorum and meeting frequency should be as follows:

COUNCIL AIMS AND OBJECTIVES - APPENDIX 4

Council's Vision is to:

"Make Bath and North East Somerset a better place to live, work and visit".

Following extensive consultation with residents, local companies and other stakeholders, the Council set out a series of strategic objectives, each with a set of specific performance targets.

The Council's strategic objectives are:

1. To improve quality of life and the environment

2. To build a healthier and safer community

3. To promote a thriving economic community and combat poverty

4. To encourage and support life long learning

5. To deliver quality and accessible services

These objectives provide the framework for all the Council's policies and plans. These aims, furthermore, link directly to the property portfolio, since it is through the portfolio that the services are delivered which achieve these objectives.

The Corporate Plan 2003 - 2007 sets out the key actions and targets that need to be achieved to enable the Council to realise its Community Strategy, Improvement Priority, performance and financial objectives.

Within this document the Council has identified ten improvement priorities. These priorities address those issues and consequent activities upon which the Council decides to focus its energy and resources, in order to ensure that overall Council objectives are achieved.

The Improvement Priorities are:

Resources, especially money and time) will clearly be needed to achieve the outcomes of the Improvement Priorities. Through the Corporate Plan, strategies have been devised to create the financial and organisational headroom and capacity needed to ensure that resources can be directed towards its priorities. These strategies involve:

Clearly the use of the Council's property has an impact for each of the above strategies. The previous asset management plan identified corporate property objectives which link to the Council's objectives above. These are restated here

The management of the Council's property assets, therefore, cannot be considered in isolation and this document demonstrates how the Corporate Asset Management Plan enhances the overall strategic objectives and targets of the Council and illustrates its relationship with other Council strategies and plans.

CAPITAL STRATEGY TERMS OF REFERENCE - APPENDIX 5

BATH & NORTH EAST SOMERSET COUNCIL

(Note: only minor changes are recommended to the current Terms of Reference. These are shown in italics)

PROJECT PROGRAMME BOARD - TERMS OF REFERENCE

To advise the Executive in relation to the impact of the Capital Programme on the Corporate Body.

To act as Capital Control Group to monitor & control expenditure of the Capital Programme.

To monitor and direct major project activities, exposure to risk and resource impacts.

Membership

The board shall be made up of the Executive Members for Resources and Economic Development together with the Chief Executive (Chair), S151 Officer and Director of Development and Major Projects.

Project Programme Board Role

The Project Programme Board will:

1. Review the position and progress of the capital programme. Monitor the overall or combined spend/predicted final costs and cash flows against the agreed budgets.

2. To recommend to the Executive:

· Carry forward of capital budgets from one year to the next

· A draft capital programme for future years based on corporate priorities and available resources

· Adjustment to the capital programme in the light of changes during the year (including virement, reductions, additional schemes)

3. Have an overview of projects and to identify any major exceptions of corporate concern.

4. Monitor and review the overall risk exposure of the Council from developments and major projects and ensure satisfactory actions/plans are in place to manage this.

5. Advise the Executive on the overall level of exposure from project risk that should be considered when formulating the Council's budget and financial plan.

6. Review use of programme resource.

7. Ensure the various projects are programmed with due regard to the Council's capacity and best interests (including minimising disruption to the community).

8. Oversee the development of best practice in project management processes and reporting arrangements across the Council.

9. Advise Executive on 3rd party influences outside of Council control.

(Appoint the project leader, members of project boards and approving Terms of Reference for boards - to be deleted as this is a function of the Executive)

10. Monitor the adequacy of project governance arrangements.

11. Oversee the procurement approach to the Capital Programme.

BATH AND NORTH EAST SOMERSET COUNCIL

CAPITAL STRATEGY & ASSET MANAGEMENT GROUP

Proposed Terms of Reference

Objectives

The role and objectives of the Capital Strategy and Asset Management Group are to recommend to the Project Programme Board (PPB):

1. A Corporate Capital Strategy reviewed annually and reported/approved as part of the Council's Corporate Plan/Financial Plan/budget process in February of each year. This is to include consideration of the appropriate time horizon for capital planning (e.g. 5 years plus a 10 year outlook)

2. A Corporate Asset Management Plan, reviewed annually and reported/approved as part of the Council's Corporate Plan/Financial Plan/budget process in February of each year.

3. The prioritisation criteria, process and timescale for capital investment.

4. The resource envelope/range of resources available for new capital investment, including the balance of borrowing, capital receipts and the treatment of Single Capital Pot resources. This will include consideration of the balance between further reducing/avoiding borrowing, maintenance, new build facilities and development.

5. The initial prioritisation of projects considered by the Project Initiation and Development Group and other programmes and projects within the agreed resource envelope and prioritisation criteria. This includes recommending projects/programmes for which a full business case needs to be developed for the PI&DG to scrutinise for deliverability. It also includes recommendation for the appropriate start year to projects/programmes.

6. To deliver and approve the guidance on the capital programme to be included in the Service and Resource Planning process.

7. To develop a draft capital investment programme to meet the Council's agreed corporate priorities, statutory requirements and to facilitate the effective and sound management of the Council.

The roles and responsibilities of the CS&AMG within an integrated capital investment process are shown in the attachment to these Terms of Reference.

Culture of the CS&AMG

Officer representation is to be on a corporate basis, whereby group members

· Are objective and pragmatic with a view to providing solutions not merely identifying problems

· Are corporate and not "silo" biased with a clear remit to align proposals to corporate priorities, statutory requirements, risk and resources

· Seek to maximise opportunities to join up projects and programmes

Reporting Lines

The Capital Strategy and Asset Management Group reports to the PPB, who will make recommendations to the Council Executive via Directors' Group on the future capital programme, the Council's Capital Strategy and the Asset Management Plan.

Meetings

The CS&AMG meets on a quarterly basis, or more frequently when required to facilitate the relevant bidding rounds, the Council's decision-making process, and the service/resource planning timetable. The meetings are to be fully minuted.

Membership of the Capital Strategy & Asset Management Group

Co Chairs

Executive Member for Economic Development

Executive Member for Resources

Officers

Strategic Director to be nominated by Directors' Group

Assistant Director - Support Services (Finance)

Assistant Director - Support Services (Property and Facilities)

Assistant Director - Development (Major Projects) OR Director of Development & Major Projects

Assistant Director - Planning and Transport Development

Assistant Director - (responsible for waste)

Assistant Director - Children's Services

Assistant Director (responsible for Housing)

Head of Improvement and Performance

Supporting Officers

Estates Manager - Property and Facilities on an ongoing basis.

From time to time the Group may require technical advice from other officers on aspects of the projects being considered.

May 2006

Appendix 6

OPTIONS APPRAISAL METHODOLOGY

A guide to appraising investment decisions

TABLE OF CONTENTS

1. FOREWORD AND INTRODUCTION

2. IDENTIFYING BUSINESS NEED

3. STRATEGIC CONTEXT

4. DECIDE OBJECTIVES

5. IDENTIFY THE OPTIONS

6. IDENTIFY THE COSTS AND BENEFITS OF EACH OPTION

7. RISKS, UNCERTAINTIES AND SENSITIVITY ANALYSIS

8. EVALUATING THE OPTIONS

9. ASSESSING AFFORDABILITY

1 FOREWORD AND INTRODUCTION

1.1 Foreword

The Council has a responsibility to ensure that public money is spent effectively. Conducting effective option appraisals is one of the ways of ensuring good value for money.

Taking informed investment decisions is a key facet of property management within this Local Authority. The outcome of decisions may have significant impact strategically and financially, both in the short and long term. It is important therefore that the decision process is well structured and the information presented in a clear and logical manner.

The principles of option appraisal are not new. However, much of the published guidance is directed at commercial decision making. This guidance sets out the process with a local government context. It sets out a framework for the appraisal process which can be used for all kinds of decision making, the details will vary but the same principles apply.

1.2 Introduction

Appraisal is a technique for obtaining value for money by systematic comparison of alternative investment options. All major investment decisions should be supported through option appraisal.

Decisions must be justified and the reasons for them must be analysed and supported by evidence. To obtain maximum value from the appraisal process it is necessary to understand the assumptions on which the decisions are based and also the circumstances which might lead to a different outcome. Consequently the assessment of risk and uncertainty will be as important as the financial estimates for each option.

1.3 When is an appraisal required?

There is a tendency to think of option appraisal just as a means of deciding between different ways of acquiring physical assets, but the principles of option appraisal can be followed in making any investment decision.

Other examples of property decisions which require an appraisal include:

Relocation proposals

Reducing accommodation

Whether to improve or refurbish existing buildings as an alternative to building or acquiring new property

Whether to buy or lease

Replacement of existing equipment or the supply of new equipment.

2

The first stage of the options appraisal process is to clearly define the business need that has to be addressed. This should be done within the service context by setting out gaps in current service provision and what level of service is required to meet the user needs and Council objectives and targets. As for where the need comes from, in the case of a gap in service provision this could be identified from the objectives set out in the Corporate Plan or customer demand. Where the need relates to suitability of accommodation this would be identified in the Asset Management Plan, as a result of statutory inspections or could be as a result of an unforeseen event, for example, a loss through fire.

3 STRATEGIC CONTEXT

The Strategic Context for capital project Option Appraisal is described in the Corporate Asset Management Plan and is defined by the following documented parameters:

1. Corporate Strategies and Plans

2. Departmental/Service Strategies and Plans

3. Departmental/ Service Performance Data

4. Capital Priorities

5. Property Performance Data

Option Appraisal is part of a "top down" process that systematically identifies and considers all the relevant factors in the decision-making process. The strategies and plans are considered on a holistic basis and subsequent projects should align directly with such plans. The headline objective is to achieve strategic best value solutions for the highest priority projects.

The Strategic Context determines that the defined objectives of a proposal should clearly reconcile/align with the headline strategies, plans and priorities.

4 DECIDE OBJECTIVES

The objectives of a proposal should follow clearly from the strategic aims and objectives of the Council set out in the Corporate Plan and other policy documents. The statement of objectives sets a firm boundary to the appraisal. It provides the criteria against which the options will be judged and against which the success of the project will be evaluated. Objectives must not be too narrowly defined as to rule out important options but on the other hand objectives which are too broad create unnecessary work and lose credibility. Emphasis should be placed on outputs and how the outputs enable objectives to be achieved.

Objectives can be very wide ranging and can vary from a high level strategic objective down to lower level management objectives within a service area, however, what is key is that investment decisions are clearly linked to recognised objectives of the Council. Without a clear link there is not just the danger that investment is made in non-priority areas, but also that investment is made which conflicts with Council and departmental objectives.

5 IDENTIFY THE OPTIONS

Whereas the Objectives set out what you want to achieve, the Options describe how you could achieve it.

The main options, or alternative ways of meeting the objectives, should be listed. Normally, at one end of the range of options will be "do nothing" or "do minimum" and this should be included as a base case

for comparison. Comparing the options with the base case will assist with the justification of need and identification of the consequences of not proceeding with the project.

The range of options to be considered will depend on the nature and scale of the project being appraised. For small-scale projects there will not be a wide range of options. However, for major capital investment, a wide range of alternatives may be identified. Each listed alternative will require detailed consideration before some are rejected and the remainder are short-listed for full-scale analysis. Factors for early consideration may involve:

timing

physical scale

location

stakeholder involvement

planning issues

environmental factors

alternative uses for assets released

financial implications

opportunities for innovative design and technology

sustainability

funding

At this stage of the process it is important that the right people are involved in identifying the options and this could include Asset Management and Planning as well as service area Officers and stakeholders.

6 IDENTIFY THE COSTS AND BENEFITS OF EACH OPTION

All the implications of each option must be accounted for. This will involve considering all the costs and benefits, including the non financial benefits and penalties. It will also involve analysing the effect of variations in timing and any risks and uncertainties involved (these are dealt with in section 7)

Whole Life Costing

Whole Life Costing (WLC) is not a new concept but is assuming increasing importance as prospective building clients evaluate the long-term future costs of ownership. This is an important feature of option appraisal.

In comparing investment options there is a tendency to concentrate on the initial capital costs of the development and not consider the costs of operating a building or facility for its lifetime. A rule of thumb ratio of whole life costs is:

Initial capital costs = 1

Operational / maintenance costs = 5

Client occupancy costs (including staffing) = 200

The long term costs of operating and occupying a building far outweigh the initial capital costs and therefore they should be including in the option appraisal.

Defined as "the systematic consideration of all relevant costs and revenues associated with the acquisition and ownership of an asset", the principle of WLC involves aggregating all costs associated with the various project options to represent the total cost. Future costs are discounted to present-day value. Essentially WLC is a means of comparing options and their associated cost and income streams over a period of time. It provides a rationale for choice in circumstances where there are alternative means of achieving a given objective and where those alternatives differ, not only in their initial costs, but also in their subsequent maintenance and operational costs.

WLC is particularly used to:

Determine whether higher initial costs are justified by reduced 93future94 costs or

Identify whether a proposed change is cost effective against the 93do nothing94 alternative which, typically has no initial costs, but involves higher 93future94 costs.

There are two important elements to consider as part of the WLC calculation:

1. Discount Rates and Inflation

2. Facility/component life

Typical Costs

For a typical project the following costs might need to be included in WLC calculations:

Capital Costs - such as land, land restoration, demolition, asbestos removal, construction or refurbishment costs, fees and expenses (including planning fees), furniture and fittings, plant and equipment, decanting and removal, commissioning and handover costs.

Annual Running Costs -such as rates, water and sewerage charges, annual maintenance, power, heating and lighting, cleaning, insurance, security, staffing costs, supplies and services and payments for services bought in.

Periodic Refurbishment / Replacement Costs - such as external and internal decoration, heating system replacement or upgrade, communications installations, plumbing and sanitary appliances

Costs of other features that are affected -these may be associated with ease and availability of access, operational convenience, environmental factors and costs of retaining and disposing of vacated accommodation.

Typical Benefits

For a typical project the tangible benefits might include:

Fee income from new services / facilities available / new opportunities

Income from third party use of facilities

Capital receipts from disposal of land / property that is being replaced or freed

Residual value at the end of the appraisal period

A reduction in rental payments where a leased building is no longer required and can be surrendered.

Clearly a project may generate non-tangible benefits and these are referred to below.

Opportunity Costs

All the costs and benefits should be included, even where the costs do not involve cash expenditure. For example, the value of an asset should be included even when it is already owned by the Council. Such an asset could be used for other purposes or sold, if it were not used in the project being appraised and therefore there is a cost involved in using it, the size of which depends on the alternative uses. This is known as the opportunity cost and for property is usually taken as the market value or the value in alternative use, whichever is the higher.

Similarly benefits in the form of cost savings or an improved quality of service should be included even where they do not produce a cash flow.

Residual Value

Some assets will have a value at the end of the appraisal period -the residual value, which should be counted as a benefit and these will largely be land and buildings.

When calculating residual values, land and buildings should be considered separately. This is because buildings usually depreciate in real terms over their lifetime at a rate depending on standards of maintenance. On the other hand the site value behaves differently and may depreciate, remain constant or even appreciate. Depreciation

may be attributable to, for example, contamination, mineral workings or heavy foundations.

The real residual value of the buildings at the end of the appraisal period is difficult to ascertain because buildings do not necessarily depreciate on a straight line basis. Professional property advice should be sought. For the site, the usual assumption is that the value of a site remains unaltered in real terms. Actual increases in land prices should not normally be counted as benefits if they would have occurred even if the project had not taken place, since they would be realised equally by the `do nothing' option.

Double Counting

Many types of cost or benefit can be included under a number of heads, but their value must only be counted once. Examples of a double counting error are the inclusion of both rents and capital values for the same building in the same cash flow; or including what is a cost in one option as a benefit in another. The `do nothing' option provides a common baseline to avoid this sort of mistake, since each option in the appraisal should represent a change from the base case.

Timing of Costs and Benefits

Costs and benefits which can be valued in monetary terms should be allocated to the time period in which they are expected to occur. It is generally sufficiently accurate to treat all costs incurred in a particular year as falling at mid-year. However, longer term variability in timing can have a significant effect on the appraisal and the range of options might include possible scheduling variants for the same idea. For example, timing in generation of income at a new sports facility could have a significant impact on the option chosen.

Appraising non-financial aspects

Some benefits of an investment decision will not be realised as a cash flow, and there could be benefits which cannot be expressed in financial terms at all. In some cases judgements will have to be made as to the desirability of an investment's outcome, however, such decisions are easier if the relative merits of different decisions can be presented in a rational way.

Appraisals will have to handle non-financial aspects differently, depending on how easily they can be measured. They can be categorised as:

Benefits which can be valued

Benefits which can be measured in some way

Benefits which cannot be measured at all in conventional terms

In practice it may be possible to put values on the benefits and costs of a decision, even though there is no market value for them that can be realised in cash terms. For instance, options that save staff time can be compared by putting a value on the time saved; locations for office accommodation might be compared by including the costs of travel and parking for staff.

If these methods are used to compare alternatives, care must be taken to distinguish between the notional values which will influence the decision on which option offers better value for money, and the actual costs which will have to be met from the budget. There is no sense in selecting an apparently attractive option if it proved to unaffordable in cash terms.

There may be costs and benefits which can only be assessed in nonfinancial terms, but which can nevertheless be quantified. For example, options may deliver more or less of an outcome whether it be numbers of classrooms in a school or seats in a theatre or shelf space for books in a library. Such data can inform decisions and in these cases a decision on what is a reasonable price to pay for more of a particular feature is needed.

A different problem is posed by attributes which cannot be measured in conventional terms. For instance, alternatives may offer different levels of satisfaction under headings such as:

contribution to the Council's long term strategy /objectives

flexibility for the future

political acceptability

enhancement of image

compliance with planning constraints

staff wellbeing

Qualitative judgements of this kind will have to be made. The appraisal of these factors will carry greater conviction if the basis for the decision is made clear. The criteria used should be explicit and how each option is assessed. The simplest analysis defines the criteria that are significant in the appraisal and ranks the options in order of preference. The decision maker will have to reconcile the perceived benefits with the cost of each option.

A scoring system, even a subjective one, can help to clarify the decision process and give it more rigour. First it must be established what criteria are significant and how to score them; scores can be weighted to reflect their relative importance. The results are only an aid to decision making and can never relate to any absolute measure. However, even if the scores and weightings are fundamentally subjective, the process does provide a better basis to explain the rationale for a decision.

Appraisal Period

The appraisal period should normally be the period for which the service is required or the remaining economic life of the asset.

For buildings it is essential to distinguish between the physical life of a building and the period during which it has occupational value, which may be shorter. In the absence of any other determining factor, it is sensible to use an appraisal period of 25 years for buildings unless there are compelling reasons for choosing a different period.

7 RISKS, UNCERTAINTIES AND SENSITIVITY ANALYSIS

This section provides guidance on risk assessments as part of the option appraisal process.

7.1 Risk management

A risk can be defined as anything that may impact upon an organisation's ability to achieve its objectives: this may be a hazard or the failure to recognise an opportunity.

Risk management is a process through which potential opportunities and adverse effects are identified, evaluated and controlled, leading to improved planning, decision making and processes. It consists of the following steps:

(ii) Identify the risks and analyse them in relation to existing controls

(v) Report all risk documentation to relevant personnel.

8 EVALUATING THE OPTIONS

8.1 Initial Option Appraisal

This stage looks at both the financial and non-financial costs and benefits of each option and seeks to eliminate some options which are clearly not viable or deliverable. This stage acts as a `sifting' mechanism which will hopefully prevent abortive work on costings etc. Options that are considered worthy of further consideration will then go forward to the full appraisal stage as outlined below.

8.2 Detailed Option Appraisal

Calculating the present value of costs and benefits

For options remaining after the initial appraisal stage, a detailed appraisal is carried out.

Even when all the costs and benefits, including costs savings, are expressed in real terms it will generally not be possible to compare options directly because the costs and benefits are spread over time.

Almost all expenditure proposals produce benefits later than the costs. To compare options, costs and benefits must be discounted so that a single figure -the net present value - can be calculated for each option.

To give more weight to earlier, rather than later, costs and benefits, a discount rate is applied. The discount rate determines how rapidly the value today (the `present value') of a pound falls away through time, just as a real rate of interest determines how fast the value of a pound invested now will increase. It is related to the `time preference' of money -the fact that normally people would rather have cash now than later and would prefer to pay bills later rather than sooner -and must not be confused with inflation.

The discount rate that should be used for all major procurement projects is as set out in the Treasury Green Book.

Comparing financial options

All other things being equal, the most beneficial option will be the one with the highest net present value (NPV) or the lowest net present cost. This is the basis for comparison and each option should be compared to the `do nothing' option.

Besides comparing NPV or net present cost, in some cases it may be appropriate to use the Payback method in some circumstances.

The Payback method measures the number of years required to produce a return on the original investment. It provides a crude measure of project risk. For certain types of project, for example, capital for revenue type schemes, a target payback period could be set as a criterion to appraise investments. Like the IRR, this method will only produce a result when the discounted financial benefits of the project outweigh the discounted costs.

Handling inflation

Normally net present values are calculated by expressing all costs and benefits in present value terms and applying a real discount rate. This approach is valid where all the factors included in the calculation are affected equally by inflation. However, here it is expected that some prices are likely to increase at a significantly faster or slower rate than

general inflation, this should be taken into account in the calculation. This is done by showing the effect of inflation on all costs and benefits at the appropriate rates and then by using a nominal discount rate which reflects anticipated general inflation. The formula for calculating the nominal discount rate is shown below.

The real discount rate is r = 3.5%, the inflation rate is a = 2.5% per annum, so the nominal discount rate is

r = (1+a)(1+r)-1

Inflation Rate 2.5000%

Real Discount Rate 3.5000%

Formula = r = (1+2.5000%)(1+3.5000%) - 1

= (1.025 x 1.035) - 1 = r

= 6.0875% = r = nominal discount rate.

Non-financial costs and benefits

Sometimes it is difficult to estimate absolute costs and benefits but easier to estimate the differences between options. The differences are the key factors in making comparisons.

To be able to compare costs and benefits which are not easily valued and are essentially qualitative it is necessary to score or rate each option on its contribution to the project objectives. In other words, rate each option against the extent to which it delivers what is being sought to achieve. This can be done by the use of a 0 - 10 scale where a zero rating is a measure of complete failure to deliver an objective and a 10 rating indicates that the option fully delivers the objective.

Objectives are unlikely to be of equal importance. To differentiate between essential and desirable objectives it is necessary to apply weighting factors to reflect the relative importance of each objective.

This ensures that the most important factors have the greatest influence on the outcome of the option appraisal. Using a weighting scale of 1 - 5 will usually be sufficient to ensure that the appropriate result is achieved.

Combining Financial and Non-Financial Factors

To assist identification of the preferred option, the following alternative approaches may be employed:

In the value for money solution, the total weighted score for the nonfinancial factors of each option is divided by the total net present value of whole life cost. The project with the highest value for money rating becomes the preferred option.

i.e. Total weighted score = Value for money rating

NPV whole life cost

9 ASSESSING AFFORDABILITY

In identifying costs and benefits and evaluating the options, projects have been assessed in terms of the competing merits of the investment options. However, there would be little point in adopting a solution that the Council could not afford and therefore the impact of the preferred option on the overall financial position of the Council must be assessed. This will involve distinguishing between those costs and benefits which have a direct impact in cash terms and those such as opportunity costs which impact on value for money but have no effect on affordability.

In particular the following factors will need to be looked at:

10 PRESENTATION OF RESULTS AND APPROVAL OF PREFERRED OPTION

The presentation of the results of an Option Appraisal is an aspect which deserves particular care. The important features of the appraisal must be set out clearly, in a logical order and all the relevant assumptions made clear. The appraisal should include discussion of the major unquantifiable costs and benefits. In addition it is important to record such details as the price basis and the base date for discounting.

The results of an appraisal should be set out in a report covering:

the strategic context and objectives

the options considered

the results obtained, in both financial and non-financial terms

the preferred option and how this compares with the alternatives

how the risks have been evaluated

the sensitivities of the preferred option to variations in key

assumptions

the impact of the project on the capital and revenue budgets

any procurement factors

how and when the project will be monitored and evaluated

Finally, the report should show in conclusion:

the option which is assessed to be the best value solution and the reasons for this

how the preferred option compares with the important alternatives

After taking a decision to proceed with a particular option, the appraisal needs to be kept under review. The initial appraisal will of necessity be based on coarse data which can be refined as the project progresses. Initial estimates will need to be confirmed as key decision points are reached and assumptions will need to be checked to ensure they are still valid.

Approvals Process

This process is yet to be finalised.

APPENDIX A - APPRAISAL CHECKLIST

EXECUTIVE SUMMARY - APPENDIX 7

1.1. Introduction

This Asset Management Plan is intended to cover the Financial Year 2006/2007. The Plan is a live document which will be constantly updated and action points revisited as necessary. Formal submission to Members will follow in the summer of 2006.

1.2. Context

The Asset Management Plan brings the property dimension into the Service Planning process and reflects the requirements of the Comprehensive Performance Assessment (CPA).

The council's property portfolio is currently held within two separate estates

This AMP concerns the Corporate Estate only.

The Corporate Estate is the collective name for the operational property portfolio of the Council. Corporate estate properties are those identified for the provision of front line service delivery. These mainly include Schools and other Educational Establishments, Social Services Buildings, Council Occupied Offices, Car Parks, Sports Centres, Leisure Facilities and Open Spaces, Heritage Buildings, Depots and Libraries.

Another major initiative is the need for an overall policy for the management of the Council's property assets. This Policy is in the course of being rolled out and contains 4 main elements

A7 Clarification of the Roles and Responsibilities of occupiers, Property Services and others.

A7 Confirmation of the allocation of properties to relevant Service Heads.

A7 Introduction of an overall revenue charge to cover the costs of occupation of all property.

A7 Implementation of a Property Performance Model which will inform both the Service Planning and Property Review processes.

1.3.

The following stages describe the AMP process

Data Management

Accurate and robust information in relation to the Council's property holdings is pivotal to all aspects of asset management. Over the past few years a considerable amount of work has been undertaken in this area and the quality of data improved significantly. These improvements and aspirations for further work are set out in the sections and Appendix 3.

Condition Surveys

Property Services undertake a programme of condition surveys to identify the condition of all elements of buildings and the extent of outstanding maintenance required.

A five year cycle of surveys has been developed and the vast majority of buildings have now been inspected. The 5 yearly surveys are reviewed during an intermediate annual structured site visit giving building managers an opportunity to influence property decisions such as Repairs and Maintenance.

Consultation

The best use of resources needs to complement where possible service delivery and reflect occupiers aspirations as part of the service planning process. This presently comprises three distinct areas:

a) Building Suitability

b) Property Division Performance

c) Project Performance

In addition further processes of consultation need to be introduced. The Capital Strategy and Asset Management Group (CS&AMG) is to be reformed with key internal stakeholders in its membership and this group will act as the forum for the advancement of improved asset management throughout the authority.

Property Performance Model

Condition surveys and consultation with building occupiers form 2 key elements and together with Service Planning generally provide an assessment of overall property performance. This information needs to be analysed to prepare an objective assessment of the various factors leading to an overall score by which properties can be compared. To address this problem a performance model has been developed as described below.

1.4.

The Property Review process takes the results from the Model and includes this within a more detailed examination of properties or groups of properties. The purpose of this is to ensure that a full picture of asset performance properly challenges overall performance. This stage becomes increasingly subjective when combined with the Service delivery process at HoS level.

Such reviews will comprise a joint exercise involving occupiers and the Client Services team in Property Services.

1.5. Conclusions

This AMP introduces the property perspective into the best use of Resources and the Service Planning process.

The CPA for 2005 included a mandatory requirement to have an up to date AMP, and for such plan to detail existing asset management arrangements and outcomes, and planned action to improve corporate asset use.

A need has been identified to improve management of the Capital programme and the establishment of a Capital Strategy and Asset Management Group is imminent.

The Council has developed a Property Performance Model to bring together assessments of the various aspects of the performance of properties.

It is further introducing a programme of Property Reviews to take the results from the Model and apply these to selected properties or groups of properties.

A detailed action plan sets out key activities to be put in hand during the life of the Plan and performance against these actions will be carefully monitored throughout.

THE ASSET REVIEW PROCESS - APPENDIX 8