Meeting documents

1. THE ISSUE

1.1. The purpose of this report is to analyse the most suitable options for the replacement and consolidation of Council offices for Bath & North East Somerset Council.

1.2. The Council occupies 12 offices at present. Of these, 4 are held on a leasehold basis with the remaining 8 being freehold.

1.3. The accommodation provided within the 4 leasehold properties comprise approximately 55% of the Council's total occupation.

1.4. Three of the leases expire by 2011, with the fourth expiring in 2016. This gives the Council a window of opportunity within which to address its future accommodation needs. The Council has no security of tenure on one of the leasehold properties and it is likely will be required to give up occupation by August, 2011.

1.5. In parallel with this, the Council, in order to increase the effectiveness and efficiency of service delivery to its customers, has embarked on a major Transformation Programme comprising flexible working and lean reviews, which, along with other work-streams including NHS Bath and North East Somerset integration, will ultimately determine its overall office needs.

1.6. The report sets out the next steps and seeks approval formally to initiate the office rationalisation project based on one preferred site, or a combination of sites, for the consolidated offices.

2. RECOMMENDATION

2.1. The Cabinet agrees

2.1.1. to instruct the Chief Property Officer to pursue its preferred option from the four options in section 6.4 below, summarised as:-

Option 1: Continue with existing position

Option 2: Keynsham Town Centre New Build plus retention of Lewis House

Option 3: Keynsham Town Centre New Build

Option 4: Bath New Build

All options assume:

o retaining the Hollies, Midsomer Norton,

o retaining the Guildhall as the democratic decision-making presence in the centre of Bath,

o the provision of one-stop-shops in Bath, Keynsham and Midsomer Norton, and

o provision of appropriate `landing sites' (the numbers for which have been supplied by the Transformation Project Team to go in any final bid)

2.2. The recommendation of the Chief Property Officer is that Option 2 is the preferred option to pursue.

2.3. To instruct the Chief Property Officer to report back to Cabinet within 9 months with a detailed viability appraisal of the chosen option having completed a market assessment and market test.

3. CONTENTS

3.1. This report is structured as follows:-

o Financial Implications

o Corporate Priorities

o Background

o Vision

o Options analysis criteria

o Options analysis - summary

o Financial analysis - summary

o Next steps

o Conclusions

4. FINANCIAL IMPLICATIONS

4.1. The medium term financial implications of this project are set out in section 6.5. This shows that running costs (including finance charges) will be lower than the existing offices costs about 5 years after completion of the office moves. The project is being designed to achieve a financial return by saving space, improving energy efficiency and reducing maintenance expenditure.

4.2. In addition to the financial return referred to here there will be medium term savings in travel costs and improvements in efficiency derived from co-location of staff and new ways of working. This second category of savings is not dealt with in this report, cannot be accurately quantified at this stage, but compliments the 25% efficiency improvements being sought through the transformation programme.

4.3. In the short term there are costs associated with setting up the project. The project set up costs are summarised in Appendix 3 and total approximately £2.8 million over the next 4 years. These will be capitalised on the basis that the project will go ahead and will result in annual finance charges as set out in Appendix 3. These costs will then be recovered from the savings arising from the project in the medium term and may be reduced by sharing some of the costs with a development partner.

4.4. In the medium term there are other one off costs such as costs of staff relocation, dilapidations and office moves. These costs occur principally from 2012-13 and for the following 4 years as set out in Appendix 3. Initial estimates suggest these costs could be in the region of £3.5 million and the majority of these would need to be met from revenue reserves as they arose. The assumption at this stage is that they will be treated as an invest to save item in future budgets. The report in 9 months time will look at these assumptions in more detail and explore the extent to which these costs can be mitigated or avoided.

4.5. The above sections (4.3 and 4.4) set out the revenue costs that need to be financed before the project makes a return and suggest the methods of finance. The draft budget for 2009-10 includes the finance costs of the initial project expenditure and the initial project costs as a line in the capital programme. The main project costs are not yet included in the draft capital programme as at this stage the method of financing the project has yet to be determined. This will depend on the development partnership that is entered into and this is a key element of the next report. This options appraisal assumes that the new build aspect of the project will be financed through borrowing, but this is purely to enable like for like comparisons with existing costs.

4.6. The financial risk at this stage is the initial project expenditure. In the period to the next report, in about 9 months time, this will be in the region of £0.8 million. The main risk is that there will be a need to charge some or all of this to revenue, rather than capital, if it is decided to terminate this project at the next review. This would become a new call on the Council's reserves should this contingency materialise. It is more likely that if market conditions are difficult seeking a development partner may be delayed and as a result aspects of the overall project will be delayed.

5. CORPORATE PRIORITIES

5.1. The proposals contained within this report contribute to delivery of all eight of the Council priorities. Any change to the existing position will provide an opportunity to improve the Council's carbon footprint, and sustainable growth.

6. THE REPORT

6.1. Background

6.1.1. The pattern of office provision dates back to the creation of the unitary authority in 1996, when the Council occupied 20 offices. Over the years this has been reduced to 12 main offices which provide for circa 1600 staff.

6.1.2. The current type, location and mix of office accommodation limits open and efficient working practices needed to improve delivery of services, and are not suited to the strategic and operational needs of the Council. In particular, the present arrangements do not maximise the opportunities to:-

o Create a "one Council" culture,

o Integrate the strategic or commissioning roles of the Council and key partners on fewer sites,

o Integrate front office arrangements (contact with the public in `one-stop-shops')

6.1.3. The consequences of the current office arrangements include :

o too much time travelling between sites

o imperfect communication with excessive reliance on email

o imperfect arrangements for meeting members of the public and co-ordinating services for the public

o inefficient use of Council property assets

6.2. Vision

6.2.1. The Vision is to:-

Create a more joined-up approach with other public service providers to improve services for the public

o Integrate other public service strategic and commissioning roles in the broad-based partnership with NHS Bath and North East Somerset but also, over time, potentially involving the police and others

o Develop a combined public sector approach for contact with the public

Provide a better working environment to improve performance

o Consolidate all strategic and administrative functions into as few offices as possible.

o Use the office integration as a catalyst for further development of a `one Council' culture

o Develop a modern working environment making best use of information technology and flexible working

Reduce the Council's carbon footprint

o Reduce the Council's carbon footprint by improving energy efficiency of its buildings and by reducing business travel

o Reducing the space required for new offices through flexible working

o Enable the public to gain access to services locally more effectively by web, phone or through one- stop-shops.

Support regeneration of the local economy

o Rationalise office provision in a way that supports and develops the local economies taking into account relative levels of need and prosperity.

Maintain strong community leadership and civic pride

o Retain the Council's democratic decision making presence in the centre of Bath within the Guildhall

o Retain the Hollies in Midsomer Norton.

o Enable public sector and voluntary sector partners to make better use of the Council's facilities for public and partnership meetings.

Produce a sound business case for any changes in office accommodation

o Improve the standard of offices, reduce energy use and help protect the Council from rising energy costs, with no net increase in the ongoing cost of administrative and strategic office accommodation.

6.2.2. The pattern of office provision emerging from the achievement of this vision could be :-

o No more than two / three strategic and administrative headquarters occupied by the Council and NHS Bath and North East Somerset.

o A multi-agency one-stop-shop in each of the three main settlements - Bath, Keynsham and Midsomer Norton

o Improved access to Council services through other local Council facilities, such as libraries.

6.2.3. The extent to which post offices and other local facilities can be involved in this vision has yet to be assessed. The Council has already agreed that it wishes to explore options.

6.3. Options Analysis Criteria

6.3.1. The criteria to be used in evaluating the options need to flow from the Vision. Accordingly the main criteria selected are as follows:-

o Number of strategic and administrative offices required

o Suitability, flexibility and deliverability of the offices for other public sector partners

o Energy-efficiency and carbon footprint of new offices

o Contribution to the local economy - positive or negative

o Net ongoing costs including debt charges and energy usage

6.3.2. In addition to the above, it is assumed that any of the competing options will be associated with :-

o An assumption that

• The corporate / commissioning arm of the NHS Bath and North East Somerset Health and Social Care Integration Project will be housed within the accommodation provided by this project.
  
• The delivery arm of Health and Social Care will be housed in alternative accommodation including St Martins Hospital site.

o Improved one-stop-shops for Council and other public-sector services

• Consolidate the public `face to face contact' for Council services in Bath into one location only (location to form a separate decision)
  
• Retain and improve the one-stop-shop facilities in Keynsham and Midsomer Norton.
  
• Increasingly involve other public sector agencies and partners in the one-stop-shops
  
• Enable outreach services from local facilities, such as libraries, to improve local access to public services and potentially to involve the post office in this initiative.

o The democratic decision-making hub remaining at the Guildhall

o `Landing-sites' to be provided to enable staff to `hot-desk' when they are working away from their normal base - numbers to be determined by need in each of Bath, Keynsham, and Midsomer Norton.

o Better use of information technology to enable staff to work out in the field using mobile technology without the need to return to an office base.

o A separate depot for Council services such as refuse collection, highways and grounds maintenance

o Green travel plans and good connectivity to public transport for the main office locations.

o Support and encouragement for staff to travel to, from and for work in as environmentally-friendly a way as is practicable

6.3.3. There are various mitigating solutions that can help resolve the potential divergence between some of the criteria:-

o Exemplar energy efficiency standards to overcome the carbon impact of any new build

o Combining strategic and commissioning roles in one location with operational roles in other location(s) or an alternative strategy to allocate robustly the right locations to staff.

6.4. Options Analysis Summary

6.4.1. From an initial site search involving some 38 locations across the area, 4 have been selected for consideration.

6.4.2. The relative merits of the four most viable options are compared with the existing pattern of office provision:

6.4.3. Existing Position

o The existing position is a benchmark against which to compare other options for financial modelling purposes.

o The pattern of lease expiry dates for existing accommodation necessitates some rationalisation by 2011. There is not, therefore, a 'no change' option.

o Incurs disruption and "decant" costs without achieving any of the strategic objectives in the vision set out in this paper.

o Energy efficiency of existing buildings requires major investment to reduce the carbon footprint of the Council which has a 2% annual improvement target that may soon increase.

o Unless major refurbishment works are carried out, the life expectancy of Riverside, in Keynsham, as useful offices is limited without major investment by the Council's landlord.

o Keynsham Town Hall relates badly to the town centre. It has a central location and poor visual impact and requires separate dedicated staff to offer proper reception facilities.

o Existing buildings make poor use of space as a result of layout, separate internal offices and need to replicate reception facilities, resulting in a space standard of 15.9m² per work space (excluding buildings with public rooms) compared with the anticipated standard of 12m² work-space expected with a new build.

o Existing working patterns do not make best use of technology to enable flexible working, minimise travel and reduce office space requirements.

6.4.4. Keynsham New Build Plus Retention of Lewis House

o Locates staff in 3 locations - Bath, Keynsham and The Hollies, Midsomer Norton

o Achieves all the objectives inherent in the vision (6.2.1)

o Provides potentially the lowest costs but the final figures are difficult to estimate in detail as they are dependent on both market conditions and the outcome of negotiations with potential development partner(s).

o Provides an anchor for the proposed Keynsham Town Centre redevelopment.

o Offers a real opportunity for inward private investment into Bath by releasing approximately 450 desk spaces within vacated premises for use by the private sector. In economic terms, this is worth in the region of £9- 10M per annum to the City.

o The allocation of space within the 3 centres will have to be handled robustly.

This option and the following option both involve:

• As a first phase, demolishing the existing Keynsham Town Hall (including the offices, library, on-site shops and decked car park) and replacing it with a mixture of new shops, a Council One Stop Shop, a new library, new Council offices and, as yet, unidentified third party uses.
  
• Retaining Council staff in Riverside whilst the Town Hall Development takes place.
  
• The possibility, subject to negotiation and agreement, of redeveloping the Riverside building as a second phase to complement regeneration within the town.

6.4.5. Keynsham Town Centre New Build

o Locates all staff on 2 sites - Keynsham and The Hollies, Midsomer Norton.

o Achieves all the objectives in the vision (6.2.1) except is likely to have an increased net annual running cost.

o Provides second lowest costs albeit there is uncertainty about the new build costs until a detailed design has been prepared, specified and costed and negotiations with the development partner(s) are concluded.

o Creates the opportunity to design a high-quality working environment as well as achieving excellent energy efficiency standards.

6.4.6. Bath New Build

o Locates all staff on 2 sites - Bath and the Hollies, Midsomer Norton.

o Provides the most expensive option and there remains uncertainty about the new-build costs until a detailed design has been prepared, specified and tendered.

o Frees up the Council office site in Keynsham for redevelopment, although it potentially makes delivery of a town-centre redevelopment more difficult without the Council as a key occupant.

o Creates the opportunity to design a high quality working environment as well as achieving excellent energy efficiency standards.

o Would mean that a major office development in Bath would be taken by public sector when there is high demand for private sector office space

6.5. Financial Analysis - Summary

6.5.1. The finances for this project are summarised in the attached Appendix 1 Parts (a) and (b).

• An office relocation scheme based on the option of retaining Lewis House in Bath and a new set of offices on the Keynsham Town Hall site (as part of a wider redevelopment) has the potential to pay for itself through reduced running costs.
  
• The running costs of this option might be in region of £200,000 lower than the existing costs, the higher the increases in fuel costs the better the return

6.5.2. The conclusions of the financial appraisal are that:

• there will be one-off revenue costs including of relocating staff which will be paid for by reduced running costs starting in year 5 after completion and taking about 10 years to repay
  
• none of the other options achieve a significant return
  
• the scheme is only viable if a 40% reduction in workstations can be achieved through removing workstations that are empty most of the time, different work practices to enable sharing of workstations, and some additional working from home where the job has been assessed as suitable for this (and ICT and performance management arrangements are in place). A financial sensitivity analysis showing 20% 30% and 40% is attached as Appendix 2.

6.5.3. There are large uncertainties about costs at this early stage and the figures enable options appraisal and indicate viability, rather then being detailed scheme costs.

6.5.4. The scheme will relate closely with aspects of regeneration of Keynsham and Bath, irrespective of the option selected. There are related but separate costs and opportunities not included in this options appraisal.

• replacing the library on the Keynsham Town Hall site would need to be linked to any Keynsham office scheme but is not costed as part of this project - there is an opportunity to renew and upgrade the library facility and potentially to gain an external contribution towards this through the wider regeneration scheme
  
• S106 planning contributions have not been assessed in detail at this stage. The assumption is that any improvements would relate to and be borne by the wider regeneration scheme that would see the redevelopment of the Riverside Offices (phase ii of a Keynsham scheme)
  
• On the other hand no savings have been assumed through reducing the net operational costs of the Guildhall although each option potentially results in substantial vacant space in the offices in the Guildhall. The aim would be to identify alternative and more appropriate uses for the accommodation within the building. In this respect, a property advisor with experience in the field of rejuvenating the uses of civic buildings will be briefed to produce options for innovative uses of the accommodation released. The project will need to be capable of responding flexibly to the outcome of this separate piece of work.

6.5.5. As this is an options appraisal, costs have been expressed as revenue implications so that it is possible to compare like with like and to enable the exiting pattern of office provision to be used as a benchmark.

6.5.6. Some of the other key assumptions are as follows:

• Relative rates of inflation can affect the options appraisal - higher construction costs inflation favours less new construction but higher energy inflation favours more efficient new buildings
  
• Excellent energy efficiency standards are assumed
  
• A space standard of 12 sq.m. per workspace is assumed. This is based on gross internal area (GIA) which is defined as the entire space from the inside faces of the external walls with no exclusions.

6.5.7. The financing of the project will depend on the option selected, and would be subject to later decisions. The basic approach proposed is as follows:-

o Capital costs of new offices, office acquisition and new information technology assumed to be netted-off by capital receipts from related disposals and otherwise funded from borrowing. Timing differences between expenditure and capital receipts also assumed to be funded by borrowing or by the structure of any development agreement. It is hoped / expected that the net effect on revenue budgets can be kept neutral depending on the option selected.

o One-off revenue costs are likely to include :

• The debt charges on the timing differences referred to above, and the
  
• Payments/compensation for extra travel to employees (for 4 years) would be funded from reserves, with the costs being determined following negotiations with the Trades Union linked clearly to other potential savings e.g. car parking permits and existing / future contracts with staff.
  
• If the scheme goes ahead, project and consultancy costs can be capitalised, together with decommissioning costs, including fees on sale of buildings

o It is assumed that the NHS Bath and North East Somerset and any other public sector partners would be charged an appropriate annual amount based on the amount of space they occupy and appropriate rental levels and service charges for the accommodation and services they use. There will have to be pro-rata processes put in place in respect of similar charging arrangements relative to any use of accommodation at St Martin's, Bath.

6.5.8. The approval for the financial package will require the consideration of Council as part of the budget process as there is a need for :-

o Appropriate capital provision which will form a new item in the capital programme

o Release of revenue reserves at the appropriate time and the earmarking of reserves until that time.

6.5.9. The figures in this report should be regarded as suitable for options appraisal only at this stage and not for creating detailed budget estimates. Regular reports on the financial impact will be presented to Cabinet, together with progress on the delivery structure.

6.6. Next Steps

6.6.1. The following steps are appropriate once a decision has been made about the preferred option for office provision.

General

o Set up a dedicated and fully-resourced project team.

o Review financial viability and project deliverability in detail and report back to Cabinet within 9 months.

o Produce Project Initiation Document

Main Offices

• Needs of NHS Bath and North East Somerset and other public sector partners for shared main office accommodation needs to be assessed in detail
  
• Scope for flexible working and impact on space requirement, backed by a robust delivery plan
  
• Assess Impact of Planning constraints on the project, including linkages with the master-planning work to support the vision for Keynsham (if that location is chosen to be part of the solution for future main office accommodation)
  
• Produce master-plan for the town centre site (potentially with other landowners depending on extent of site) and secure master-plan gains formal Planning status
  
• Carry out market testing to identify potential end-users in the mixed development (essential in a weak/untested market such as Keynsham) also same for Guildhall (those parts presently used as offices )
  
• Tactical plan to enable works and acquisitions to be phased taking into account the Council's end dates on leases for some of the existing accommodation.
  
• Produce new customer access strategy to develop Council Connect into something that could become Citizen Connect involving public sector and other partners.
  
• Precise space standards to be refined after further consultation.
  
• Design options to be developed for new build, including confirmation of excellent sustainability standards and general specification

Local Access to Services

• Best location for the one-stop-shop for Bath
  
• Specification for any changes to the two other one-stop-shops
  
• Proposals for outreach contact using libraries or other community facilities, possibly including post offices.

7. CONCLUSIONS

• Variations in any of the financial assumptions leading to cost increases
  
• Market forces and accessibility to funding by development partner(s)
  
• Delays or difficulty in obtaining planning consents
  
• Tactical property moves being completed on timely basis as existing leases expire
  
• Poor quality offices, rising repair bills and health and safety issues if the project does not go ahead
  
• Challenges associated with implementing new ways of working and reduce numbers of workstations to reduce office space requirement
  
• Risks in associated projects to redevelop the Keynsham library and the Riverside site (including the leisure facilities) as a phase 2 of a Keynsham based scheme
  
• A serious adverse effect on the Keynsham economy if all Council staff based there were to move to Bath and a lack of a catalyst for regeneration of the Keynsham economy if no office redevelopment takes place there as part of a wider town centre scheme