25 June 2010
The government estate is ripe for further savings, but not all in the lifetime of this Parliament and that can be difficult for ministers to understand. That was the message from Mike Burt, former director of government estate transformation at the Office of Government Commerce who has been loaned to the government’s Shareholder Executive Property Unit, speaking at yesterday’s
IPD Occupiers Property in Business Conference 2010.
“There are significant savings opportunities, but unlike commodity savings, they won’t be achieved in a year. It will take 10-15 years for the big savings to be realised and it’s difficult for ministers to grasp this as they deal in four-year time frames,” Burt told delegates.
Existing savings from the central government estate in 2010/11 are expected to be around £55m, he added, while three-quarters of the predicted £1bn a year savings by 2013/14 from the Central Government High Performing Property had been delivered. In many areas the public sector estate was as good as, and even better, than the performance of the private sector.
Burt expressed surprise – and a hint of disappointment – that it had taken six weeks since the election for any announcements about the role that property was going to play in the expected cost-cutting. “I expected the new government to hit the ground running on the new agenda for property,” he said. The Public Sector property portfolio worth £370bn and costs around £25bn a year to run, so there are plenty of opportunity for savings, he said.
But another relocation of civil servants out of London was not necessarily the answer, he added. Big savings could be achieved by centralising estates functions across the public sector – towards (but not as far as) the centralised command and control model adopted after the Second World War, Burt said.
In the future the government “will flex its purchasing muscle and be much more demanding as a client”, Burt warned. “Suppliers have played government department off against each other and made a killing, that’s got to stop.” The era of 25-year sale and leaseback was over, he added. “The future is all about short tenures and flexible use of property.”
Burt’s comments echoed those of Barry Varcoe, chairman of CoreNet Global who argued that the FM and property sectors needed drastic change. “We have reached the edge of the envelope of performance on our current way of doing things. We must change or we will become irrelevant and get caught in a cost spiral with less and less cost meaning less and less value.”
Varcoe discussed the conclusions of his recent PHD research which revealed that there was no relationship in FM between cost, service quality and satisfaction. “In most industries, if you spend more, you get high quality and more satisfaction. But that’s not the case in our industry,” he argued. Nothing is connected, there is no cause and effect and so the industry cannot improve, he said. “It is an industry built on sand. Or a beautiful sandcastle that will fall to pieces when the storm hits or the sea comes in.”
Describing it as a crisis point for the industry, Varcoe argued the solution lay in three numbers 12, 1:3 and 80: 12 sq m for each work setting; 1:3 the ratio of desks to people; and 80, the percentage of utilization for each work setting. The current reality, he concluded, was closer to 20, 0.8 and 50.
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