Property Management

Commentary

By Marc Warner, Deputy Chief Executive, People Capability and Resources, Ministry of Social Development (MSD)

MSD has established the Property Management Centre of Expertise (PMCoE) in June 2011. The PMCoEprovides leadership, guidance, and support for all 64 public sector Departments and Crown agents and 11 other agencies that are involved on a voluntary basis. It is guided by a Deputy Chief Executive Advisory Group. Activities to date are:

• Providing a brokerage service. The PMCoE brokers surplus government accommodation, particularly in Wellington with agencies seeking leases of $250k to $1m per annum. Where surplus space in another agency can be arranged, rental costs are a direct saving to the Government. At the time this document was written, the PMCoE had active listings for approximately 20,000m² of space, and this amount is expected to increase as under-utilised space is identified and made available.
• Establishing an all-of-government property database. This database enables a portfolio view for the first time of the approximately 1000 office-style properties across New Zealand. It supports comparisons of performance; the development of cross-agency business cases; and the identification of opportunities for more efficient procurement, co-location, and rationalisation by geographical location or by occupancy type (e.g. call centres or in-person service delivery sites).
• Once complete, this database will support calculations and forecasts of the cost of office space and future efficiency gains, strategies for rationalising the portfolio, and earlier responses to government site disruptions such as the Christchurch earthquakes.
• Promoting good practice. An interactive property management community of practice supports knowledge-sharing and collaboration and includes a shared workspace with 70 users across government to date. The PMCoE plans to release draft guidelines for good property management practice for consultation in January 2012. In addition, the PMCoE releases case studies on its community of practice shared workspace on recent innovations of relevance to government agencies. Local examples of innovation include the new IRD head office, which features a flexible working environment and a performance based lease. The Government Communications Security Bureau and Tourism New Zealand also provide useful case studies for open plan and hot desk arrangements.
• Strengthening procurement. This work includes drafting a procurement plan that outlines property procurement opportunities over the next 12 months andworking with agencies to advance syndicated procurement. To date, two significant contracts (for design and construction and an integrated property management system) have been established. With the majority of agencies undertaking procurement processes each year at an administration cost of $10,000-$50,000 each, there are significant administrative savings for future additional all-of-government contracts.
• Responding to emergencies. The PMCoE is well placed to play a centralised co-ordination role for the Christchurch earthquakes and to support subsequent seismic assessments. Having a centralised capability maximises opportunities to share resources, avoids duplication, and ensures a consistent approach in times of rapid response and uncertainty.

The work undertaken by the PMCoE confirms that, over the medium to long term, the Government can make significant gross savings by reducing the m² per FTE. This report shows that reducing the m² per full time equivalent (FTE) from the current median of 19.5m² to 16m² would save a gross amount of $34 million each year across the 31 agencies. Indications from the three major business cases underway in Wellington confirm that targets of 12-16m² per FTE are realistic and can drive significant savings. Agencies participating in these business cases are all working to around 13m² per FTE, and across the approximately 3000 FTEs within these agencies, each square metre reduction per person saves around $1.2 million per annum.

Reducing our office footprint for traditional office space can realise significant savings. Even greater gains can be made from service delivery innovations that make use of new locations and new layouts. Improvements in individual agency property management practices are part of a much wider opportunity to better use our property portfolio collaboratively. The PMCoE is working with agencies to identify opportunities for colocation and to challenge the traditional decisions on location and layout.

Savings from reduced office footprints or implementing property management innovations tend to be medium to long term in nature. Because property contracts are generally long term in duration (5 years or more), and rental arrangements are usually reviewed at three year intervals with limited mechanisms for reductions, cash savings from contracts are generally only possible in the medium to long term. Recent increases in non-rental costs (e.g. rates and insurance) at the rate of inflation are likely to continue, so within current office footprints, property costs can be expected to increase even with good property management practices.

In the longer term, savings must be driven by a reduction in footprint. In the shorter term, savings can be made with reductions in costs other than rental, rates, and insurance; improvements in utilisation (especially colocation); and use of the PMCoE brokerage service.