Supporting local public services through change. Getting more from strategic commissioning
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- Cornelius Young
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1 Supporting local public services through change Getting more from strategic commissioning
2 Public buildings house the meeting places, books, clinical equipment, blue light vehicles, sports facilities, care beds, classrooms and workspace used by our communities and the staff who work on their behalf. The current fiscal environment dictates that savings be found from property and facilities management, in order to protect the front-line. More effective use of the 370bn of public buildings is crucial to public sector efficiency and reform. 1 saved on rent, heating, lighting and maintenance is 1 extra to the front-line. Innovative yet practical solutions are called for; solutions that link property with service design, finance, technology, customer demand, working practices and commercial excellence.
3 The public sector property challenge Government owned property is currently valued at 370bn and costs 25bn a year to run. Local public service property accounts for approximately two-thirds of this value. At a time of unprecedented austerity and business change, real estate has a critical role in releasing cash and supporting organisations change their operating models and service delivery. With unprecedented budget deficits and concerns over medium-term financial plans, property inefficiency is no longer affordable. However, changing the current model creates challenges, for example: Reducing spend on operational property without compromising service provision to citizens Responding rapidly to changes in the operating model (e.g., headcount reduction, strategic commissioning) with limited resources to plan and reconfigure the portfolio Taking costs out of facilities management that are sustainable and quick to implement Collaborating with other organisations, without delaying your own efficiency initiatives Creating new income streams from property and using surplus and retained assets to bring in more cash, employment and social infrastructure. Optimising property means responding to these challenges, using limited available resources and having to balance often conflicting objectives. Reasons for better management of public property: Property is an important service delivery channel for customers requiring face to face advice Buildings provide the infrastructure for efficient processes and service designs e.g., workspace influences corporate culture, customer-centric ways of working and productivity Property is commonly the highest revenue cost after staff and the number one generator assets of CO2 Property and building services can play a critical role in place shaping, supporting the local economy and regeneration Estimated savings potential from the local public estate Scotland 500mn savings potential We have identified 20 30% savings that can be made through rationalisation of operational portfolios. England 6bn savings potential West Midlands 600mn savings opportunity Essex target savings 150mn 1
4 Tackling the challenges EY regularly supports high profile organisations in the public and private sectors deliver efficiency and performance improvement in property. Driving efficiencies in the public sector estate commonly involves: A prioritised and costed improvement programme Identify high benefit initiatives for streamlining property and facilities management, including through collaboration; prioritise according to speed, benefit and ease of implementation. Re-configuring the property portfolio This can range from sharing front-line and support facilities with other public sector bodies to re-thinking the use of office space, whilst recognising dependencies with IT, new ways of working and the local economy. Reducing the service property portfolio involves challenging your dependency on property and developing detailed cases for reconfiguring, reducing and better utilising the portfolio in support of new service designs. Reducing facilities management costs Reduce FM costs by up to 20% by redesigning internal service organisations, smarter procurement, benchmarking and contract reviews. Plug value leakage and clawback value, particularly where payment and performance measurement regimes are complex or opaque. New delivery models Structure, test, procure and review arrangements for delivering property services and capital assets. A vision for property optimisation By 2015 your organisation would have saved money and carbon through efficient use of your estate and reinvested this saving into the frontline. Your property services team will be considered a centre of excellence and integrally involved in supporting the improvement of services to citizens. You will have established property partnerships with other public and voluntary sector organisations to deliver more for less. You will have delivered 30% savings through intensifying the use of space, sharing facilities, moving customer access to other channels and reducing dependency on assets. You will have an asset vehicle to leverage value from surplus and economic assets. Your suppliers will be adaptable to change and working in partnership with you to identify the best solutions. Flexible working practices will be a norm and supported by modern workspace and technology 2015 Portfolio contributes to increased income generation and external funding More efficient FM sourcing and contract management Portfolio supports new service designs, better customer access and flexible working Leaner and greener portfolio with significant revenue savings, capital receipts, carbon reduction 2
5 Identifying savings within an operational portfolio A Council s senior management team identified property as an area where potentially significant savings could be made to address future budget deficits and carbon targets. Their challenges included a tight time scale and the need to improve front-line service quality and avoid indiscriminate cuts. EY were commissioned to understand the source and size of the potential efficiency savings through better deployment of property assets used by council service departments. We also helped to prioritise the changes required to release these savings. We worked with the Council to realise the efficiency and improvement opportunities within their operational portfolio, including office properties. This involved challenging services dependency on property and preconceptions and embracing principles such as: The building is not the service Service quality is not proportional to the number of buildings We found that much of the low lying fruit had already been picked, but by shifting delivery channels and moving to multi-service buildings up to 2mn of additional revenue savings were possible. Supporting West Yorkshire Police EY were responsible for leading preparation of a business case for a new corporate HQ and re-location of the existing training centre. This involved working closely with the Force, liaising with department heads and presenting to the Command Team and Police Authority. In addition, Ernst & Young also undertook organisation design work with the Estates Department, helping establish a new structure, systems and processes focused on improving the overall level of service provided to the Force. We have recently appointed EY as financial advisor on the Divisional HQ programme to help in preparation of the business case, liaison with Home Office and review of the estate rationalisation plans. Nigel Brook Assistant Chief Constable, West Yorkshire Police 3
6 How can EY help? Complexity is a common feature of real estate change programmes. Success depends on prioritising the right programme and on managing the risks and dependencies between legal, technology, people and finance, as well as property. We can help public sector organisations: Rapidly realign real estate to the changing business such as responding to changes in headcount, customer contact strategy, the personalisation agenda, commissioning, joined up service delivery and community budgets Quickly improve the use of resources by: Reducing floor space Reducing FM costs Leveraging value from assets e.g., creating income streams and investment We can help you to accelerate property optimisation using our real estate excelerator toolkit which comprises six linked solutions Real Estate Excelerator Identify Diagnose Design Deliver Estate Diagnostic Accelerated portfolio streamlining Office Workspace FM Cost Reduction Excelerator Collaboration Excelerator New Delivery Models and Procurement Delivering Successful Real Estate Programmes and Sustaining Benefits 4
7 Supporting local public services through change Why EY? EY recognises that public sector property and asset management influences the public debt, confidence in public services, productivity and efficiency savings. Our dedicated local public services real estate team advise on how to plan, fund, deliver and manage efficient and optimised property portfolios, drawing on advisors in service redesign, change management, sustainability, construction, finance, tax, HR, technology and programme management. Our focus is on facilitating benefits from property collaboration, optimising portfolio rationalisation, accelerating cost reduction and new delivery vehicles. Our wide-range of technical professional competencies is key to offering both impartial strategic advice and successfully delivering complex change programmes. To find out more contact: Our real estate team is part of a multidisciplinary practice focused on the local government sectors. Simplicity: our approach involves an initial assessment to quickly identify and focus on actions to actually realise savings and/or help to deliver the strategic change you need. Collaborative: we will work alongside you and equip your team with the knowledge to effectively monitor, review and achieve savings in the future. Experienced: the products are tried and tested, reduce cost and realise greater cashable savings in a shorter period of time. Darra Singh Partner Local Public Services Neil Sartorio Director Local Public Services dsingh@uk.ey.com nsartorio@uk.ey.com Risk and reward: our commercial offer is grounded firmly in the tangible benefits delivered to you. 5
8 EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. Ernst & Young LLP The UK firm Ernst & Young LLP is a limited liability partnership registered in England and Wales with registered number OC and is a member firm of Ernst & Young Global Limited. Ernst & Young LLP, 1 More London Place, London, SE1 2AF Ernst & Young LLP. Published in the UK. All Rights Reserved. ED None indd (UK) 02/16. Artwork by Creative Services Group Design. Information in this publication is intended to provide only a general outline of the subjects covered. It should neither be regarded as comprehensive nor sufficient for making decisions, nor should it be used in place of professional advice. Ernst & Young LLP accepts no responsibility for any loss arising from any action taken or not taken by anyone using this material. ey.com/uk
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