15 Asset Management of Local Authority Land and Buildings – Good Practice Guidelines

3. ASSET MANAGEMENT PLANNING

3.1 This section covers five areas:

Introduction Asset Management Plans (AMPs) Responsibilities for AMPs Implementation of an AMP Audit and Review of AMPs.

INTRODUCTION

3.2 The previous section noted the definition of asset management as optimising the utilisation of assets in terms of service benefits and financial performance. Consequently, asset management planning is the systematic planning and documenting of how this is to be achieved.

3.3 A principal reason for developing asset management planning is to raise awareness of the financial resources invested in property assets and to develop strategies and programmes to ensure that they are deployed in the most effective way to meet the authority’s corporate and service objectives. In some cases this will mean ensuring that financial resources devoted to property assets are delivering better value than if they were invested elsewhere. There is an “opportunity cost” of locking financial resources in property and property assets should only continue to be held if they meet the current objectives (including financial) of the authority in the most cost-effective way.

ASSET MANAGEMENT PLANS (AMPS)

Aims of AMPs

3.4 The main overall aims of AMPs are:

To ensure efficient, effective and sustainable use of land and buildings.

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To minimise the opportunity cost of holding land and buildings and to protect the value of council assets.

To ensure that expenditure on land and buildings maximises value for money.

To ensure that the use of assets contributes to the process of service improvement.

To provide innovative accommodation solutions to service needs.

To ensure an explicit, co-ordinated approach to asset management across the authority, reflecting service needs (determined from stakeholder consultation).

To ensure the financial return from investment and surplus properties is maximised in an appropriate manner to meet financial requirements.

Objectives of AMPs

3.5 More specifically, the main objectives of an AMP are:

To make co-ordinated local decisions on spending priorities.

To be an integral part of the local authority business process and ensure national and local aims, objectives, and policies are linked to implementation.

To achieve commitment to action programmes.

To provide a useful management document on property asset strategy..

To provide assurance to stakeholders that assets are being managed in accordance with service needs.

To provide a regular review of property assets to identify areas where improvements can be made.

To identify specific opportunities for innovation.

To provide a framework for prioritising capital projects.

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To assist in the development of partnership projects/private sector partners.

To identify assets suitable for investment or disinvestment.

To identify opportunities to increase income and decrease expenditure.

Key Issues Associated with AMPs

3.6 There are a number of key issues which are associated with the production of AMPs.

3.7 They ensure a systematic and co-ordinated approach. If the overall objective of optimising asset utilisation is to be achieved, an explicit, systematic and co-ordinated approach is required. This is of particular relevance to local authorities, each of which have multiple objectives and various committees/ departments seeking to meet these various and sometimes conflicting objectives. Furthermore, in a restricted spending environment, it is essential that any creative opportunities in the portfolio are exploited. Systematic analysis and preparation of a plan will improve the likelihood of these opportunities being identified. Box 3.1 gives an example drawn from the case studies in the Research Project of the consequences of an uncoordinated approach.

Box 3.1

Departmental level planning

Where asset planning is undertaken at departmental level only, corporate priorities are overruled by short term departmental needs. An example would be the retention of a surplus old persons’ home for the alternative short-term accommodation needs of the Social Services department instead of the sale and realisation of capital receipts for the wider benefit of the authority. Localised planning makes corporate prioritisation of an authority’s asset programme extremely difficult.

Asset of Local Authority Land and Buildings – Good Practice Guidelines 18

3.8 AMPs should be tools for all types of Councils. Local authorities vary in their approach to managing property assets. At one extreme is the highly centralised approach where property responsibilities are held centrally. At the other are the devolved systems, where individual committees/departments are responsible for their own property. In centralised systems an explicit asset management plan (AMP) will provide a forum by which the “centre” can inform committees/departments what the corporate intentions and direction of the authority are in relation to property assets. In the case of devolved responsibilities for asset management, an AMP is needed to ensure that assets are managed in line with the authority’s core objectives. AMPs are important tools for implementing good asset management in all types of authorities. The Plan is one of the four main steps in the asset management process which are identified earlier in these guidelines (Figure 1.2), namely to:

1. Identify objectives, aims and policies2. Prepare plan3. Implementation of plan4. Audit and review the plan and its programmes.

3.9 Barriers to authority-wide asset management. Set out in Box 3.2 are two perceived barriers to authority-wide asset management planning highlighted in the DETR Research Project. These Guidelines are aimed at addressing the barriers as well as setting out good practice.

Box 3.2

Perceived barriers to authority-wide Asset Management Planning

1. A culture of powerful front-line services ‘owning’ the property they occupy/use, which in some authorities feeds down to individual sections of departments. This is not only undermining an authority-wide strategic approach but is also hindering co-ordination at service department level.

2. Uncertainty in the level of funding beyond the next 12 months, because of the annual nature of local government financing, does not support long term planning.

3.10 AMPs relationship with other council documents. The following diagram, Figure 3.1, explains how the AMP fits into the wider

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picture in relation to the Best Value Performance Plan and the Capital Strategy. It must also be remembered that the Council’s Asset Management Plan should cover all its land and building assets including housing and schools. However, these two services will be covered by their own asset documents (Housing Investment Programmes and DfEE Asset Management Plans). Whilst it will not be necessary to repeat the content of these other asset documents in the AMP, it will be necessary to adequately co-ordinate the content of the AMP with those documents and cross-reference them in the AMP.

FIGURE 3.1

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Content of AMPs

3.11 This Guidance is intended not to prescribe the exact format of an AMP but to set out the considerations in working towards one. Whilst the DETR is likely to use a Council’s AMP as one of the mechanisms for measuring, it will be left to the authority to decide what is appropriate in its own circumstances. The following pages focus on the overall content of an AMP.

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3.12 An AMP should comprise 5 main sections:

Overview of property aims, objectives and strategies Statement of current portfolio Key areas for change Preferred options for key areas Implementation programmes.

Overview of property aims, objectives and strategies

3.13 The first section should address how the Authority’s core objectives, as well as changes in services, will impact property asset requirements over the relevant time-scales. All relevant stakeholder requirements should be taken into account, as well as other resource strategies and their implications for property. It captures all the initiatives underway and draws out the property implications. It is an authority-wide document that sets the organisation’s high level objectives for managing property assets and could be considered part of an authority’s capital strategy. Box 3.3 lists some of the most frequently occurring objectives found in the case study authorities.

Box 3.3

Frequently recurring objectives that relate to land and property include:

minimising cost in use,

optimising the utilisation of land and buildings.

generating capital receipts

maximising return on investment

managing properties in the most economic, efficient and effective manner

ensuring that properties are appropriate for the delivery of the authority’s services and objectives

other less specific and less measurable objectives identified include:

improving the quality of investments ensuring accessibility to all ensuring that users recognise opportunity costs of property

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3.14 Some key points to remember when identifying aims, objectives and strategies are:

Ensure there is an explicit link to the Best Value Performance Plan.

Identify property implications of the Council’s core objectives and link property objectives directly to core objectives wherever possible.

Keep stakeholder consultation simple, starting with internal stakeholder consultation.

Use corporate, service and other related plans, if available, as a basis.

Take account of any previous internal or external audits or reviews.

Challenge why each property and each category of property continues to be held, via an objective review.

Statement of Current Portfolio

3.15 This section should summarise the position of the current property portfolio, in terms of how the properties perform against requirements. It may summarise property asset performance in relation to any targets that have been set. It should also summarise progress made since the previous AMP. It will be in this section that an annual performance review (the output of a performance measurement system} will feed into the AMP and will be used to inform the future strategy for the local authority’s property assets.

3.16 Some key points to remember when reviewing the current portfolio are:

Whilst the data for the review will be drawn from a database of individual properties, keep this review at the strategic level, only referring to individual properties where necessary.

Make a start, even if available information is limited and have to be made.

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Over time, move towards a more objective assessment using the performance review against targets as data becomes available.

Summarise the position on a category by category basis.

Examples of issues that might be covered in the review are listed in Box 3.4.

Box 3.4

Examples of Issues Covered in the Statement of the Current Portfolio

General description of portfolio by category of property Overall condition of the portfolio by category of property and category of condition Overview of running cots by category of property including maintenance Utilisation in relation to original requirements Value of portfolio Review of any capital projects completed since the last review focusing on their performance Review of performance of each category of property, in relation to existing standards and

targets Degree to which service and financial objectives are currently being met by category of

property (sub-divided if necessary) Improvements in performance since last review Areas requiring improvements before next review Appendix listing all properties.

Key Areas for change

3.17 This section should look into the future to predict what requirements will be in five to ten years’ time, taking into account future changes in, for example, service delivery, IT, working practices, etc. The future should then be compared with the present position.

3.18 Some key points to remember when identifying key areas for change are:

Identify areas of mismatch taking into account corporate priorities, resources and time-scales.

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Review projects already in the development stage to ensure they remain appropriate.

Identify realistic options for each key area, keeping them down to a few in number.

Undertake a preliminary assessment of possible options for each key area of mismatch.

Record the financial and service justification for selection, using simple but robust evaluation techniques.

Preferred options for key areas

3.19 This section identifies options to address the key areas for change and appraises these options. It will then identify the preferred option or options for each key area that will be pursued during the current year. It should identify priorities taking into account the corporate as well as the service perspectives.

3.20 Some key points to remember when identifying the preferred options for key areas are:

Consider authority-wide priorities and what resources are available.

Establish explicit mechanisms for determining priorities, which take into account strategic as well as local service objectives.

Use an explicit approach to evaluate the preferred options and resource implications, including the “do nothing” option where appropriate.

Keep a record of each option appraisal.

Implementation Programmes

3.21 This section identifies what actions should be undertaken to implement the preferred options, by whom and by when. It is here that the planned programmes such as the programme for disposals,

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property review and planned maintenance programme will feed into, and from, the asset management plan. It may also identify the critical success factors, which will be used to assess how well these programmes attain their purpose and these factors will clearly link to performance measures.

3.22 Some key points to remember when setting out the implementation programme:

Set out activities and allocate responsibilities explicitly for each activity.

Identify target time-scales explicitly.

Feed existing programmes, such as planned maintenance programmes, capital receipts and property review programmes, into this implementation programme.

Include a systematic programme of property review in the implementation programme, aimed at asking fundamental questions about the allocation of resources in line with the Best Value requirement to challenge the authority’s approach.

3.23 Box 3.5 below sets out an example of the asset management planning process in action in Composite Council, constructed from the case studies.

Box 3.5

Asset Management Planning in Composite Council

Composite Council was constructed from the case studies as an example of how a good practice authority might act.

1. Prepare overview of property aims, objectives and strategies

In September, the corporate property officer (CPO) reviews the Best Value Performance Plan, corporate plan and council’s core objectives to identify property implications, setting these down explicitly in a document.

In December, the CPO meets with each service department to discuss the property implications of their service plans for the coming year.

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In December CPO discusses the financial context with the Head of Corporate Finance regarding the commercial portfolio.

The CPO considers any previous internal or external audits or property reviews, to identify property implications for the coming year.

The CPO considers the programme of fundamental reviews and which areas of the property portfolio should be challenged in the coming year.

From all of the above, the CPO prepares a statement setting out the property aims, objectives and strategies identified, by the end of January.

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2. Prepare statement of current portfolio

In October/November, the CPO reviews the current portfolio, on a category by category basis, by investigating readily available property data on properties, value, use, condition and suitability, etc. from the performance measurement system, looking at whether targets have been met for the year.

CPO discusses the current portfolio’s performance with service departments as part of their meeting in December (see above).

CPO discusses the current performance of the commercial portfolio with the Head of Corporate Finance as part of their meeting in December (see above).

CPO prepares a review of the current portfolio, identifying which areas meet needs, but in particular identifying areas of concern, or where further investigations should be addressed

3. Identify key areas for change

Following the series of meetings in December, the CPO identifies the areas of mismatch between requirements and the current portfolio, bearing in mind corporate priorities, resources and time-scales.

The CPO reviews the current projects in the capital programme to ensure that they remain appropriate to the future needs and in line with current priorities.

The CPO considers each key area and identifies possible options, undertaking a SWOT analysis for each on a pro forma and undertaking investment appraisal, where appropriate. Departments are consulted, where relevant.

Following this analysis, the CPO identifies one or two realistic options for each key area and sets them out in a table.

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4. Identify preferred options for key areas

In September, the CPO prepares a framework for prioritising projects, based on the corporate core objectives identified in 1. above.

This is passed for approval to the strategic management team (eg. Chief Officers) and then circulated to all service departments, prior to the meetings in December.

Following 1., 2. and 3. above, the CPO reviews the options in the light of the corporate priority framework, scoring each option on a simple pro forma, including the “do nothing” option. Where appropriate, the options are subjected to investment appraisal.

The CPO prepares a schedule of options, which are to be actioned in the coming year.

This schedule of options is passed for approval to the strategic management team. in February.

5. Set out implementation programmes

The CPO considers the schedule of action, and groups activities into programme areas in an appropriate manner, identifying and allocating responsibilities and time-scales for each programme area. This includes all existing programmes including property review and the disposals program.

The implementation programmes are passed for final approval, along with all of the above documents prior to the beginning of the new financial year.

Scale of AMP

3.24 An AMP should be fit for purpose. It will be up to each authority, to determine the precise size, nature and contents of the document based on its unique circumstances. A short, succinct document for a small district local authority, which has limited property assets, should be appropriate. A larger county or urban authority with an extensive and valuable portfolio is likely to require a more extensive document.

Time period

3.25 Short, medium and long time frames. The AMP should define the period that it covers. While the AMP will be related to other

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corporate plans of the authority, the long lead times and gestation period for property projects and the “permanent” nature of property assets may necessitate that the AMP takes a longer view than other plans. This will require taking account of long-term trends and making assumptions about service delivery, property use, costs, values and other property related issues in the future. While the period covered by the AMP is not prescribed, it is suggested that the statement of aims and objectives should give the direction for the asset base in the long term (say, 5-10 years ahead), as well as considering service requirements in the short (1 year) and medium (2-5 years) period. The sections on key areas for action and preferred options for key areas should set out short, medium and long-term issues. Implementation programmes are more focussed on the short term - what steps should be taken this year.

RESPONSIBILITIES FOR DEVELOPING AN AMP

3.26 The combined responsibility of service departments and the corporate centre. Section 2 has already covered this issue but nonetheless it is worth repeating here. As the Audit Commission (1998) stated ‘Good property management is not an end in itself. It must clearly respond to the policies and objectives of the service areas. These in turn, will relate to the policies of the council as a whole.’ This can only be achieved by an integrated approach. Therefore, effective asset management is a process which will be a combination of both a “bottom-up” and “top down” approach, with service departments driving forward their requirements and the corporate centre setting the overall direction and framework, and pulling together all the elements. This integrated approach should also apply to the provision of property services (for example, estates, maintenance and building surveying, architecture, mechanical and electrical engineering).

3.27 Establish a corporate role. Several case study authorities in this research project suggested that a ‘bottom-up’ approach (generated by individual departments/committees) to preparing an authority-wide asset management plan would be the most practicable. Whilst there is recognition that service departments have an important role to play in asset management planning, the involvement of the strategic management team and members is essential in order to provide a steer on strategic direction and

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authority-wide objectives and initiatives. Three ‘good practice’ examples of approaches to departmental asset planning are set out in Box 3.6 below.

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Box 3.6

Approaches to Departmental Asset Planning

Burnley Metropolitan Borough Council allocates responsibility for producing service property plans to the central property team. The property plans are prepared after extensive consultation with service departments. This provides an integrated approach between individual departments and the corporate centre.

In Oxford City Council and Hertfordshire County Council, a framework for preparing property strategies is set out centrally for individual service committees to follow when preparing their property action plans/property strategies. This enables a co-ordinated approach that should then be collated into an authority-wide asset plan.

One option being considered by Wirral Metropolitan Borough Council is for significant property consequences of changes to service delivery to be explicitly set out in the Service Plans prepared by service departments. These should then be collated into an authority-wide asset plan.

3.28 Allocate roles and responsibilities clearly and explicitly. Since strategic asset management in local government is not yet well developed, local authorities should be encouraged to put in place appropriate management arrangements to ensure roles and responsibilities for corporate and service based asset management, and in particular asset management planning, are clear and explicit. The structure of an authority has a significant influence on its approach to asset management. Strong departmentalism has been highlighted as one of the main barriers to achieving co-ordination. Asset management is a ‘cross-cutting’ issue and the most effective asset management occurs when asset management responsibilities explicitly rest with a separate strategic property unit reporting to a specific committee with corporate-wide terms of reference. The draft bill - “Local Leadership, Local Choice” would have implications in terms of the appropriate decision-makers, perhaps resulting in scrutiny committees with an executive making the decisions. Implementation of AMP

3.29 Make it happen. As identified in Figure 1.2, once a plan has been developed this must be implemented as part of the asset management process. Key aspects to consider include:

explicitly allocating responsibility for implementation programmes

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establishing project teams

good project management

good resource allocation

project monitoring

start and finish dates.

AUDIT AND REVIEW OF AMP

3.30 Set a framework for change. An AMP is only a statement of intention, setting out the current position and plans for the future based on the position at a specific point in time. It is recognised that circumstances are constantly changing. There will be a need to respond to increasingly rapid changing circumstances, a need for continuous improvement under the Best Value regime and a need to develop the content of the AMP over time. Changes to the Plan should be documented and communicated to the relevant stakeholders. Systems will need to be developed to ensure that these changes are documented and shared.

3.31 Undertake an annual formal review of the AMP. Whilst there will be on-going amendments to the plan, there should be a formal review of the AMP on a yearly basis. This does not necessarily require a complete redrafting of the plan, but should be a reconsideration of all the issues. In particular, new implementation programmes will need to be set out, bearing in mind the progress made in the year and changes in direction and requirements.

3.32 Time the annual review in line with other business planning timetables. The timing of the annual AMP review should feed into the annual business planning process. Indeed it should not be considered a separate activity but an integral part of the overall strategic planning of the authority.

3.33 Develop a monitoring process. A monitoring process is required to ensure that the plan is implemented and to enable problems to be anticipated rather than correcting them after they occur. This monitoring process should be explicitly described and

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responsibilities allocated, along with the timing of any reviews. A review of progress against the implementation programme should be undertaken at least every three months.

3.34 Produce an annual report on performance. A review of performance against the implementation programme should be undertaken at the year-end. This should be included as part of the position statement in the following year’s asset management plan.