University of Edinburgh

EPAG 31/9/09 Paper 2.3 University of Edinburgh

Estates Advisory Group [EPAG]

31 March 2009

Maintenance Programmes & Condition update

Brief description of the paper

This paper provides comment and an update on the non-residential and residential major replacement /legislation non-compliance programme including building performance assessment update and backlog maintenance programme for 2007/08. It provides a report on the current programme for 2008/09 for the core and residential estate. It highlights the funding issues and presents the provisional programme of works for 2009/10. An update on the building performance assessment is also provided. Special funding is sought for condition items presenting a significantly increased risk linked to the capital programme and other strategic priority changes. The cost of which can not be accommodated within the Major Replacement programme.

Action requested

EPAG is asked to note the progress to date on the 2007/08 and 2008/09 programmes.

EPAG is invited to endorse a recommendation that the provisional 2009/10 non-residential Major Replacement Programme be implemented. It is acknowledged that the actual programme for 2009/10 will be contingent upon the Planning and Budgeting outcome but the prioritisation of projects will be retained.

EPAG is also invited to endorse a recommendation that the 2009/10 residential Major Replacement Programme be implemented within the funds available to Accommodation Services.

EPAG is invited to endorse the request for the special funding for items of significantly increased risk identified in the paper, Appendix 3

Resource implications

EPAG is asked to note that the anticipated level of funding for the core estate falls short of the funding regarded as appropriate relative to the projected backlog over the next 10 years. Special funding is also sought for significantly increased risk items linked to the capital programme and other strategic priority changes identified in the paper.

Equality and Diversity No implications

Any other relevant information None

Freedom of information Can this paper be included in open business? Yes

Originator of the paper

John Leishman Depute Director Estates and Buildings

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Maintenance Programmes & Condition update

Non-Residential and Residential Major Replacement/Legislation Non-Compliance Programme including Building Performance Assessment Update

2007/08 budget

At the beginning of the year it was anticipated that funding of around £5.5M would be available for backlog and legislation compliance work in the Core Estate. This was however enhanced by a special allocation from the Scottish Funding Council of £1.6M. As the funds were received mid year and with the proviso that it had to be spent by the end of the financial year it meant that the list of works progressed was drawn up on the basis of what could be done rather than items of greater priority but requiring a greater lead in time. A list of the additional works funded from the SFC allocation is attached in Appendix 1 for information. This funding came at a time when unplanned work was being undertaken on the external façade of the Appleton Tower and the opportunity to fund these works from the SFC source was taken to avoid impacting on the planned programme previously submitted.

The target for backlog maintenance expenditure was therefore exceeded as a result of the additional funding from the SFC and by restricting the reactive spend and maximising our income, producing an end of year expenditure of around £7.3M

The backlog maintenance programme for the Residential estate for 07/08 submitted to EPAG in December 2006 was £2,400k the expenditure however was £1136k. Although not at the level anticipated it is regarded as adequate taking into consideration the overall condition of the Residential Estate.

2008/09 budget

At this point in the financial year we are on course to spend in the region of £5.4M on backlog maintenance on the Core Estate. In addition to this we have a programme of works on the Roslin Estate amounting to £75k generally addressing items of legislative compliance and ensuring business continuity until the EBRC building is in place. A Small Works programme is also being undertaken and the combined programme is outlined in Appendix 2 The Residential estate has a programme of works in place and we are on course to spend in the region of £1500k

Market Conditions

Maintenance costs have continued to rise above University budget inflation rates but we are likely to see a change in the coming years. For the Financial Year 07/08 the rate of maintenance inflation in the Private Sector was around 3.8% and the forecast for the 08/09 is around 4.8%. The projected figure for 09/10 is around 4.5%. These figures are projections from the Building Cost Information Service in the RICS as at January 2009. In the current economic climate this may be rather pessimistic, however wage agreements in the construction industry are already in place averaging around 5% and imported materials have increased in price as a result of the falling pound. The construction market on the other hand is extremely competitive with output forecast to drop by 8.5% in 2009 and a further 4% in 2010. Tender prices are forecast to drop by 5.24% in the latter part of the university financial year 08/09 and by 5.96% in 09/10. At the moment it is anticipated that tenders for maintenance works will follow suit but perhaps to a lesser degree. This potentially means the University should be getting a little more for their money over the next couple of years than previously forecast.

Backlog Maintenance

Last year we estimated the backlog maintenance and legislative compliance to be around £161M over a ten year period till 2018, for the core estate.

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We have carried out our annual review through our Premises Teams using the Kennedy, Drake and Kanneymeyer (KDK) survey and we now estimate the backlog to be in the region of £170M over the next ten years till 2019. This takes into account the work being planned for this year, the contribution of the capital programme and our planned disposals. There is also an allowance of 4.5% to cover the predicted inflation for 09/10. This was the forecast as at January 2009 and the trend since then has seen the inflation in construction tenders falling and this will likely have a similar impact on the Maintenance tenders for backlog work. In broad terms however this still suggests that we should be spending around £17M per annum if we are to keep pace with our deteriorating estate and the backlog legislative non-compliance. In our professional judgement, taking into account that the KDK survey is conservative in its life expectancy assumptions, that asbestos will in general be managed rather than removed and the contribution of the capital and disposals programme to reducing the backlog, the annual expenditure on backlog maintenance for 2009/10 should be in the order of £7700k. This is however is dependent on the capital refurbishment programme being maintained at the previously projected level.

The rate of progress on this programme raises concerns about the added risk of failure of fabric and or mechanical and electric services as time passes. . Significantly increased risk elements linked to the capital programme and other strategic priority changes are discussed in Appendix 3. It is proposed that special funding be provided, some of which might come from the CAC in advance of the capital works, much the same as other enabling works.

We have also carried out a review of the condition and legislative backlog survey for the residential estate and the results indicate a backlog of around £26M over the next ten years. Again taking a judgement on this we would suggest an appropriate investment in backlog maintenance would be in the order of £1600k

Building Performance update

Annually we submit a building performance return as part of our Estates Management Statistics (EMS) return to the Funding Council. This provides our assessment of the building condition across the estate. Buildings are assessed as being in grade A,B,C or D condition with the definitions being as follows:

A - As new condition

B - Sound, operationally safe and exhibiting only minor deterioration.

C - Operational, but major repair or replacement needed in the short to medium term

D - Inoperable, or serious risk of major failure or breakdown

The methodology we have used to assess the categories is based on the ten year backlog in each building being expressed as a percentage of the replacement value. The criteria is that 0-5% represents condition A, 5-20% represents condition B, 20-50% represents condition C and over 50% represents condition D

This year our return indicates that 77% of our core estate is in either A or B condition showing an improvement of 2% on our position compared with last year. This continues to be regarded as above average when compared with the UK HE sector.

The remainder of the estate is in C and D condition with 3.86% in D condition highlighting our poorest performing buildings. This has increased this year mainly due to the McEwan Hall marginally falling into this category.

The cost of bringing the estate into condition B is now assessed at £86M and with the combined impact of the capital refurbishment and the backlog maintenance programme, continues to show an improvement in the core estate. A graph is shown in Appendix 4 showing the %age improvement plotted against the cost, inflated to represent today’s cost, over the period 03/04 to 07/08

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We are currently in the Planning and Budgeting process for 09/10 and based on the projected 1% uplift in funding and the NPRAS adjustment, the amount available for Maintenance would be in the region of £8500k.

This figure is inclusive of Reactive, Planned Preventative and Backlog maintenance. We have included for the continuation of the £1M CAC contribution in this projection to fund items of enhancement as identified in the programme. After making allowances for materials, reactive and planned preventative maintenance, the sum available for backlog Maintenance and Legislation Compliance in the Core Estate would be in the region of £5400k. It will be noted that this figure is substantially below the £7700k level of investment that is recommended. The budget for the Residential Estate has been set by our Accommodation Services colleagues at around £1150k which is also, this year, significantly below the recommended minimum of £1600k. The condition of the residential estate however is good with over 90% in A and B condition and this therefore does not represent any cause for concern in the short term. 2009/10 Programme

The attached list of projects has been developed from the priorities taken from the KDK survey listed as condition D and identified as required to be programmed for year 1. See Appendix 5.They are further prioritised to take account of business risk, legislative risk and strategic factors. The list of projects identified for year 1 in the ten year plan continues to be significantly in excess funding available. The list has been reduced to show only the projects that take the total up to around£7.7M. This is to reflect what is regarded as the appropriate level of funding and more than covers the likely funding to be determined through the planning and budgeting process. We have shown a cut off point at the £5400k point to reflect the current budget scenario

As per previous years we have used a scoring method to reflect the relative legislative risk (Leg risk.) and business risk ( Bus. Risk) on a scale of 1-5 with the highest scores reflecting the greatest risk. These columns are multiplied to provide the Priority Sum to produce the ranking order. Other information provided in the table indicates the zone and whether the works are Legislative or Condition.

The attached 9/10 programme for the Residential Estate has been developed in consultation with our Accommodation Services Colleagues based on the backlog condition survey information and taking account of availability. See Appendix 6 This process follows the same general principles as those adopted for the core estate. The list shows a total spend in the order of £1150k

The Major Replacement programme for the Roslin Estate has been set at zero for 9/10 as the premises are being managed on a reactive basis only following the small investment in 08/09. This will continue until the relocation to Easter Bush in 2011. Small capital Works are however planned at the Dryden Farm and are identified in Appendix 2. The Maintenance and the Small Works are funded by the Roslin Institute and do not impact on the Core Work programmes

EPAG is invited to endorse a recommendation that the provisional 2009/10 Non-Residential Major Replacement Programme be implemented. It is acknowledged that the actual programme for 2009/10 will be contingent upon the Planning and Budgeting outcome but the prioritisation of projects will be retained.

EPAG is also invited to endorse a recommendation that the 2009/10 Residential Major Replacement Programme be implemented within the funds available to Accommodation Services.

EPAG is invited to endorse the request for the special funding for items of significantly increased risk identified in Appendix 3

EPAG is invited to note the programmes of work being undertaken by the Roslin Institute

John Leishman Depute Director, Works Division 23 March 2009

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