SHEFFIELD CITY COUNCIL Cabinet Report 15 Report of: Executive Director for Resources – Laraine Manley ______________________________________________________________ Date: 24th August 2011 ______________________________________________________________ Subject: Sheffield City Council’s Office Accommodation Strategy ______________________________________________________________ Author of Report: Director of Property & Facilities Management Services Nalin Seneviratne 0114 273 4120 ______________________________________________________________ Summary: This paper sets out a plan with recommendations for dealing with the Council’s need for office space which aim to deliver a variety of benefits, in terms of reduced costs, reduced environmental impact and improvements in working arrangements. The constraints on budgets and the fact that a number of leases will be coming to an end over the next four years, mean that action needs to be taken to change current arrangements. ______________________________________________________________ Reasons for Recommendations: The current office accommodation model is not sustainable in terms of cost, use of space and environmental grounds. The use of Moorfoot leaves future options for the site open along with the use of an otherwise redundant building. It provides the greatest flexibility for the Council regarding its own requirements as it will not be tied to any lease or contractual commitment. The Council can therefore use the site or vacate it as needs require in the future. Recommendations: 1. Cabinet is recommended to approve this strategy (Retain Moorfoot) including approval of its financing as set out in section 13 including utilisation of the Invest to Save Reserve. Any Capital funding approvals to be dealt with through the Capital Approval process with borrowing and revenue support 1 thereof to be in accordance with the profile set out in this report. As the project develops, any required variation to the final cost profile is to be approved through the budget monitoring process for capital and revenue as for any project. Over the lifetime of the project, cash flow requirements will change or need to be modified due to normal project issues or changes in market conditions particularly with reference to the delivery of capital receipts. 2. To provide the Director of Property & Facilities Management delegated authority to deliver this accommodation strategy in consultation with the Executive Director for Resources, the Cabinet Member for Finance and the Executive Management Team. 3. Project governance and monitoring to be established through the Modern and Efficient Council Board. 4. To approve the implementation of Workstyle, currently being implemented in Redvers House, as the standard across all Sheffield City Council office accommodation. The costs for which are included in the revenue cost profile indicated in table 2, section 13. Without adopting Workstyle, the required reductions cannot be delivered. 5. To provide the Director of Property & Facilities Management and the Director of Legal Services as appropriate to their respective areas delegated authority to deal with all estate management issues with regard to the existing leasehold office accommodation, including negotiating lease terminations and agreeing and approving expenditure with regard to, for example, dilapidation costs and completing any documentation required to formalise such matters. 6. To provide the Director of Property & Facilities Management delegated authority to work with the City Development Division and lead the work on seeking long term regeneration for Moorfoot with existing adjacent landowners or the wider development market. 7. To confirm the requirement to centralise all office accommodation costs under Property& Facilities Management. ______________________________________________________________ Background Papers: 1. Investment Property Databank – Benchmark Report Category of Report: OPEN/CLOSED* 2 Statutory and Council Policy Checklist Financial Implications YES/NO Cleared by: A Kidder Legal Implications YES/NO Cleared by: G Duckworth Equality of Opportunity Implications YES/NO Cleared by: J Toner Tackling Health Inequalities Implications YES/NO Human rights Implications YES/NO: Environmental and Sustainability implications YES/NO Economic impact YES/NO Community safety implications YES/NO Human resources implications YES/NO Property implications YES/NO Area(s) affected City Wide Relevant Cabinet Portfolio Leader Cllr B.Lodge Relevant Scrutiny Committee if decision called in Scrutiny Management Committee Is the item a matter which is reserved for approval by the City Council? YES/NO Press release YES/NO 3 1. Summary The Office Accommodation Strategy (Phase 1) Cabinet report of the 10th November 2010 set out the position regarding the Council’s core office portfolio. The report showed how the base case (i.e. do nothing) costs will rise with inflation over the next 10 years to almost £18 million per annum (excluding the costs for the acquisition of the Moorfoot building) increasingly outstripping available budget levels. With leases coming to an end over the next 4 years, doing nothing is not an option. We are currently faced with taking action to manage our office accommodation. The Investment Property Databank benchmarked our office space and found that our costs equated to £3068/annum/full time equivalent member of staff (FTE). This is some 18% lower than the private sector in the region and some 4% lower than other public sector partners. However, our utilisation of space is very poor, with further savings being achievable with the implementation of modern methods or working (Workstyle). This report advocates the full use of Moorfoot over at least a 10 year period to enable the following benefits:- Co-location of staff groups in a flexible working environment to assist service delivery. Co-location opportunities for other partners, public, private or community. Phased regeneration of the Moor through adding over 2000 people to the built environment, aiding footfall for the retail district. Reduced carbon outputs by approximately 50% Reduced floor space and buildings (26 to 5) Common office standards Reduced costs, on average from £3068/annum/FTE to at most £2450/annum/FTE. To achieve an overall financial profile within limited resources. To provide a flexible approach as an owner-occupier, providing the flexibility to exit Moorfoot as and when alternative regeneration proposals are available. The current use of Moorfoot has made it possible to surrender the lease at Central Buildings and facilitates the lease ‘swap’ between Sovereign House & New Bank House. The analysis in the report demonstrates that the option of retaining Moorfoot provides the lowest cost over the 10 year period examined. It seems appropriate therefore that this be progressed as the recommended option. Work will continue to address the profile of short-term additional costs that arise in both the current year and 2012/13. Thereafter the strategy does generate savings against the approved funding level. It needs to be emphasised that the “do nothing” option is not sustainable. Part of the costs of Moorfoot arose from acquiring the building for wider regeneration purposes. However we are now using the site for both this objective and our own occupation needs. Therefore we have incurred consequential costs such as the £1m rates liability. 4 This paper seeks approval for the implementation of Workstyle across the office accommodation, the full use of Moorfoot over at least a 10 year period, enabling a reduction in core office buildings from 26 to 5 and approval for the additional costs that will be incurred, particularly in 11/12 and 12/13. 2. What does this mean for Sheffield People? Delivering this accommodation plan is an effective use of resources by the City Council. Optimising office use will assist with the provision of key services to Sheffield people without unnecessary expenditure on office space. It also means that through a reduced office requirement, our carbon footprint is reduced thereby adding to the improvement of our environment. 3. Outcome and Sustainability The outcome will be to provide office space in an effective and efficient manner, allowing for flexibility with regard to future requirements. The reduction in energy consumption together with more people using the Moor improves the sustainability of our current position. 4. Current Position The Council currently occupies a large amount of office accommodation, with a mix of tenures, types, quality and efficiency of use. Our office buildings are mainly leased with a number of leases coming to an end over the next 4 years. The current office estate is not meeting the needs of the organisation, is costly to run and maintain and due to the number of leases will inevitably increase significantly in cost over the coming years. The Council has undergone significant reductions in funding over the last months and is consequently in the process of service redesign. The Council’s office accommodation therefore has to respond to the challenge of reduced budget, service redesign, energy efficiency, carbon reduction and pressures in terms of impending lease terminations. Council funding constraints mean that the accommodation strategy pursued by the council must have cost as a key focus. Securing funding for investment in local government offices has always been a challenge which traditionally has been offset through rationalisation and disposal programmes.