1. The Office of Government Commerce (OGC) estimates that the annual cost of running the government's non-military estate is £6 billion, with central government departments' office accommodation accounting for around £1 billion of these costs.[2] On an estate of such size poor decisions can quickly lead to poor value for money. At the same time, this scale of spending presents significant opportunity to identify and deliver efficiency savings.[3] Recent assessments, including the Gershon and Lyons reviews and more recently the 2007 Comprehensive Spending Review, support the view that property is a rich source of potential efficiency savings. Specifically these reviews ask departments to consider where they locate staff, to develop a more co-ordinated estate strategy across government and to deliver better value for money strategic asset management as a key component of their spending reviews.[4]

2. The challenge presented by these reviews has given property asset management a higher profile at department management boards. The OGC is supporting departments to respond through its High Performing Property initiative.[5] This initiative is designed to provide departments with the required advice, guidance and tools to improve the management and performance of their property estate and realise efficiency savings.[6]

3. The performance of office property can be assessed using a small number of key metrics. These are accommodation costs per square metre, accommodation costs per person, and space per person.[7] The accommodation cost is the amount paid for rent and operating costs. Figure 1 shows that there is a wide range in departments' performance against each of these key metrics.[8] The median cost of accommodation per square metre across all departments is £412 and the median cost per person is £7,392.[9]Figure 1: The range in performance by departments

Source: National Audit Office

4. The aggregate analysis of each department's portfolio of buildings shows that there is significant room for efficiency improvements against the private sector. As a whole they are performing at 38% worse than the private sector benchmark.[10] The department with the best performing portfolio is operating at 14% worse than private sector benchmark and the poorest performing department at 50% worse. The analysis indicates that, compared to private sector buildings of the same type and in the same location, government can do much more to improve building efficiency.[11] Most improvement can be made by making better use of existing space. Increasing space efficiency, which reduces the amount of space allocated per person, in line with private sector benchmarks, can deliver up to two thirds of the predicted £326 million of gross efficiency savings.[12]

5. OGC is aiming to achieve better space efficiency by implementing a space standard for government of 12 square metres per person.[13] However, in 2005-06, not one department was operating at this level across its estate, and many departments are significantly above this proposed standard.[14]

6. The variation in regional accommodation costs also presents opportunities to achieve savings by locating office staff in cheaper regions (Figure 2).[15] The North East is the cheapest region, with accommodation costs per square metre of £133 and costs per person of £1,371.[16] London is the most expensive with accommodation costs of £507 per square metre and £9,133 per person.[17] Despite London being the most expensive region, in 2005-06 47,000 central government staff (25%) were still based in London.[18] While departments have relocated 15,500 of the targeted 20,000 post moves out of London they cannot accurately identify how many of the remaining staff genuinely need to be there.[19]
Figure 2: Regional accommodation costs per person

Source: National Audit Office

7. Departments need to assess carefully the options for relocating staff to cheaper regions. Relocation can incur a number of costs including implementation and other associated costs such as redundancy payments, individuals' relocation expenses and dilapidation costs on surrendered leases.[20] Most importantly, the business needs of a department must be at the forefront of any decision to move location.

3   C&AG's Report, Summary para 1 Back

4   Q 50; Well Placed to Deliver? Shaping the Pattern of Government Service, Sir Michael Lyons, March 2004; Releasing Resources for the Frontline: Independent Review of Public Sector Efficiency, Sir Peter Gershon, July 2004; Towards Better Management of Public Sector Assets: A report to the Chancellor of the Exchequer, Sir Michael Lyons, December 2004; Comprehensive spending review 2007, The Treasury  Back

5   C&AG's Report, para 1.6 Back

6   Q 46 Back

7   C&AG's Report, para 2.8 Back

8   Q8 Back

9   C&AG's Report, para 2.3 Back

10   C&AG's Report, para 5.8 Back

11   Q 9 Back

12   Qq 9, 18, 21, 36 , 93-94, 117-119, C&AG's Report, Figure 27 Back

13   Qq 11, 12 Back

14   Q 11; C&AG's Report, Figure 18 Back

15   Qq 95-96 Back

16   C&AG's Report, Figures 12, 13 Back

17   C&AG's Report, Figures 12, 13 Back

18   Qq 15-16 Back

19   Qq 15-16 Back

20   C&AG's Report, Recommendation (iv) Back