Property maintenance and capital renewals – tactical approach to strategic cost constraints

Report: 7
Date: 19 June 2006
By: Commissioner

Summary

The MPA has commissioned a report on this subject and requested a risk assessment. This report outlines the issues as already reported to other MPA Committees and as outlined in the MPA approved Estate Strategy.

A. Recommendation

That

1. members note that a detailed risk assessment, across the entire £ 1.7 billion estate, is not feasible within the commissioning time frame and is not considered appropriate for the reasons stated in the report; and
2. note that estate ‘compliance’ is not the sole responsibility of the Property Services Department. Property Services will continue to work closely with Corporate Risk Management Group and HR Health & Safety going forward as well as Business Groups.

B. Supporting information

1. The historic maintenance backlog within the property estate has been previously reported and currently stands at an estimated £160m (excluding professional fees). In addition, a benchmarking study shows a capital renewal shortfall of some £ 50m per annum.

2. The MPA approved estate strategy identifies this issue and the need to move the estate strategy and provision to ‘live within’ the available funding envelopes going forward. An updated estates strategy has been timetabled for MPA Full Authority in 2006 (having already been seen by MPA Finance Committee).

3. This report seeks to address the backlog issues and strategic risks involved. It is not considered possible, or indeed practicable, to report in a detailed / tactical level for an estate valued at over £ 1.7 billion, covering over 600,000 sq metres and over 720 sites.

4. The Maintenance backlog list was initially developed over the course of 2003/2004. The original list contained over 3000 projects across the estate, ranging in value from £2000 to £4m, with an average value of £56000. 72% of projects identified were under £50,000 – and the overwhelming majority required revenue expenditure rather than capital outlay.

5. These estimated project values are indicative and exclude any assessment of the feasibility of carrying out the works or associated costs such as vacating a building or works to be carried out by others such as Department of Information. Accordingly, it serves more to highlight the general condition of the estate than forming a costed, feasible plan of remedial action.

6. Members are therefore advised that seeking to fund the ‘backlog’ is not a practicable proposition and the overall strategic approach is to modernise the estate and achieve large scale relocations to modern alternatives. This will obviate the need to address backlogs in the current estate and at a level of funding that is not available.

7. In the meantime, the current estate is maintained to a level that is reflecting the operational level of criticality and / or operational imperative. For properties and sites outside this category we remain statutory compliant and / or adjust the service delivery to ensure wider compliance (e.g. DDA). These judgements are informed by both emerging asset management plans (AMPs) and the criticality of a site in relation to MPS functions.

8. In 2005/06 Property Service budgets were reduced on the maintenance front by some £18m per annum. This has proved challenging to reconcile with compliance but has been achieved although it is potentially taking savings in advance of strategic changes to the location and content of the MPA estate. In part this has been achieved by reducing devolved decision making, maximising the benefit of current out sourced contracts and moving to a more reactive, rather than planned, approach where appropriate.

9. It is also true that some of the backlog cannot be executed in a manner that keeps a facility operational. In reality some of these works can simply not be executed and would represent poor VFM / Asset Planning. Replacement invariably is the only practicable and VFM compliant solution.

10. Members are advised that no site or property is kept ‘open’ if it fails to meet compliant status either physically to the building or through adjustment in use or methods of Service delivery.

11. Clearly to meet the financial and legal matters it has been necessary to adopt a revised maintenance regime at a tactical level. Hence based upon Service priorities and level of ‘criticality’ a shift in spend from ‘planned maintenance’ to maintaining on a ‘reactive’ basis has been inevitable. Regrettably this has become known as ‘fix on fail’ which is regarded as rather inappropriate and potentially alarmist terminology. Members are advised that in no way should this be construed as operating the estate in a non-compliant manner. It is correct however, to say that service delivery adjustments have been necessary and as a result the potential backlog situation will worsen if asset renewals are not actioned in accordance with the estate strategy.

12. The maintenance backlog list is a live document, as there are many operational, VFM and AMP pressures on the estate that have the potential to increase or change the estimated spend requirement, such as changes in use affecting criticality and resilience standards, or changes in legislation. However, over the course of 2005/2006 there has been a reduction to the maintenance backlog list. The development of asset strategies for the BOCU estate has allowed us to reduce the forecast maintenance backlog by £22m as previously identified projects – such as internal redecorations – will not be actioned and spend can be targeted and prioritised on the new and retained estate.

13. In addition, we have completed some listed high priority revenue projects and capital programmes of work have obviated the need for maintenance repair works. This programme is regularly reported to The Treasurer as required under MPA Regulations.

14. When compiling the 2006/2007 revenue project budget, newly identified and existing listed projects have been reviewed and prioritised against existing asset strategies and are informing those AMPs still under development. Lower priority projects have been added to the list, and the backlog now stands at £160m, compared to £180m a year ago.

15. Should Corporate Governance Committee require a detailed, and site specific, risk assessment review of the estate in addition to the works already undertaken to prioritise expenditure from a reduced revenue base, it should be noted that this will take a considerable time to achieve and the cost is presently unfunded/unbudgeted.

16. A high-level risk assessment against MPS 5 key risk areas is attached in Appendix 1.

C. Legal implications

1. No buildings or sites will be non compliant allowing for service adjustments as well as physical building charges.

2. In compiling this report, the views of Corporate Risk Management Group and Health & Safety within HR have been taken into account.

D. Race and equality impact

1. There are considered to be no direct impacts. The estate continues to meet the standards set down in the MPA approved estate strategy.

2. In an increasing number of cases impacts and compliance are being met by changing service delivery rather than seeking to make all sites / buildings physically compliant for all issues. This is considered appropriate and compliant in legal terms.

3. Numerous reports about modernising the police estate exist including moving provision to take account of community changes and retaining greater location / community patterns for policing. The MPA / MPS approach is considered compliant and improving in this regard and will, over time, provide a valuable addition to meeting matters in this arena.

E. Financial implications

The financial implications for the estate are being reported elsewhere as part of estate strategy review.

F. Background papers

None

G. Contact details

Report author: Alan Croney, Director of Property Services, MPS.

For information contact:

MPA general: 020 7202 0202
Media enquiries: 020 7202 0217/18

Appendix 1

High Level Risk Assessment against MPS 5 key risk areas

Service delivery

A key risk to Service Delivery is failure to implement asset renewals in accordance with the planned programme. This will result in over-extending the life span of existing buildings, leading to more failures and resulting in unplanned disruption to building operations and potentially impacting on service delivery. Work to improve the resilience of critical buildings continues and risk to service delivery is therefore mitigated.

Finance

A key risk to Finance of this approach is that failure to implement asset renewals in accordance with the planned programme will result in extending the period of time when existing buildings could fail, resulting in unplanned revenue maintenance expenditure and/or capital works for buildings with a short expected MPS life span.

Diversity

No strategic risks against this key factor are identified.

Health and safety

This approach is considered to present no risk to Heath and Safety as the basic Planned Preventative Maintenance and associated audit regime ensures essential compliance.

Reputation

There remains the potential for adverse publicity to arise from building failure or poor appearance. This can be balanced by the positive financial impact on the maintenance backlog of the asset renewal strategy and the tactical approach to Strategic cost constraints outlined in this paper.

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