Property Services update paper

Report: 08
Date: 18 December 2008
By: Director of Resources on behalf of the Commissioner

Summary

This report seeks to provide members with an update in regard to the responsibilities covered by Property Services and the specific issues that have been addressed since the last report.

Members are asked to note the content of the report and provide direction as to whether future updates would be of assistance and whether these should be presented to the Finance and Resources Committee or a specific sub-Committee.

A. Recommendations

That

1. members note the Property Services’ update provided Appendices 1, 2, 3 and 4 in regard to Property Services’ related issues; and
2. consider whether future reports would be of benefit; what additional information may be of assistance, and to which Committee these should be presented.

B. Supporting information

1. At the Finance Committee on 24 October 2002, it was agreed that Property Services should provide a report on estates issues to alternate meetings. Source documents can be found on previous relevant reports and also in the Members’ Library, the last such report was presented in June 2008.

2. In addition the delivery of the current estate strategy, including maintaining the existing MPA estate; undertaking modernisation programmes and providing facilities to meet operational needs, the Property Services Department includes an specialist operational support team which provides specialist advice to operational colleagues including the provision of crowd control barriers and feeding centres at special events; logistical support at major incidents; physical target hardening of vulnerable buildings; crime scene forensic support; crime scene plan drawing and reconstruction; specialist methods of entry/protestor release; covert property management, and emergency planning in support of major incidents.

3. The bi-monthly reports seek to provide brief updates on specific work-streams and key areas of responsibility. The reports do not seek to provide updates relating the MPA Estate Strategy; where approvals are required for specific programmes or projects, proposals will be presented separately.

4. With the formation of the new MPA committee structure; the new MPA Finance and Resources Committee and the various sub-Committees that now feed into Finance and Resources, Members may feel that it is more appropriate for future updates to be provided to a specific sub-Committee. In doing so, members may also feel additional/alternative information would be of benefit.

5. The latest update is summarised in the appendices. Appendices 2 to 4 are exempt. There are no consultation or environmental issues.

C. Legal implications and risks

1. Contract or other documentation in regard to the items referred to under the appendices will contain all the usual commercial terms and provisions, and no unduly onerous or unusual terms – except where reported otherwise.

2. Significant risks have been evaluated and considered and steps taken to minimise or manage such risks.

3. All reported matters are considered to be within the powers of the Authority.

4. All/any disposal represents the best consideration that can reasonably be obtained – save where stated otherwise.

C. Race and equality impact

Any equality and diversity implications arising from the matters referred to in this report are being assessed as part of the individual project or item and will be reported separately to the Committee at the appropriate time.

D. Financial implications

Any financial implications in regard to the items included under the appendices will be reported in full to the relevant committees at the appropriate time.

E. Background papers

None

F. Contact details

Report author(s): Jane Bond, Director of Asset Management, Property Services, MPS.

For more information contact:

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

Appendix 1

Market overview

1. After 10 years of substantial growth, residential capital values are now dropping across the capital. Transaction levels have fallen substantially and there are no signs of any immediate recovery.

Key indicators on the current state of the market are set out below:

• Halifax & Nationwide have just announced a UK wide fall of 14 % in house prices for the year to October 2008. The same organisations are showing 9-16% falls for London.
• House Price Index data for October 2008 shows that the rate of fall is actually increasing
• Transaction volumes are now at a 30 year low. Estate Agents in London are currently averaging two sales per month
• All industry observers and Surveying practices are now predicting falls, e.g. Savills are now projecting 25% falls by the end of 2009
• There is substantial oversupply as first time buyers have all but disappeared & any prospective purchasers who can wait are doing so
• The recent banking crisis has shaken public confidence levels & forced lenders to tighten lending requirements further dampening demand
• Despite a reduction in interest rates to 3%, mortgage approvals are still very low and lending highly restricted, e.g. many lenders are requiring a Loan To Value ratio of some 60% - or better.

The outlook for 2009

As the economy deteriorates commercial rental levels are anticipated to fall further. At the same time existing investments (commercial property) let to local authorities and government have seen a contrary move as the income generated is seen as extremely secure. Lower lending rates, has created a situation where many authorities can now fund the buy in of leased property on a basis comparable to (or below) the revenue costs represented by rental payments.

As the UK economy weakens further, many workers from the EU / overseas are returning to their home countries. This has reduced demand for rental properties within London, although this has been offset to some degree by demand from prospective purchasers who have put their property acquisitions on hold. Simultaneously, vendors unable to sell have taken their properties off the market and are attempting to rent them out. Public sentiment has been changed substantially by significant negative media coverage. This is expected to continue as long as there is no imminent recovery.

• Prime initial commercial yields are currently circa 6.25% and are continuing to weaken. Capital values have dropped by an average of over 20% in the last year and are forecast to fall another 10% in 2009, whilst commercial rental levels are now broadly flat with minor falls in some sectors
• Nominal residential capital value projections for 2009 range from minus 5% to minus 20%.
• 10% of the UK residential market comprises rental properties belonging to private investors. Whilst rental yields are increasing, negative capital growth has incentivised some landlords to sell their investment portfolios & this trend is likely to increase next year.

Estate Strategy

2. On 23 October the Finance and Resources Committee agreed:

• to the establishment of a member led panel (supported by officers from the MPA and MPS) to lead on updating the current Estates Strategy and Estates Strategic Plan to provide clarity between the Strategy and delivery of the estate modernisation programme for presentation to the Authority in Spring 2009;
• to the establishment of a member led panel (supported by officers from the MPA and MPS) to lead on the development of a revised consultation strategy in regard to the public / citizen facing elements of the estate, providing direction in regard to the consultation process and the timing of consultation on a Borough by Borough basis;
• that during this process the Safer Neighbourhood programme and those projects that have previously been approved by the MPA, within the front counter programme, patrol base programme and Borough Based Custody Centres programme, and work in relation to the non-public operational estates will continue and that there will be no further disposals of properties that support the public/citizen facing estate at this stage.

3. The roll out of each Operational Business Group strategy is dependent on the need to meet the current challenges surrounding custody facilities and the need to generate receipts to fund estate modernisation. Until suitable facilities are made available, much of the existing building estate will be retained. The costs of maintaining older building stock in terms of compliance etc., will increase placing further pressure on already stretched revenue budgets. The modernisation of the estate will assist in ameliorating these costs.

Safer Neighbourhoods

4. Stage 2 of the SN Property Programme is now well under way with approximately 59 of the 109 bases to be delivered in this phase identified and in progress, with the first 6 already completed and a further 7 now on site. In overall terms the programme is viewed as being 8 weeks behind programme but recent progress is encouraging. Installation of signage to bases completed under stage 1 is now underway, with both the simple signage package and the complex signage completed. Installation of Bike Lockers to Stage 1 properties has recently been instructed and will be prioritised in line with TP requirements. Following the re-phasing of the MPS Capital Programme, SN2 is being re-programmed to complete over a 3 year period by the end of 2010 (an additional 12 months) with priority being given to specific locations on the basis of operational requirements.

5. A reporting protocol has been developed to enhance visibility of action as Stage 2 is implemented, and this is consistent with Programme Management reporting on other MPS Property programmes. It is currently proposed that we re-phase the construction of bases to spread the programme over a total of 3 years. It is proposed that we reduce the number of bases under construction at any one time to a level that will spread the investment over 3 years, taking account of operational priorities, but this will have the effect of increasing the costs of supervision and overheads. Proposals will be submitted to the MPA in February 2009 in this regard.

Residential Estate Strategy update

6. In line with approved MPA Residential Estate Strategy which provides the framework to reduce the number of residential units (flats and houses) held by the MPA to a maximum of 200 units for welfare and operational needs, Property Services continue to support/communicate with those individuals occupying residential properties owned by the MPA. The next review of residential rents is due in April 2009 where residential rents are reviewed in line with rental levels levied by Registered Social Landlords and collected through salary.

7. The PSD ‘Property Zone’, which offers a gateway to third party residential providers, continues to receive in the region of 100 phone calls per week to the help line and 200 emails per week to the Property Zone email address.

8. Each month a Property Zone representative attends the Police Staff induction day and also regularly goes to the MPS Transferee and Rejoiner Fairs where officers who are considering a move to the MPS can receive advice about residential accommodation and any other housing needs they might have.

9. Property Zone is considered a 'Centre of Excellence' by the Department of Communities and Local Government who refer other constabularies and organisations to the MPS Property Zone, to find out how the MPS promote and manage the Key Worker Scheme and other initiatives. Individual briefings on "best practice" have also been given to British Transport Police and the London Fire Brigade, which has enabled their staff to have access to the scheme.

10. Property Zone works with many outside organisations, such as housing associations and developers / providers both in the private and public housing sectors.

11. Property Services and TP representatives met the Head of Housing and Homelessness at the GLA in September to discuss issues regarding crime prevention initiatives, and designing out crime initiatives in considering new developments as well as key worker opportunities for Police Officers and Police Staff.

Sports clubs

12. The MPS sports clubs at Bushey, Chigwell and Hayes have incorporated as individual Companies Limited by Guarantee. Formal leases were completed on 29 September 2008.

13. The leases make provision for the clubs to pay a rent to the MPA. The rental charges are ‘stepped’ for the first five years. The leases are for a period of 20 years on full repairing and insuring terms. The repair clause in each lease is informed by a Condition Survey that describes the premises’ state of repair at the start of the lease. Each club is responsible under its lease for compliance with all statutes and regulatory regimes associated with their use and occupation of the premises.

14. The leases are complemented by an Employer’s Contribution Agreement by which the MPA will continue to provide financial support to the clubs. This Agreement is also for a period of 20 years, although the quantum of financial support is subject to review every 5 years and at the MPA’s sole discretion it might be raised or lowered by up to 20%. The MPA has licensed the clubs to use the name Metropolitan Police under strict terms to protect the MPA’s reputation and strength of covenant. The MPA has reserved emergency access rights for the MPS to use the clubs in the event of a major police operation.

15. Discussions to regularise arrangements with the Imber Court Club are ongoing.

Town planning issues

16. As previously reported, Property Services continue to work closely with the Greater London Authority (GLA), London Development Agency, London Thames Gateway Development Corporation and Local Planning Authorities. The revisions to the current London Plan were been adopted by the Mayor’s office, and the profile of policing as a material consideration in determining planning applications has been raised considerably. Policing is now included within the definition of ‘Social Infrastructure’ meaning that policing will now be a material consideration during formulation of emerging planning policies across the London Boroughs. This is already paying dividends as increasingly the London Borough's Local Development Documents are including policies, which reflect the MPA's estate and operational needs in growing / changing communities. Property Services have given more feedback to the GLA in regard to the Consultation process in regard to “Planning for a Better London”, which sets out the key areas that are to be addressed in revising the London Plan.

PFI Contract Management

17. The PFI Contractor has re-tendered the services provided in regard to the MPSTC at Gravesend as part of the Benchmarking exercise within the contract. As reported separately, this has resulted in an increase in costs which will be funded from existing budgets due to operational and management savings.

18. Benchmarking is also due to take place on the SEL PFI contract which cover Bromley PS, Deptford PS, Lewisham PS and Sutton PS. This is due to be implemented from January 2009.The PFI contract terms set a tight timetable for this process and hence impacts and approvals may be required via MPA urgency routes.

19. The SEL PFI provider has also indicated that they have not maintained pay parity between former Met personnel and their direct labour as previously agreed. Property Services are negotiating with the PFI provider to resolve this issue urgently.

Capital Programme related issues

Acquisitions and disposals

20. The sale of Beckenham Police Station was completed on 21 May 2008. The short-term lease of Wellington House expired on 31 August and the building has been handed back to the Landlord. Northolt Police Station was sold to Ealing Council on the 15th September and will facilitate the construction of a new leisure centre project which will incorporate a new Safer Neighbourhood base and public counter under a separate option to lease.

21. The acquisition of a property forming part of the Central London Estate was approved by MPA Committee on 13 November, subject to funding. Funding routes will be confirmed in late November.

22. Schedules of Commercial and Residential disposals completed up to 31 October 2008 are attached at Exempt Appendix 2 and 3.

Property “deals” / “schemes” under consideration

23. Within the framework of those elements of the estates strategy that have been approved, Property Services continue to consider other property opportunities. These are subject to the parameters of the current capital and revenue programmes.

Key construction projects

24. Construction of enhanced facilities at Cobalt Square was substantially complete in May 2008, with a second phase of ‘security enhancement’ works to be completed later in the year following the granting of planning approval.

25. Works have been completed in various areas of New Scotland Yard to accommodate those teams that vacated Wellington House in July 2008. Works have also commenced on the refurbishment of the ex – HSBC Bank space in Victoria Block, ready for occupation by end of March 2009. Planning is also progressing for the utilisation of the space formerly occupied by the Sorisso restaurant.

26. Works have now been completed at ‘Quicksilver’ Patrol Base for Haringey Borough and this was occupied by the BOCU at the end of September 2008.

27. Works commenced in October 2008 at Havering Patrol Base (Spilsby Road) and this should be completed by the end of March 2009 with occupation following in April 2009.

28. A paper on Greenwich Patrol Base (Warspite Road) was presented and approved at MPA F & R Committee in November 2008. Works will commence in January 2009 with an anticipated completion in July 2009.

29. In line with the revised Capital Programme and following discussions with Business Groups a number of projects are being deferred and will now be completed later than originally envisaged. The planned investment in the estate in 2009/10 is budgeted at £78m.

Fire arms training facility

30. Following MPA approval to explore options to acquire a firearms training facility in West London, a site in West London has been identified for further consideration before formal presentation to the MPA. Meetings with the appropriate Local Planning Authorities to discuss the proposed use and likelihood of obtaining consent for such use are on going. Due to financial constraints, no funds have been allocated to this project in the draft capital budget considered by the F&R Committee on 20 November 2008.

Revenue related issues

31. The current backlog of maintenance stands at just over £200 million and as budgets are tightened the backlog increases at a rate of approximately £10 million a year. This backlog does not include any redecorations.

32. In addition to the condition of the estate, far greater numbers of people are now based in buildings especially police stations; adding to the speed of degradation of the buildings.

33. Slowing down the asset disposal strategy and the deferral of certain capital projects have considerable impact on FM spend in maintaining “time expired” buildings.

34. The introduction of FMS (Facilities Management Suppliers) and MPIC (Met property Information Centre) has significantly improved the performance of the estate in terms of reduction in failures; more planned maintenance programmes will ensure breakdowns are reduced to a minimum.

35. Current performance figures (per year) for FMS and MPIC are shown below

• Calls to MPIC 150,000
• Orders written from those calls 126,000
• Money spent on reactive calls £11.2m
• Completion on time
  • North 84%
  • South 80%
• Customer satisfaction with relative repairs 82%
• End user complaints 2%
• Money spent on planned works (non projects) £32.9m
• Money spent on small (planned) works (revenue) £9.0m

36. London living wage has now been implemented in all contractors working for PSD. This means that no staff, working either in house in PSD or sub contracted to PSD are working below the minimum level of £7.45. Our contractors contributed significant sums to this initiative which will help bring 744 people above the London Poverty Line.

Procurement related issues

Property Procurement Transition Project

37. A review was undertaken by GapGemini in August 2007 which identified a business improvement programme for the procurement function within the Property Services Directorate (PSD). The CapGemini report proposed the transfer of the procurement function from PSD to Procurement Services to provide commercial independence, more focus on delivering value for money, greater governance and visibility and a mechanism to ensure integration with the over arching MPS procurement strategy. Following consideration of the review’s conclusions, the MPA Finance Committee agreed in November 2007 to the proposals and an implementation timeline of 12 – 18 months.

38. A transition project team was appointed in February 2009 to work closely with PS and PSD to facilitate the transition. A new Director of Category Management was appointed in Procurement Services during May 2008 and took overall project responsibility for the transition and development of a category team from that point onwards. A transition programme manager has been appointed within PS to co ordinate the various work-streams identified to support and facilitate a smooth and successful transition.

39 Work has been ongoing, and the final definitions of the high-level functional roles and responsibilities in delivering the Category Management, Contract Management and Supply Chain Management are well advanced.

40. The project team is well advanced in the process of developing a holistic suite of roles and responsibilities and ‘process flow maps’. The aim is to use these process maps as the basis for the preparation of service level agreements (SLAs) between PSD and PS.

41. PSD are working closely with PS on a number of ongoing procurement activities and full transfer of procurement activity is subject to recruitment of staff within PS which is due to commence in early 2009. A communication and consultation strategy is currently being prepared together with a HR strategy.

Procurement activity

42. MPA approval has been confirmed for the transfer of C3i management to the north FMS provider, Balfour Beatty Workspace (formerly Haydens), and audit contracts to MPIC provider, Atkins. The incumbent provider, Amey have now provided the TUPE data, and we await the formal proposals from both parties.

43. PSD are working closely with Procurement Services and the following procurement activities have commenced for the following contracts:

• Annual/Interim – Real Estate Valuation
• Town Planning/Regeneration
• Supply of Corporate Furniture
• Advisory services for research into and the forecasting of energy markets
• Installation of automatic gas/electricity meters
• Energy Bureau Services
• Purchase of Fuel Oil Services
• Halon Gas

44. PSD are also working closely with Procurement Services to deliver the Intermediate Works Framework contracts. We anticipate that the OJEU notice will be published within the next month. It is intended to use the e-tendering system for this framework procurement.

Procurement general

45. PSD have worked with Procurement Services (PS) to input PSD contract information onto the Corporate Contracts Management Database that will enable PS management to plan and programme resources to meet the demands of renewing and letting contracts in a compliant and timely fashion.

46. PSD are awaiting feedback from MPA Internal Audit on requirements in relation to The Office of Fair Trading (OFT) investigation into a number of construction companies in relation to ‘price fixing’.

Operational Support Group

47. Special Events provided their on-going annual support to the Notting Hill Carnival which included building a feeding centre / 5 snacking/briefing centres, installing numerous overt and covert observation posts and deploying crowd control barriers and traffic management systems, along with delivering a wide range of logistics. The events team also have recently provided support for the National Service, the festival of remembrance events and security works around the US Embassy during the US presidential elections. Events are currently planning for the state opening of parliament, campaign against climate change march and rally and the New Years Eve celebrations in central London.

48. The Operational Support Group continues to plan for the London 2012 Olympic & Paralympic Games. This includes providing breakdown costs for the construction of three large temporary feeding/briefing/deployment centres and installing various logistics such as crowd control & Vehicle CT security measures.

49. The Computer Aided Modelling Bureau have been involved in producing maps, 2D plans, 3D models and ‘Sequence of Events’ animations in support of numerous projects including the Stockwell Inquest and Operation Casa Grande (Cutty Sark Investigation).

50. Demand for plan drawing had seen a significant 90% increase in demand during 1st quarter of 2008, compared to previous year. This demand, although still above normal levels, is now running at a 40% increase at the half-year stage (89 projects during this 6 month period). These requests are supporting many high-profile MPS investigations, including some of the widely publicised knife crimes within the capital.

51. The DoR Emergency Planning Team working with CO3 Emergency Preparedness provided planning and logistical support to Operation Torch – a multi-agency EU funded CBRN/DVI exercise that took place at Crystal Palace in October 2008 attended by over 600 participants and observers. Work is ongoing to develop a CBRN and Conventional DVI logistics response capability to support ‘First Responders’ and maintain a supply chain at the scene of an incident. In addition to this, work is being progressed to provide detailed plans for the policing element of site clearance following a major disaster, of a scale such as 9/11, on behalf of A/AC Allison, ACPO and Civil Contingencies Secretariat at the Cabinet Office. This project is likely to involve the potential procurement of national assets in excess of £4m for forensic evidence sorting vehicles. Co-ordinated by the Home Office, this project is being led by CO3 via a Working Group including stakeholders from across the MPS. Work continues on identifying suitable ‘Sorting Sites’ within the MPS area. Consideration is being given to the impact of 2008-9 National Planning Assumptions particularly those relating to the MPS response capability in respect of seven simultaneous Major Incident sites involving up to 2,400 deceased victims in total one of which could be a CBRN incident.

Environment & sustainability

Environmental Management Programme

52. The Environmental Management Programme is progressing well. Second Quarter progress was reported to the Environmental Strategy Steering Group with 9% targets complete and 81% on track. In particular good progress has been made on the Sustainable Waste management Plans for North and South, with the roll out of recycling schemes at over 70 sites as part of the FMS contract. In addition, the roll out of the MPS recycling scheme to all South East London PFI sites was completed in November with good feedback from our internal customers.

53. The MPA are currently conducting an internal audit on the Environment with a report expected in January 2009.

Climate Chance Action Plan (CCAP)

54. The Climate Change Action Plan, including Buildings Energy Efficiency Programme (BEEP) and Salix grant is integral to delivering carbon reduction savings in line with the MPS Environment Strategy. The MPS are required to reduce carbon emissions by 10% by 2010 against 2005/06 levels, and 30% by 2025. The MPA approved a £5.725 million CCAP fund to deliver energy efficiency retrofit to MPS buildings. The 10% emission reduction target for MPS Buildings equates to 13,140 tonnes of CO2.

55. As at 31 March 2008 emissions have been reduced by 4.02% with savings of £1.706m per annum have been realised.

56. There are a number of further projects which have been identified and are currently at the project delivery stage, to reduce emissions further in line with targets set.

57. The Buildings Energy Efficiency Programme (BEEP) is now at the Investment Proposal Evaluation Stage and the proposals show possible savings of 2500 tonnes of CO2 per annum and £500k per annum. In parallel the MPS awareness programme is currently at development stage and could be expected to reduce emissions by a further 2%.

Energy Performance Building's Directive (EPBD) - Display Energy Certificates (DEC's)

58. As part of the EPBD, Display Energy Certificates are required with legislation coming into force on 01 October 2008. There has been a significant delay imposed by Department of Communities and Local Government (DCLG) in formalising the accreditation processes to be followed, with a revised target date for the display of certificates now being 01 January 2009. The MPS have a programme in place and are on target to deliver DEC's for its eligible buildings (120) by mid December 2008.

Abbreviations

A/AC

Acting Assistant Commissioner

ACPO

Association of Chief Police Officer

BOCU

Borough Operational Command Unit

CAMB

Computer Aided Modelling Bureau

CBRN

Chemical, Biological, Radiological Nuclear

CO

Central Operations

COP

Coordination of Policing

CPS

Crime Prosecution Service

CT

Counter Terrorism

CTC

Counter Terrorism Command

DoI

Directorate of Information

DoR

Directorate of Resources

DPA

Directorate of Public Affairs

DVI

Disaster Victim Identification

EOG

Estates Oversight Group

ESP

Estates Strategic Plan

FMS

Facilities Management Suppliers (from 2007)

GLA

Greater London Authority

LB

London Borough

MPIC

Met Property Information Centre

MPS

Metropolitan Police Service

MPSTC

Metropolitan Police Service Training Centre

ODA

Olympic Delivery Authority

OFT

Office of Fair Trading

OJEU

Office Journal of the European Union

OSG

Operational Support Group

PFI

Private Finance Initiative

PS

Procurement Services

PSD

Property Services Department

SLA

Service Level Agreement

SEL

South East London

SN

Safer Neighbourhoods

SN2

Safer Neighbourhoods Stage 2

TP

Territorial Policing

TUPE

Transfer of Undertakings and Protection of Employment

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