New South Wales Government

Government Office Accommodation Reform Program

Improved service delivery Better workplaces Savings in accommodation

Government Office Accommodation Reform Program This document outlines 12 key strategies, which are designed to further improve planning and use of accommodation resources in NSW. These strategies emphasise the need for a whole-ofgovernment approach not only from the point of view of more consistent planning and decision making across agencies but also to maximise the Government’s position in the marketplace. The 12 strategies cover the areas of asset management and planning, location, space utilisation, investment practices, best use of Sydney CBD heritage assets, collocation and lease rationalisation. Implementation of the strategies will considerably reduce the Government’s accommodation costs.

December 1998 DPWS report number 98165

© This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced by any process without written permission from the Department of Public Works and Services. Requests and inquiries about reproduction and rights should be addressed to: Director Policy Services Division Level 23, McKell Building 2–24 Rawson Place SYDNEY NSW 2000 phone fax email (02) 9372 8881 (02) 9372 8822 colin.campbell@dpws.nsw.gov.au

NSW Department of Public Works and Services Cataloguing-in-Publication data New South Wales. Dept. of Public Works and Services. Government office accommodation reform program ISBN 0 7313 0724 0 ISBN 0 7310 0914 2 (set) 1. Office accommodation—Government— New South Wales. 2. Total asset management—New South Wales. I. Title. (Series : Total asset management manual). 354.944072

Prepared by NSW Department of Public Works and Services Information design by Montague Leong Design Pty Ltd Printed on 100% oxygen-bleached (totally chlorine free) paper using vegetable-based mineral-oil-free inks.

Foreword
The vision of the New South Wales Government is to create a world class public sector, one which can adapt and change while continuing to provide services to the people of the State. To make the vision a reality the Government has embarked on an ambitious program of reform in corporate services across the public sector. An integral part of the corporate services reform is in the area of asset and accommodation management. The Office Accommodation Reform Program approved by Government is designed to further reduce the financial burden on government agencies and free up funds for core services. Adopting the Reform Program strategies will bring about a best practice approach to asset and accommodation management. It will reduce the Government’s exposure to rent increases, lead to better space utilisation and make the most of the Government’s position as a significant player in the real estate market. Whole-of-government benefits will flow from better overall planning that aligns decisions on office accommodation with Total Asset Management, as well as broader government objectives for corporate services reform, urban planning, transport and economic development. I encourage all government agencies to review their approach to asset and accommodation management in line with the strategies of the Office Accommodation Reform Program.

The Hon. Ron Dyer, MLC Minister for Public Works and Services
Government Office Accommodation Reform Program 1

Government Office Accommodation Reform Program
The New South Wales Government occupies more than a million square metres of office accommodation that costs around $385 million a year. The Office Accommodation Reform Program is an integral part of the Government’s larger reform agenda and it offers an excellent opportunity to achieve savings without reducing staff numbers or the level and quality of services delivered to the people of New South Wales. The accommodation reform commenced in 1997 with the Premier’s Memorandum, Government Office Accommodation and Property Disposal, that established space consumption targets and new procedures for office accommodation management and property disposal. In this, the second stage, the Government has developed strategies that will deliver: • better planning • better decision-making • better and more cost-effective management of acquisitions and disposals • better management of leases • better use of space through economies of scale.

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Government Office Accommodation Reform Program

Whole-ofgovernment coordination
Critical to the success of the Government’s accommodation reform strategies is the Government Asset Management Committee, reporting to the Budget Committee of Cabinet. This body will provide broad coordination and oversee the changes.

Strategy 1 Government Asset Management Committee

Strategy 2 Government Asset Management Committee’s terms of reference

Whole-of-government perspective
A high-level forum will be convened, bringing together central agencies and asset experts to ensure the Government’s reforms occur within the whole-of-government context. In this way, the Committee will be able to incorporate the Government’s Total Asset Management requirements in the wider resource allocation process. The Premier’s Department, NSW Treasury, Department of Public Works and Services, Roads and Traffic Authority and the Attorney-General’s Department will make up the membership of the Committee. They will be represented by their Chief Executive Officers.

How the Committee will operate
The Committee will work with agencies to sustain the reform process and they will have a framework for the planning and coordination of asset management throughout New South Wales. The Committee will advise the Budget Committee of Cabinet on: • the appropriateness of agency asset management strategies • strategic issues involving more than one agency • regional office accommodation plans • major investment strategies • performance standards for asset and accommodation portfolios.

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Investment

Strategy 3 Criteria for appraisal of acquisition or disposal decisions

The Government’s investment decisions have to be based on long-term strategies that are consistent with other government initiatives and fit into the Total Asset Management process. The decisions need to take into account the issue of owning or leasing property, the best use for heritage buildings and the balance of cost against value of other objectives.

Own or lease?
The Government manages $300 billion worth of public assets. There is almost as much office accommodation (47%) in government-owned buildings as in leased premises. There is an ongoing debate on the benefits and drawbacks of owning and leasing accommodation, with recent reports suggesting that longterm needs may be best satisfied with a portfolio of buildings owned by the Government. However, experience suggests that a balanced portfolio of owned and leased premises achieves the best long-term results. It is essential to develop a government investment policy on whether office accommodation should be owned or leased, recognising competing demands for investment eg. education or health facilities. Rigorous financial appraisal, in accordance with NSW Treasury guidelines will, in future, underpin decisions to own or lease accommodation. The criteria will cover: • service needs and objectives • projected costs for 10–15 years • whole-of-life costs and benefits, including capital improvements and refurbishment • cost of capital • property market fluctuations • return on investment.

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Government Office Accommodation Reform Program

Strategy 4 Best use of heritage buildings

Strategy 5 Determine the costeffectiveness of lease pre-commitments

Maintaining our heritage
The Government owns a significant number of heritage buildings, especially in the Sydney CBD. Whatever their aesthetic and historic merit, these buildings are not always suitable to meet the needs of a modern office. To ensure the preservation of these buildings, the Government will establish a plan to realise their optimum long-term use.

Lease precommitments— better value for money
Agencies can sometimes obtain purpose-built offices at good locations by agreeing to take leased space before the construction starts. These arrangements usually involve a significant amount of office space and require long-term leases. The Government may obtain benefits by pre-committing to private sector office developments: • by reducing the developer’s risk, the profit margin can also be reduced and more favourable terms agreed • government-owned land can be developed with a smaller capital outlay • agencies may be able to reduce the cost of fitout. Given their complexity, these arrangements will require the approval of the Budget Committee of Cabinet.

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Location

Strategy 6 Reducing Sydney CBD Core costs

Strategy 7 Preferred locations for agencies seeking to remain in the Sydney metropolitan area are CBD South and Parramatta

Central to the reform is determining the location of government office accommodation. Not all services will need to remain in the costly Sydney CBD Core and some agencies could move from the centre of the CBD or even out of Sydney.

Minimising exposure to high rentals
The Government has a significant presence in the Sydney CBD, both in buildings that it owns and in leased premises. Rent costs in this area are high and the Government’s client base has spread well beyond the city. Traditional arguments for maintaining services in the CBD Core are no longer justifiable as information technology allows agencies to operate further away from central government. Several agencies are already operating successfully outside the high-cost CBD Core, especially in Sydney CBD South and Parramatta. Agencies will require a business case if they wish to remain in the CBD Core.

Office accommodation aligned with wider urban planning strategies
In 1995, two strategies1,2 were released outlining plans for the more rational development of Sydney and its hinterland. This strategic focus will ensure that development will meet: • the needs of the Government and its customers and stakeholders • economic and regional development objectives • urban planning requirements • transport strategies. To meet planning strategies and government objectives, decisions on office accommodation should consider: • two key areas, Sydney CBD South and Parramatta • if agency head offices relocate, they should go to areas where there is adequate infrastructure and access to public transport • office relocations have an impact on regional economic growth • if agency head offices are already located in secondary centres, such as Bankstown or Liverpool, they should stay there unless there is a business case for relocation.

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Government Office Accommodation Reform Program

Strategy 8 Regional development opportunities

Accommodation to serve rural development
In 1997 the New South Wales Country Summit discussed how to improve access to government services. This led to the development of the Integrated Service Delivery Management Plan which identifies opportunities to relocate government jobs to rural and regional NSW. If an agency cannot be relocated from the Sydney metropolitan area, jobs still might be moved to regional centres. Agencies will annually test the viability of a move to regional areas as part of their accommodation planning. The test will examine whether: • the agency provides services critical to regional business development • there is scope to place staff at regional locations • any withdrawal of agency staff from regional locations will affect the quality of service to clients or the regional labour market • agency activities are similar to prospective private sector activities in regional locations • there is scope to place staff in regional locations to complement private sector developments.

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Compact Cities

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The Department of Urban Affairs and Planning released Cities for the 21st Century, Integrated Urban Management for Sydney, Newcastle, the Central Coast and Wollongong. The document sets out a strategy for the integrated management of transport, the economy and environment for the Greater Metropolitan Region. Its emphasis is on creating “compact cities” and it identifies the central business districts of Sydney, Parramatta, Newcastle and Wollongong as primary centres, and North Sydney, St Leonards, Chatswood, Hornsby, Blacktown, Penrith, Bankstown, Liverpool and Campbelltown as secondary sub-regional centres. The Government will support these centres by developing infrastructure, such as transport, and by concentrating government employment.

Integrated Transport Strategy Integrated Transport Strategy for the Greater Metropolitan Region was released by the Department of Transport. It recognises that rail corridors converge on Sydney and Parramatta and that further decentralisation of workplaces to any areas other than the central business districts of Sydney and Parramatta would mean more people using their cars to drive to work. The effectiveness of public transport has already been reduced by residential growth on city fringes, the relocation of government agencies and a trend to decentralise employment. The result has been an increase in the cost of infrastructure and services, and environmental problems in their wake. Public servants have traditionally been heavy users of public transport. This trend has been reversed when agencies moved away from places easily accessible by public transport.

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Space utilisation

Strategy 9 Agency space utilisation performance

Strategy 10 Office Accommodation Workspace Guidelines

The Government wants to maximise savings from applying its space utilisation target of an average of 18m2 per person and it will assist agencies to achieve it. To achieve this target, new accommodation will need to be designed at 15m2 per person, subject to business functional requirements.

Reducing square metres per person over the next 10 years
In 1996 the average space consumption figure in the New South Wales public sector was 24m2 for each person, higher than the average of the Australian private sector and the international public sector. If the public sector reduces the average space per person, the savings will be considerable. There are already examples of government agencies reducing the average amount of space for their employees without detriment to productivity or effective service delivery. In the long term, all government agencies will have to reduce their space consumption and the Government Asset Management Committee will monitor progress. In order to achieve the Government’s space utilisation targets, all new accommodation will be designed at 15m2 per person or better, subject to the functional requirements of the agency.

Assistance for agencies
Traditional office accommodation no longer suits contemporary working patterns. Offices now have to accommodate telecommuting and provide flexible arrangements that require less space. The Department of Public Works and Services will issue guidelines which will: • include a range of office accommodation space standards • highlight alternative workplace models that support different modes of working • provide guidelines for buildings that allow more efficient workspace layout.

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Government Office Accommodation Reform Program

Purchasing power

Strategy 11 Lease consolidation

Strategy 12 Collocation opportunities

Better planning and better management will allow the Government to use its purchasing power effectively.

Benefits from rationalisation
The New South Wales Government as a whole is a large player in the office accommodation market and can exert market leverage and buying power to get better value for the Government dollar. There are at least 50 buildings which house more than one government agency. They have separate leases and often different lease arrangements. At least $1 million a year can be saved if multiple leases within a single building are consolidated into one “head” lease. That lease would then be managed on behalf of all tenant agencies.

Benefits from shared resources
Collocating several government services in the same building provides benefits to the community by offering a range of services at one location. There are also benefits for agencies which can share services and facilities such as meeting rooms, training facilities and some corporate support services. The collocation of agencies will be encouraged to take advantage of economies of scale. The Department of Public Works and Services will establish a “just-in-time” office workspace trial in the Sydney CBD Core and evaluate its efficiency and costeffectiveness. The office will work on the “hotelling” concept, where users book space as required on a user-pays basis. The office will provide facilities such as computers, fax machines, photocopiers and meeting rooms.

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What does this mean for government agencies?

Building long-term financial strategies will help agencies to manage their accommodation costs effectively. A proportion of the savings will be returned to the agencies to redirect into core service priorities. Chief Executive Officers will be accountable for the Government’s Office Accommodation Reform. The Government Asset Management Committee will work with agencies to coordinate accommodation management and to get the best leverage out of a wholeof-government approach. Integrated strategies will achieve savings and provide opportunities to improve service delivery. Each year agencies will complete their Strategic Office Accommodation Management Plans. These plans will be reviewed by the Department of Public Works and Services to ensure government objectives are being pursued. Agencies’ performance in asset management will be reported by the Department of Public Works and Services to the Government Asset Management Committee which will provide advice to the Budget Committee of Cabinet.

The benefits to agencies are: • better alignment of asset and accommodation needs with service delivery goals • clearer accountability for the effectiveness of their own strategies • clearer criteria for making investment decisions • reduced accommodation costs. Under the Reform Program, agencies will have to: • align asset and accommodation needs with service outcomes • undertake financial appraisals if they consider acquiring accommodation • review their portfolios to determine whether their properties should be sold or retained • gain approval for lease pre-commitments • consider moving their head offices out of the Sydney CBD Core to primary centres • minimise exposure to excessive rent • if located in the Sydney CBD Core, prepare a business case to demonstrate the need for their ongoing presence

• if head offices remain in the CBD Core, consider moving jobs to regional centres • reduce their space consumption and work to achieve the portfolio target of 18m2 per person at the latest by 2006 • apply the Office Accommodation Workspace Guidelines to use space creatively, in keeping with the opportunities offered by a modern office • consolidate leases within the same building under a “head” lease • collocate to take advantage of economies of scale and shared facilities.

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Government Office Accommodation Reform Program

Role of NSW Treasury and the Department of Public Works and Services NSW Treasury
NSW Treasury, together with the Department of Public Works and Services will review existing accommodation funding and management policies to ensure they support the objectives of best practice in accommodation planning. NSW Treasury will also: • approve all office accommodation proposals for budget sector agencies within the annual budget process • review the economic appraisals for lease versus own options for accommodation proposals for budget sector agencies • seek confirmation of compliance with Total Asset Management guidelines for Government Trading Enterprises and for State Owned Corporations. Specifically, the Department’s roles and responsibilities include: • assistance to agencies in the preparation of their Office Accommodation Strategies • monitoring the implementation of the Government Office Accommodation Reform Program including: – the alignment of asset and office accommodation resources with government’s service delivery priorities – providing advice to Government on the appropriateness of agency Total Asset Strategies – development of office accommodation strategies for Sydney CBD and regional centres – consideration and implementation of major investment strategies – development and monitoring of benchmarks and performance standards for asset and property portfolios • approval and coordination of changes to leasing arrangements, including lease renewals and exercise of options • development, implementation and monitoring of government policy relating to asset management • implementation of the Office Accommodation Workspace Guidelines • maintenance of the Government Office Accommodation database.

How to access the Government Asset Management Committee

The Government Asset Management Committee (GAMC) Secretariat has been established within the Department of Public Works and Services. Agencies wishing to place issues before the Committee for consideration can do so by contacting: GAMC Secretariat Level 23, McKell Building 2–24 Rawson Place Sydney 2000 phone (02) 9372 8889 fax (02) 9372 8822 email gamc@dpws.nsw.gov.au

Department of Public Works and Services
A coordinated whole-ofgovernment approach is required to reduce the current level of duplication and overlap of functions that currently occurs in the planning and management of office accommodation. The Department of Public Works and Services will be responsible for this centralised coordination role and will advise the Budget Committee and relevant Ministers on the Government’s current and future strategic property and accommodation needs.

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New South Wales Government

Government Office Accommodation Reform Program