Sharing the costs and benefits of a collaboration programme

Sharing the costs and benefits of a collaboration programme ACES Presidential Conference 22 September 2011

Introduction Laura Stamboulieh Director Public Sector Consulting, DTZ

The theory If considered from a long term perspective, collaboration is not a cost ....... it is all benefit !

The reality Short-termism = cost focus !

The mentality So, what’s in it for me?

‘Short term’ costs of collaboration? Who pays? Who benefits?

Let’s review where we were in May 2011 Source: DTZ Collaboration Survey – May 2011

So where are we now? • More organisations are engaging collaboration as a way forward. • There is definitely more activity around shared services. • Capital and Assets Pathfinder Programme • GPU has gone ‘national’. • More organisations are recognising that a holistic approach to the public sector asset base makes sense. • But .......... many initiatives are still at the ‘talking’ stage!

The position is that • There appears to be a lack of evidence of ‘multi-partner’ collaboration projects. • There are very few examples of a results based upon an holistic approach to a wider public sector asset base. • Projects delivered tend to have been borne out of a Proactive Partner’s ‘need’ giving rise to a Reactive Partner’s subsequent ‘involvement’. • Consequently, cost and benefit sharing mechanisms used to date have been relatively straightforward.

£ Cost reduction benefits £ Simple cost and benefit sharing mechanism Lease or occupancy agreement based upon space occupied and £psf running cost contribution/rent

Are the benefits of collaboration understood? Regeneration is re-emerging and proving a catalyst for collaboration. Source: DTZ Collaboration Survey – May 2011

What benefits will the Pathfinders deliver? Overall, it is anticipated that the Pathfinder projects could shrink the public sector estate by 10% - 29%.

Micro Pan-Asset Approach: collaborate to regenerate Regeneration-based collaborative projects can be based on a straight-forward ‘land-owner agreement’ and pro-rata value sharing arrangement. 1 • Multi-asset ownership • Differing objectives • Collaboration could make a difference • Keep it simple • Jointly agree the objectives and understand the benefits (VFM etc) • Jointly appoint a project lead (internal or external) • Jointly agree a ‘cost profile’ and apportion cost • Jointly agree a ‘benefits sharing mechanism’ • Jointly appoint a delivery Partner 3 2 6 4 5 7

Micro Pan-Asset Example: over-coming the differences Overall, through new ways of working and sharing ‘non-territorial’ space, the project could shrink the Partners total footprint by over 40% giving rise to running cost savings . Capital receipts in excess of, say, £14M could be derived via a re-development of the site acting as a catalyst. The capital costs involved in driving the project forward could be borne by a Private Sector Partner who would be rewarded for the risk incurred. Greater certainty from the public sector = less risk = less payout !

Macro Pan-Asset Approach – more complex ! • How do you get beyond the Strategic level? • Differing priorities • Differing politics • Differing financial positions

Public Sector Property Company – too much to handle?

To wrap up ........ • The benefits of collaboration appear to be understood but there is still a lot of ‘talk’. Are we trying to over-complicate collaboration and be too ambitious? • Short-term cost-cutting targets may prevent longer-term benefits being realised. Is this putting our Partners off as they can’t show the required returns or is it simply that they have differing approaches to risk and funding/financial arrangements. • Should we accept that delivery will continue to be driven largely by Local Government ? Do we plan for this ‘short term cost’ exposure in our budgeting? • Overall, in terms of cost-benefit sharing mechanisms, should we accept that collaboration on a Macro Pan-Asset basis will take time to deliver but that an ‘organic’ approach to collaboration based upon simplistic mechanisms will derive results?

... Is the message really..... Approach collaboration incrementally, don’t be overly ambitious and keep it simple !

Sharing the costs and benefits of a collaboration programme