West Lothian Council And Real Estate Construction Essay

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The Council area of West Lothian is a diverse geographical area of Scotland, with a mixture of rural villages as well as urban towns. It is situated between Edinburgh and Glasgow and has a population of 169,500 (Office for National Statistics, 2008). The area holds key strategic importance for the Scottish economy as a whole as the West Lothian economy has grown strongly despite losses of manufacturing jobs in the area; this has been counteracted with strong growth in retailing and other service sectors. West Lothian holds the advantages of situated at the heart of the central belt in Scotland with excellent transport links and a young expanding population makes it an attractive prospect for employers.

The West Lothian area is projected to grow strongly in population over the next 25 years by 23% (General Register Office for Scotland, 2010). This provides important implications for the West Lothian Council in the provision of all services in the area for the future. With the proposed cuts in expenditure for the council, the importance of a long-term strategy for the management of Real Estate assets is paramount in order to maximise best value for assets to ensure that they are used in an effective and efficient manner.

Significance of Real Estate to Local Authorities

Local Authorities have significant Real Estate holdings. The West Lothian Council has a property portfolio in the region of 1000 properties. This according to their Corporate Asset Management Plan (2008) has 338 operational properties used to directly support council service delivery, such as schools, libraries and offices. The non operational properties are used to stimulate economic development and provide the council with a stable revenue income stream and surplus assets for disposal to support capital programmes. The management of the nonoperational properties have been outsourced to a local property agency "Property Management & Development" which upon inquiries I was unable to ascertain further detail on the management of the non operational property. With a large portfolio of Real Estate it holds a high significance as a corporate resource for the provision of services.

Weatherhead (1997) states that; "property is an essential factor of production". In all Local Authorities, property can be seen as an essential factor of frontline service provision. This is also true for the West Lothian Council. The Real Estate which they hold in their portfolio should be used to provide an efficient service for the communities of West Lothian to ensure that the property portfolio is suitable for current use and supports efficient and effective service delivery both now and in the future. Appropriate use of assets can make the difference between good and poor service delivery and assist in front line delivery.

In order to provide this service efficiently West Lothian Council must look at the all possible opportunities for reducing the number of properties to allow limited resources to be more effectively targeted.

Property is a hugely expensive factor of production; the average authority devotes 8 per cent of its annual revenue budget to running and maintaining its estate making property the second most costly resource after staff (Audit Comission, 2000).

This expensive nature of property means that it carries opportunity cost whereby retaining a property ties up investment that may be may be more appropriately used elsewhere. For Local Authorities the book value they place on operational property is largely the replacement cost of the asset, this can mean that the opportunity cost of the property may not be apparent as it is not the market value that is analysed. Therefore inefficient use of property can cause significant resources to be tied up in non operational property without consideration for return on the investment and if insufficient effort is applied to minimising the amount and cost of office accommodation. Real Estate is therefore extremely important as resource to provide services throughout a Local Authority which offers best value and reduces costs of provision of the services.

Managing these assets is a structured process that seeks to ensure best value for money from the property assets and improved performance in meeting strategic needs. Although property is a significant cost to any organisation it can be manipulated in order to produce a benefit for the organisation.

Real Estate Model of West Lothian Council

In the past, most local Authorities, along with many other organisations had not in any systematic way considered how their assets have been used and deployed. Investment in real estate has been considerable but often based on poor information with a lack of strategic importance placed upon it. Issues such as condition of asset, fitness for purpose and long term sustainability were at best considered informally. The emergence of Asset Management Planning in most Local Authorities in Scotland as a whole has ensured not only proper management and monitoring but has also acted as a tool for robust and sound investment decision making for the future.

The West Lothian Council's Real Estate model follows the broader line set out by the Scottish Government based upon the concept of "Best Value". This concept is outlined by the Scottish Government as to make arrangements to secure continuous improvement in performance (while maintaining an appropriate balance between quality and cost); and in making those arrangements and securing that balance, to have regard to economy, efficiency, effectiveness, the equal opportunities requirements and to contribute to the achievement of sustainable development. (The Scottish Government , 2003)

This explanation whilst broad has been understood by the West Lothian Council to mean the basic aim "to make more effective and efficient use of the council's property assets" (West Lothian Council, 2008)

In order to insure that the council's property assets met the aim a series of goals our laid out in their strategy along with the action needed to meet these goals in order to ensure "best value". As a key part of this decision it is necessary for data to be collected on the properties in order to monitor and report on the performance of the property. The Corporate Asset Management Plan outlines these key drivers in report, for the basis of decision making to be:

Condition

Suitability

Sufficiency

Revenue Costs

Accessibility

Values

These key drivers allow the West Lothian Council to monitor their operational portfolio and conduct a property rationalisation review following the frame work of best value to tone of the 4 C's. This is to:

Challenge whether the services are required at all, and whether they should be provided and structured as they are present;

Compare activity levels, unit costs and customer/user satisfaction levels over time and with other similar authorities;

Consult users about their satisfaction with current procedures and performance, and canvass ideas for improvement, perhaps through a questionnaire or focus groups. Involve users in service and contract specifications, monitor performance and set up mechanisms for obtaining user feedback on services received; and

Test the competitiveness of all service elements through meaningful comparisons with other local authorities and private sector providers; test the market for all services at regular intervals.

(Audit Comission, 2000)

The strategy is implemented in house for operational property with a decision framework being outlined in the West Lothian Council's Corporate Asset Management plan which is dealt with at a sufficiently senior level with the Chief Executive the Council. With the 4 C's set out it enables a clear distinguished plan of action to reach the goals set by the West Lothian council

Advantages of Best Value

Whilst the strategy laid out on the basis of Best Value may be considered vague compared to the some of the strategy that is implemented in the private sector. This is due to Local Authorities have to consider goals in terms of financial and social aspects of the services provided, thus the focus of the service is more diverse. With less tangible and measureable objectives at corporate level are likely to translate less easily into property objectives. Therefore for Local Authorities there are benefits having instigating the Best Value mantra in Asset Management.

With the increasing prevalence of new technology there has been a rapid change in service requirements, procurement of accommodation and working practices. With the introduction of Best Value strategy which appropriately monitors and implements Asset Management, then investment which had been previously used in property can be reallocated to provide frontline services for the community. The continual monitoring of the Assets within Best Value realms ensures that the portfolio can operate as efficiently as technology provides.

With the financial constraints local authorities can experience maintenance of property can be difficult. However included in the Best Value remit is the commitment to continuously improve services provided and ensures that assets continue to support service delivery.

The introduction of Asset Management within the Best Value strategy has also provided local authorities with necessitation of monitoring the current properties through the key drivers that were outlined above. The information for each of these drivers forms the bedrock of asset management decision making within West Lothian Council and enable them the opportunity to fulfil their duty of Best Value.

With the role of a Lead Officer who is responsible for Asset Management planning allows a cross cutting role in order for assets to be viewed as a corporate resource, encourages joint asset solutions whereby assets may be shared with other public agencies to maximise Best Value.

The outsourcing of management of the non operational property within the portfolio whilst may allow for specialist property managers to exercise expertise that may be difficult to attract to an in house role within the public sector. This allows impartial management based on the property as a corporate resource rather than the complications that can occur within the politics of the local authority.

Barriers to Best Value

Whilst Best Value Asset Management has largely brought about successful efficiencies in the property portfolios of Local Authorities there have been barriers to it being considered to have brought in a revolutionary change. The Audit Commission (2000) looked to outline these as the following. Property is not always treated as a strategic resource in the provision of services whereby councils may fail to challenge why they own land and property, or to review the way in which they organise and obtain property services. Existing land and buildings are still perceived as fixed assets, which is to be held onto until they fall empty or become a liability rather than as a resource hungry facilities that help or may hinder delivery of services to the public.

Whilst there is performance indicators defined these can be still offer insufficient data to inform decisions about how best use to manage the property portfolio, with poorly defined financial and managerial procedures to implement the strategy.

Councils can become trapped and maintain the status quo from the general view of were by people don't like change. Political apathy were Councillors do not want change as it may look like to voters that a reduction in services is occurring however it may be more efficient way of offering the same if not better quality of service to the community. In order to counteract this affect it has been highlighted that involving and informing communities in the decisions behind the provision of these services.

External legal and financial constraints and also limit the flexibility of applying the most suitable solutions for the needs of a local community. Investment in property it is a lumpy, illiquid asset which has many legal restraints placed upon it which can reduce its flexibility to the end user. For example many Local Authority properties may be listed buildings which prohibit alterations that may diminish their historic value, however this can mean that best value may not be realised.

Through the innovative use of property great savings can be realised within a Local Authority such as the West Lothian Council. The Best Value strategy of Asset management can be applied to the freehold interests in property were by the justification of all interests must be met at the best value level. The strategy can also be applied in a smaller scale to reap similar benefits of ensuring maximisation of resources such as the use of technology and innovative methods of managing staff to reduce need for space and therefore making the best use of resources available.

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