Assembly Finance Committee reports on Workplace 2010 and Location of Public Sector Jobs

Session: 2006/2007

Date: 09 July 2007

Reference: F&P 07/07

The Northern Ireland Assembly’s Statutory Committee for Finance and Personnel today published a report on Workplace 2010 and the Location of Public Sector Jobs, having taken evidence from key stakeholders. The report contains a range of key recommendations to the Department of Finance and Personnel, ahead of final decisions being taken by the Minister and the Executive.

Speaking after the meeting Committee Chairperson, Mitchel McLaughlin, MLA, said:

"Given the scale, duration and importance of Workplace 2010, the Committee is calling for a range of safeguards and assurances. If a PFI approach is taken it will be one of the biggest of its kind in the UK, will tie the Executive into a 20-25 year contract and will effectively double the PFI debt from the present £1.5 billion liability. The Committee therefore sees it is as being vitally important that the final business case is robust and reliable in its assessment of all the procurement options. If PFI is confirmed as being the best value for money and affordable option, the issues then will be whether the final contact takes account of best practice and lessons from other PFI projects and whether the subsequent contract management arrangements are effective."

The Chairperson also stated: "In terms of the Location of Public Sector Jobs, the Committee sees this as a key strategic issue facing the Department and the wider Executive. The Committee’s recommendations aim to encourage progress on this front and places particular emphasis on maximising and realising the economic, social and environmental benefits from a strategic approach to locating public sector jobs".

ENDS

BACKGROUND INFORMATION

The Executive Summary and key conclusions/recommendations contained in the Committee’s report are attached. The complete report can be obtained on the Committee’s homepage on the Northern Ireland Assembly website at: http://archive.niassembly.gov.uk/finance/2007mandate/finhome_07.htm The Committee for Finance and Personnel is one of 11 Statutory Committees of the Northern Ireland Assembly, which are set up to advise and assist each Northern Ireland Minister in the formulation of policy with respect to matters within his/her responsibilities as a Minister. Statutory Committees have powers as described in Strand One of the Belfast Agreement i.e. a scrutiny, policy development and consultation role with respect to the department with which each is associated, together with a role in the initiation of legislation.

As per paragraph 9 of Strand One of the Belfast Agreement, Statutory Committees have the power to:

  • Consider and advise on departmental budgets and annual plans in the context of the overall budget allocation;
  • Approve relevant secondary legislation and take the Committee stage of relevant primary legislation;
  • Call for persons and papers;
  • Initiate inquiries and make reports; and
  • Consider and advise on matters brought to the Committee by its minister.

The Committee for Finance and Personnel has eleven Members:

Mitchel McLaughlin (Chairperson) (Sinn Fein)
Mervyn Storey (Deputy Chairperson) (DUP)
Roy Beggs (UUP)
Dr Stephen Farry (Alliance)
Simon Hamilton (DUP)
Fra McCann (Sinn Fein)
Jennifer McCann (Sinn Fein)
Adrian McQuillan (DUP) 
Declan O’Loan (SDLP)
Dawn Purvis (PUP)
Peter Weir (DUP)

Media enquiries should be addressed to:

Clerk of the Committee for Finance and Personnel, Room 419, Parliament Buildings, Belfast BT4 3XX.

Telephone 028 9052 1843.

 

Executive Summary

At its first meeting on 16 May 2007 the Committee for Finance and Personnel agreed to include in its work programme to summer recess an initial scrutiny of Workplace 2010 (WP2010) and the Location of Public Sector Jobs. Mindful that decisions are pending by the Minister and the Executive on both issues, the Committee undertook this scrutiny in the period 6 June to 4 July 2007. This first report represents the outcome of the Committee’s initial considerations.

The stated strategic objectives of WP2010 are to enable the Northern Ireland Civil Service (NICS) to transform the way it delivers public services; to provide accommodation in which staff are proud to work; and to safeguard funding for priority front line services. The programme will develop new workplace standards that will support the modernisation of the NICS, whilst also addressing urgent accommodation problems facing the office estate.

WP2010 is presently following a Total Property Private Finance Initiative (PFI) procurement solution, which will include the sale of about three quarters of the NICS office estate to a Private Sector Partner (PSP). In return the PSP will make an upfront capital payment for the transferred assets, upgrade a number of key properties and maintain and service the accommodation in return for a monthly ‘unitary charge’, payable throughout the 20/25 year duration of the PFI contract. This represents the largest PFI contract of its kind in Northern Ireland (NI) and one of the largest in the UK. The resulting commitment would effectively double the PFI debt to be repaid by the devolved administration, from the present £1.5 billion liability.

Given the scale and duration of WP2010, the stakes are high and much hinges on the robustness and reliability of the Final Business Case in reassessing the procurement options and determining the best value for money and affordable solution. If the PFI approach is confirmed, the pivotal issues then will be whether the final contract takes full account of best practice in PFI procurement and whether the subsequent contract management arrangements are effective.

In a separate initiative, the Department of Finance and Personnel (DFP) commenced a public consultation on Guiding Principles for the Location of Public Sector Jobs in Northern Ireland in January 2007. Whilst the issue of jobs location is distinct from WP2010, the Committee has considered both matters in tandem. This approach reflects a general concern that WP2010 could significantly reduce the Executive’s flexibility to determine the future location of public sector jobs.

The Committee’s examination of Public Sector Jobs Location focuses on the economic and social benefits from a strategic approach to jobs location. Consideration is given to the scope and constraints for dispersal, to the approaches being taken elsewhere and to the relevance of existing cross-cutting policies, not least the Regional Development Strategy.

The Committee received evidence from a range of stakeholders, including: DFP, on both WP2010 and Public Sector Jobs Location; NI Statistics and Research Agency, on its initial review of the WP2010 pilot project at Clare House; NI Audit Office and the National Audit Office, on best practice approach to PFI; and the NI Court Service, on its experience of the Laganside Courts PFI project. Finally, the Committee was able to draw on a range of published sources, including an Inquiry report by its predecessor committee into Public Private Partnerships and a recent report on WP2010 and Public Sector Jobs Location by the Committee on the Programme for Government.

From the evidence received, the Committee has made a range of recommendations on WP2010, designed to establish necessary safeguards and assurances before the Minister and the Executive make final decisions on the project, and on the Location of Public Sector Jobs, aimed at encouraging progress on this front and at maximising the potential economic and social benefits of a strategic dispersal policy.

Key Conclusions and Recommendations

Workplace 2010

1. The Committee acknowledges the context in which WP2010 has been initiated and developed and fully supports the strategic objectives of the programme which aim to:

    • enable the NICS to transform the way it delivers public services, in terms of efficiency and effectiveness;
    • provide accommodation in which staff are proud to work; and
    • safeguard funding for priority front line services.

The Committee also supports the more immediate objectives of addressing the backlog of maintenance within the NICS estate, of preserving existing investment and of improving the working environment for staff generally. The political objectives of contributing to local economic growth and of providing the flexibility to respond to political commitments on the location of civil service jobs are also to be particularly welcomed. (Paragraph 16)

2. The Committee has concerns with some of the findings from the initial ‘health check review’ of the pathfinder project for WP2010 at Clare House and considers that the Department can learn valuable lessons from this exercise. In particular, there will be a need to ensure that in all future relocations under WP2010, provision is made for the proper introduction and testing of IT equipment, thereby avoiding disruption to staff and to the provision of public services. The Committee awaits with interest the outcome of the fuller post-occupancy evaluation in September 2007, as this should provide a clearer assessment of the merits and implications of moving to an open-plan office environment. Also, in terms of future accommodation provision, the Committee expects that, in the consideration of the WP2010 accommodation options, equal office accommodation standards will apply. (Paragraph 21)

3. The Committee calls upon the Department, in finalising the business case, to give due regard to the concerns around the use of public sector comparators and to reassess the procurement options in broad and strategic terms, ensuring that the final value-for-money appraisal takes account of the indirect and long-term, as well as the direct and short-term benefits, risks, uncertainties and costs. (Paragraph 26)

4. The Committee recommends that the final assessment of the procurement options for WP2010 should include careful consideration of the full range of qualitative, as well as quantitative, factors. This will account for potential changes and uncertainties, including, for example, the Executive’s control and flexibility over future decisions on government accommodation and wider public expenditure and administration matters. (Paragraph 27)

5. The Committee considers that, in terms of WP2010, there is a very high risk associated with accepting an up-front capital receipt which is substantially lower than the full market value of the properties. There is therefore a need to ensure that, should the Department pursue such an approach, it fully addresses this risk in the termination clauses of the contract. (Paragraph 32)

6. Given the volatility of the property market and taking into account the views expressed by the NI Audit Office, the Committee considers it to be a minimum requirement for the WP2010 project team to obtain accurate and up-to-date valuations for the transferred assets. The Committee recommends that the properties to be included in WP2010 should be valued by an independent commercial valuer in addition to the public sector valuer, and that these valuations should be updated before the conclusion of negotiations. Furthermore, the WP2010 project team should be able to demonstrate that both the upfront capital payment and the remaining net value of the transferred assets are clearly reflected in the up-to-date valuation in the financial model. (Paragraph 33)

7. Going forward, the Committee calls for transparency in the establishment of the affordability model and the efficacy of financing arrangements of the Total Property PFI option. In addition, the Committee believes that there should be greater transparency in relation to the long-term commitments arising from PFI deals in NI and in their impact on future budgetary flexibility and affordability. In this respect, the Committee believes that the affordability of the Total Property PFI option proposed for WP2010 should not be considered in isolation, but must also be considered in terms of its impact on the collective commitments arising from PFI deals and indeed commitments arising from other long-term borrowings. (Paragraph 34)

8. The Committee recommends that if the WP2010 project is to proceed on a PFI basis then the Department should ensure that the full range of applicable best-practice approaches and lessons identified from existing PFI experience, including those outlined in this report, are applied in respect of the Final Business Case, the final contract and contract management arrangements. (Paragraph 53)

9. Given the scale, complexity and importance of WP2010 and the range of safeguards required, the Committee seeks firm assurances from the Department on the following:

    • that the Final Business Case will be independently and objectively assessed, not only in terms of the process and methodology followed in its preparation but, more particularly, in terms of the underlying assumptions, calculations, analyses, conclusions and recommendations contained therein;
    • that this assessment will cover, amongst other things, the robustness of the Public Sector Comparator, the qualitative and quantitative evaluation criteria and the application of these against the different procurement options, as well as the comparisons of the costs, benefits, risks, uncertainties, optimism bias and the sensitivity and the affordability analyses associated with the different procurement options; and
    • that, in the event of PFI being confirmed as the best value for money and most affordable solution, the final contract will provide for all necessary safeguards, including those identified in this report.

The Committee regards these measures as being necessary and valuable in providing the optimal level of independent and objective assurance to the Minister, and ultimately to the Executive and the wider Assembly. (Paragraph 59)

10. The Committee recommends that any additional assessment or work necessary to provide the required assurances should be undertaken promptly and immediately once the Final Business Case and final contract are available. (Paragraph 60)

Location of Public Sector Jobs

11. The Committee recommends that the Department and the wider Executive implement the recommendation by the Committee on the Programme for Government, to develop an affirmative policy for the dispersal of public sector jobs, which ensures the capacity of the public sector to deliver a range of services efficiently and effectively, through a sustainable approach, and implemented ‘for the benefit of the whole of NI, as a matter of priority’. (Paragraph 63)

12. In echoing the call for an affirmative policy on dispersal, the Committee contends that this policy should not be framed simply in terms of the demographics of public sector jobs location or the need to transfer jobs outside the Belfast area. Rather, a strategic approach is required – in terms of the locations selected, the number, types and grades of jobs, and the functions or business units to be relocated – to maximise the benefits throughout NI. The Committee further believes that the Department, in categorising the location of offices within the public sector, should accurately reflect geographic reality. (Paragraph 64)

13. The Committee seeks further assurances that the final WP2010 contract and projected costs do not militate against future strategic decisions on the location of public sector jobs. (Paragraph 69)

14. Whilst acknowledging that the conditions in NI, in terms of the location of public sector jobs, will differ from elsewhere, the Committee, nonetheless, calls on the Department to learn the lessons from the international experience of public sector jobs dispersal and apply these, as appropriate, in the NI context. (Paragraph 80)

15. The Committee considers that, whilst the costs of dispersal are important, including the immediate investment requirements and shorter-term value-for-money considerations, the Department should give appropriate weighting to the longer-term strategic gains, including the potential of dispersal as a tool for supporting the development of the regional economic hubs and, thereby, closing the significant regional economic and prosperity gaps within NI. (Paragraph 85)

16. The Committee recommends that, as a complement to a high-level affirmative policy on dispersal, the Department takes the lead in developing a cross-cutting strategy on jobs location, covering NICS, local government and the wider public sector. This strategy should apply best practice, based on experience elsewhere, in providing a methodology for applying the guiding principles and for initiating and implementing individual dispersal projects. (Paragraph 87)

17. The Committee further recommends that, for the purposes of informing the strategy on jobs location, the Department commissions an independent study on how best to maximise the longer-term economic, social and environmental benefits from an affirmative dispersal policy. (Paragraph 88)

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