2 Prioritising work on the estate
9. The Department faces the challenge of balancing
the budgetary demands of maintaining and improving its estate
with other important aspects of defence expenditure. Following
the Comprehensive Spending Review 2007, the Department's financial
position will remain tight, and so funding will have to be targeted
at the areas of the estate which need it most.[21]
In an effort to release more funds for estate work, the Department
has reduced staff costs and overheads in Defence Estates by £21
million over four years, and by realising the benefits of more
efficient, long-term and large-scale prime contracts, it released
£22 million in 2006-07. The Treasury and the Department have
also allowed some receipts from the disposal of surplus land and
buildings to be reinvested in the estate, as with some sites in
London.[22] Since the
publication of the Comptroller and Auditor General's report, the
Department has decided to implement projects to reduce energy
at sixteen more sites following the example of a pilot at RAF
Kinloss.[23] This investment
should release more than £2 million annually, for a one-off
cost of around £2.3 million.
10. At times, however, the Department is faced with
developments which may affect its financial position at short
notice, and which require adjustments to avoid breaching its budget.
Traditionally, the maintenance and upkeep of the estate have been
among the first areas reduced to address financial shortfalls.[24]
The creation of Defence Estates as an internal expert body on
estate matters and the introduction of new, long-term contracting
arrangements were intended to reduce the defence estate's particular
vulnerability to in-year budget cuts.[25]
In 2006-07, the Department was not prepared for the sudden increase
in the cost of fuel. It faced a £70 million shortfall and
was forced to make cuts to planned expenditure during the year.[26]
Defence Estates' budget was cut by £15 million, representing
over 20% of the total shortfall, despite the estate representing
less than 4% of the Department's total operating cost.
11. The Department lacked adequate management information
to be able to target the cuts at the least important estate work.
Work to the value of £13.5 million was removed from the five
Regional Prime Contracts which are responsible for maintaining
and improving the working estate and living accommodation for
single personnel across Great Britain. The cuts included key work
such as re-roofing projects, repairs to buildings at Munitions
Centres and redecoration programmes. Deferring these projects
for one year has implications for the condition of defence assets.
Under their contracts, most Regional Prime Contractors are obliged
to ensure that there is no deterioration in the estate they manage
over the lifetime of their contracts. The Department cannot hold
its contractors to account for fulfilling these terms if it does
not identify funds to pay for most, if not all, of the work for
which it has previously withdrawn funding.[27]
12. The Department could instead have made cuts to
other estate work. Projects to the value of at least £45
million were ordered at short notice by Defence Estates' internal
customers—principally the three Services—to be carried
out by Regional Prime Contractors in addition to their core works.
Known as Minor New Works, these projects included at least £1.6
million for the construction and refurbishment of sports facilities,
such as tennis courts and all-weather pitches.[28]
The Department now accepts that its decision to carry out some
of these projects while cancelling essential maintenance work
seems questionable in hindsight.[29]
The decision was taken by high-level representatives of the three
Services and other internal customers of Defence Estates.[30]
Some packages of the deferred work were then reinstated later
as Minor New Works.[31]
13. The Defence Management Board has almost no advance
knowledge of the likely level of expenditure on Minor New Works
before the beginning of each financial year. The Department therefore
lacked key information when deciding how to apportion the £15
million funding cut in 2006-07.[32]
No system exists to allow Minor New Works projects to be prioritised
routinely alongside one another, or against other kinds of expenditure
on the estate such as upgrades to houses. The Department told
us that such a system is now being developed.[33]
Likewise, there is no effective process by which opportunities
to bring together similar projects into coherent programmes of
work—for instance numerous separate projects to repair and
replace toilet and shower facilities—can be identified.
14. The Department has been pursuing the same strategy
for its estate since 2000 but it has yet to determine what this
strategy will mean in practice for much of its land and buildings,
and it still has no evidence-based way of determining where expenditure
is needed most. Integrated Estate Management Plans are intended
to address this vacuum by providing detailed priorities for the
development of each defence site. The site occupants had initially
been tasked to complete the first version of these plans three
months before detailed guidance had been produced, although the
deadline was later extended to September 2007.[34]
21 Q 21 Back
22
Qq 22-23, 27, 53-55; C&AG's Report, Box 3, p 20 Back
23
Q 86 Back
24
Q 41 Back
25
Qq 4-5, 9, 41 Back
26
Q 12 Back
27
Q 20 Back
28
Qq 12, 40; C&AG's Report, para 1.17, appendix 5 Back
29
Q 13 Back
30
Q 13 Back
31
Q 46 Back
32
Q 71 Back
33
Qq 47, 71 Back
34
Q 82 Back
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