Local Authority Property Management

Initiatives, Strategies, Re-organisation and Reform

Mark Deakin

• Publisher: Routledge
• Year: 2019
• Print ISBN:
  9781138361010
• eBook ISBN:
  9780429780295
• Topic: Social Sciences
• Subtopic: Law Theory & Practice
• Index: Social Sciences

First published in 1999, this volume aimed to provide a signpost marking a significant development in the transition from estate to property management in local authorities. It examines the debate that has surfaced in the property profession since the Audit Commission's (AC 1988a, b) reports on Local Authority Property Management (LAPM), and brings together sixteen studies from academics and practitioners with an interest in exchanging views, opinions and experiences on the development of LAPM. Its content, which links theory, method and techniques with practice, makes it a vital source of information for those with an interest in obtaining the most effective management of property.

Part 1
Local Authority Property Management

2 The Development of Local Authority Property Management

Mark Deakin, Department of Building and Surveying, Napier University

Introduction

Ten years has passed since the Audit Commission first published its reports on Local Authority Property Management (AC, 1988a, b and c). Since then, all local authorities have responded to the reports and taken steps to improve the standards of property management in line with the guidelines set out by the Chartered Institute of Public Finance and Accountancy (CIPFA, 1989, 1991a, b and 1992). This paper examines the development of local authority property management in terms of the VFM test: land audits; property reviews and transition towards the 3 E's advocated by the AC and CIPFA. It then goes on to look at the emerging pro-privatisation consensus over the VFM test and questions the transition to the 3 E's has raised about the technical development of local authority property management. The paper identifies the questions about the nature of the development originate from progressive and conservative divisions to do with the theory of property valuation and crisis of legitimation over the economics of the post-war welfare state - the divisions and crisis reflected in the emergence of the new managerialist thesis.

In going on to investigate the 'all pervasive' market reasoning of the managerialist thesis (in both the UK and USA), the paper draws attention to the 'Anglophonic' tailoring and re-engineering of property management, augmentation of initiatives in both the technical and economic basis of the development with the informational and communicative dimensions of the corporate strategy, financial instruments and commerce surrounding the culture of property management in local authorities. Here attention is drawn to the high-tec, economic cum cultural paradigm of an information rich, communicative form of property management and the place it takes in the re-organisation and reform of public services provided by local government under the emerging structures of post-Fordism and neo-Schumpeterian workfare state. The paper draws the investigation to a close by providing some 'sign-posts' in the development of local authority property management.

The VFM test

In the late 1970s it had become generally accepted there was a real need to make large organisations more accountable and subject to a greater degree of audit. With audit came the term 'value for money', what Butt and Palmer (1985) refer to as 'a wide and ambiguous term', but one that, nevertheless, goes a long way to establishing the principle of economy and the use of money as the measure of value attributable to expenditures on goods and services. With the concept of audit and principle of economy came the idea of 'managing better with less', being 'lean, mean, enterprising and competitive'. Based on this managers started to ask the following:

• what accounting procedures are in place;
• how is expenditure audited;
• how could expenditure be made more economic;
• how can the auditing of expenditure be made use of to review the performance of goods and service provision.

In response to this managers started to question whether expenditure met the value for money test. Whether, that is: the accounting and auditing provisions in place are economic and how reviews of expenditure can be carried out to test this. As a consequence a VFM methodology began to develop. It should be noted that the methodology in question has a relatively simple and straight forward philosophy. In its most simplistic form it can be represented as:

• the definition of objectives for the test;
• the detailing of the accounting procedures underlying the provision of goods and services;
• the auditing of expenditures;
• the review of performance.

As a set of inter-related activities the methodology appears quite straight forward. At this level of representation is can be seen as generic, applicable to any situation where accounts are needed and expenditure requires to be audited.

Grounded, as it is in the principle of economy, it is perhaps possible to generalise the objective of the test as value adding - be it in terms of income producing or cost-saving measures. Working within this objective, the test transforms into a management exercise: one that details the accounting procedures for the provision of the goods and services in question; goes on to audit and on further to establish whether such expenditures can be made more economic through a review of performance. It is perhaps this simple and rather straight forward representation of the VFM test that makes it an attractive management exercise. It should perhaps also be noted that the exercise is not one which is limited to the review of performance, because the information generated from the test, its audit and review, can be and often is drawn upon to form the basis of not only a rationalisation, but a thorough and often rigorous re-organisation of the management process underlying the provision of goods and services.

In taking this form, the audit and review issues are represented by the Society of Local Authority Chief Executives (SOLAS, 1986) enquiry into the matter and the Local Authority Valuers' Association (LAVA, 1989) examination of how to manage such exercises. In chronological terms it is a development that is perhaps best marked by Britton, Connellan and Crofts' (1989) representation of such audits and reviews as a form of rationalisation and transition towards the strategic management of property held by local authorities.

Land audits and property reviews

According to Britton, Connellan and Crofts (1989) a land audit or property review, is a process by which systematic attention is given to each interest in landed property by a team of qualified people working to a close brief. Here, the audit and review in question, are seen to represent an essential first step towards attaining good management. In the context of the exercise, 'good management' is defined in terms of the initiatives - in this instance the audit and review - that not only allow the measurement of land and property in terms of 'monetary value', but which also lead to the 'minimum' amount of expenditure on the management of related goods and services.

As they go on to point out, the essential components of an audit and review are as follows. Firstly, it must be supported at both the political level of members, professional officers, directors and executives of the corporation in question. In order to achieve this, it is necessary to 'sell' the idea to those within the organisation whom it will affect and in this connection it is important to state from the outset how the financial proceeds of the exercise are to be distributed within the corporation. Secondly, it must systematically cover all the authority's landed property, regardless of tenure and use. Thirdly, it should cross all boundaries (geographical and departmental) because land audits and reviews are a corporate activity. Fourthly, the first land audit and review should be planned as a single project with a defined time span which should be as short as possible. If this means that it requires additional resources, these should be costed and provided for the project, because if the exercise takes too long, the beneficial effects of the audit and review will be diluted. As a rule of thumb, it is suggested a small portfolio of holdings should be audited within twelve months and a medium-sized holding should be reviewed in three years. It is also proposed that the largest portfolios should be audited within the span of a typical rent review period which is five years.

As they go on to point out: one of the main functions of the land audit and property review should be to establish suitable performance indicators for each property interest and to set up systems for the continuous monitoring of performance according to those indicators. The suggested measures of performance are:

• the amount of net capital receipts from disposals;
• the amount of any increases in receipts from income-producing landed property (eg: investment property);
• the reduction in landed property used by the authority;
• the reduction in running costs;
• the ratio of all receipts and savings to the cost of the audit and review.

From this it is evident that land audits and property reviews centre upon the generation of capital receipts from income producing land and property. An exercise that is geared towards solving the problem of the static estate in local authorities, the subsequent mis-match, under-use and relatively high level of vacancy, by the disposal of land and property the audit and review declares surplus to requirements. While the exercise reduces the amount of land and property made use of by the disposal of poorly performing assets and benefits from the consequent improvement such a form of rationalisation brings about, the problem of running cost control appears to take a low priority in the overall scheme of things. This is to some degree borne out by the fact questions about running cost control only appear towards the bottom of the list. It is perhaps this switch from concern over the generation of capital receipts via the said audits and reviews, to the reduction of running costs that marks the transition from rationalisation to re-organisation under the 3E's and strategic management of property this brings about.

While it is appreciated the distinctions drawn here between VFM, land audits, property reviews, rationalisations, the 3 E's and reorganisation are subtle, they are nonetheless critical for the reason they signify that:

• in responding to the VFM test, the management of property has been augmented by initiatives in land audit geared towards the review of property and assessment of whether land and property held by an organisation meets their requirements, if there is a mis-match, under use of assets, or high level of vacancy;
• in placing a monetary value on the holdings the opportunity cost of land and property ownership is established, along with the price of holding assets that are unsuitable, partially used or vacant;
• the high cost of holding inappropriate assets tends to illustrate the price of owning such resources is too high, uneconomic in real terms, a situation which tends to force a redistribution of land and property through realisation and disposal;
• the outcome of such an exercise represents a form of rationalisation and drive towards economy in the allocation of assets;
• in seeking to consolidate the gains realised from such a form of rationalisation, attention has now begun to switch from the audit and review of holdings as a stock of land and property, towards the stream of expenditure on the goods and services required to manage the assets in question;
• this focuses attention on the static estate (the so-called mis-match, under-use of assets and question of vacant property) and problem of running cost control - the need for an audit and review of the growing expenditures on the stock and flow of goods and services paid out to cover the cost of managing property;
• following this a number of additional initiatives have surfaced which looked at together represent a deep and thorough re-organisation of property in a drive towards the 3 E's in the management of assets.

It is evident that in taking this form, the movement towards the 3 E's represents a growing interest in the economics of property underlying the initial audit, review, rationalisation and subsequent process of reorganisation forming part of the drive towards a greater degree of efficiency and effectiveness from expenditure on the management of property.

Towards the 3 E’s

As already pointed out, Britton, Connellan and Crofts (1989) define good management in terms of: measuring the value of property in monetary terms and employing the minimum amount of expenditure on its management. Having defined 'good' management in such a way, they go on to suggest such a form of property management: deserves the adjectives, 'economic', 'efficient' and 'effective' as the landed property will be maintained on a business-like footing, producing sufficient benefit (performance of duties and attainment of objectives) at minimum possible cost. While economic, the authors also go on to suggest, based on a 'business-like' footing, such a form of management will be efficient because it produces the desired effect (provision of landed property to enable the organisation to perform its duties and attain its objectives) with the minimum possible input of resources. In addition, they also go on to suggest that it will be effective because it will have the desired effect of providing landed property which enables the corporation in question to perform its duties and attain set objectives. As they go on to point out: unfortunately it is not common to find such a form of property management, because in the past the management of property has been subject to two major problems - what they refer to as:

• the static estate and;
• problem of running cost control.

The term 'static estate' is perhaps a little confusing in the sense it introduces another variable into the equation. What is more, it begs the question about the exact nature of the relationship between the estate and landed property: something that also raises a question about the relationship between land and property and why the management focus is not on the former but the latter. As such it is a matter that requires clarification. The term estate is made use of by Britton, Connellan and Crofts (1989) because over the past one hundred years it is the estate which has formed the subject of interest from the academic point of view and it is only over the post-war period that such studies have drawn a distinction between the estate as an ownership of land and other forms of property in terms of fixed and circulating capital - the outcome of this being the appearance of terms such as landed estate or landed property as attempts to highlight the fixed nature of such assets as combinations...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Contents
• List of Figures
• List of Tables
• List of Contributors
• Acknowledgement
• Foreword
• INTRODUCTION
• PART 1 LOCAL AUTHORITY PROPERTY MANAGEMENT
• PART 2 INITIATIVES AND STRATEGIES
• PART 3 RE-ORGANISATION AND REFORM
• PART 4 THE WAY AHEAD
• Index