Guidance

Property spend control policy guidance v1.4

Updated 18 July 2023

1. Policy Summary

1.1 The purpose of Cabinet Office controls is to help government organisations reduce unnecessary spend, encourage cross-government collaboration and deliver value for money outcomes.

1.2 The National Property Control supports this purpose by:

• Ensuring spend on property is strategically aligned with department objectives and government policy.
• Placing greater emphasis on examining alternative commercial options prior to selection of the preferred option,
• Driving best value through the implementation of a rigorous process which assesses all the commercial options reasonably available and maximises HMG negotiation leverage where appropriate.

1.3 The Government Functional Standard for Property requires that, if a proposed property solution is subject to spend control, early engagement should demonstrate in-principle compliance with the sponsoring organisation’s property strategy, cross-government property strategy and other functional requirements.

2. What is in scope of this control

2.1 The control applies to the following property events:

2.1.1 Leasehold

• Acquisitions (i.e. grant of new lease/licences, assignments and subleases)
• Lease renewals and extensions
• Renegotiation of lease break options (incl non exercise of lease break options)
• Pre-leasing (new build)
• Sale and leaseback

2.1.2 Property Acquisition

• Freehold acquisition (new and existing buildings) with the exception of compulsory purchase
• Ground leases (secured by way of premium payment or ground rent (or a combination))

2.1.3 Disposals

• Freehold sales

2.2 Where a proposal is to relocate to another part of the central government estate then there is no requirement to seek property control approval.

2.3 The Government Functional Standard GovS 004: Property requires each government organisation with property assets to develop and maintain its own property strategy and supporting delivery plans. A government organisation is defined as government Departments, Arm’s Length Bodies or any other entity identified as being within the scope of a functional standard, by policy decision, agreement or contract, such as government-sponsored organisations. For brevity these organisations will be referred to here as ‘government property organisations’ or ‘GPOs’.

2.4 To manage and apply this property control it is expected that all government property organisations (GPOs) will work to build and then jointly maintain a Property Event Pipeline which sets out leasehold events and acquisition or disposal activity. Please refer to Property Spend Control, Property Pipeline Guidance, 1st April 2023.

2.5 To assist in planning for the government office and logistics / storage portfolios, pipelines that include these asset types shall be shared with the Government Property Agency (GPA).

3. Cabinet Office Controls Thresholds

3.1 Rental expenditure over the lease commitment^{[footnote 1]} or freehold value above £500,000

3.2 All transactions of £1m per annum or over will require Ministerial approval.

3.3 All Greater London property transactions with a rental commitment of £250k per annum or over will still require Ministerial approval, please submit requests using the PCAR form.

3.4 NPC reserves the right, at their discretion, to require a PCAR to be submitted for any property transaction (whatever the level) and also request evidence of the internal decision making for a transaction that has taken place for audit purposes.

4. What is exempt from this control

4.1 Organisational Exemptions

Cabinet Office Controls Policy defines the organisations to which spend controls apply based on those classified as central government by the Office of National Statistics (ONS).

4.2 Property Asset Type exemptions

Property Asset Types exempt from this control are listed at Annex A.

5. How the National Property Control will work

5.1 This section sets out the process for requesting an approval from property controls. These processes are to be adopted by GPOs when progressing property leasehold transactions, freehold property acquisition or disposals that require approval from national property controls.

5.2 The purpose of the property control process is to promote:

• Increased upstream visibility of planned property transaction activity to ensure alignment with policy, strategy and standards
• Building deeper collaboration between GPOs and the Controls team
• Improving value for money (VFM) through a more commercial approach that maximises HMG covenant strength.

5.3 This approach is intended to support departments to develop longer term certainty around property events that require property control approval, and give departments sufficient time to explore options to achieve the optimum VFM outcome.

5.4 An important aim of the property approvals process is to encourage GPOs ‘where appropriate and proportionate’ to introduce clearer structure and increased rigour to property control approval requests by adopting the principles of the HMT ‘Five Case’ Business Case model to support development and submission of a property approval request. Adopting the principles of the Five Case model will help departments to demonstrate the strategic rationale, options under consideration and ultimately the delivery solution relating to the property control approval request.

5.5 Requesting Control Approval for Leasehold Events and Freehold Acquisition

5.5.1 From 1st April 2023 requests for property control approval must be submitted using the revised ‘Property Control Approvals Request’ form (PCAR), which seeks key information to support the approval request.

5.5.2 The form is set out in four sections covering:

• Departmental details - organisation information
• Approval request - core event details with reference to ePIMS or In-Site, when launched. Property information and clearly outlining usage and FTE allocation with a breakdown of utilisation
• Strategic Fit - business justification, making the case for change, Option Appraisal including NPC/NPV comparisons as part of the result of economic appraisals and Preferred Option
• Commercial Assurance - including HoTs / recommendation with market evidence supporting the decision.

5.5.3 The PCAR form will provide information at the key event stages to support the approval request and may reference (and be supported by) relevant GPO documentation e.g. a project business case.

5.5.4 In seeking approval, GPOs may choose to work with the controls team and property business partners on a staged or incremental submission, adopting an approach similar to the stages of the HMT Green Book approach.

5.6 The Importance of Early Engagement and Collaboration

5.6.1 Early engagement and collaboration during the approval process is recommended and is considered essential to the success of the revised property approvals process.

5.6.2 As part of the Cabinet Office Controls Reform Programme GPOs will be required to maintain a ‘Property Event Forward Look Pipeline’. The Pipeline will provide a vehicle to start the early engagement process with OGP Property Business Partners. Depending on the nature of the property approval being sought, it will often be beneficial to engage with the property control team early allowing an incremental approach to the approval process.

5.6.3 The revised PCAR form promotes and supports early engagement and is designed so that it may be completed at different stages during the event lifecycle promoting earlier engagement, collaboration and information sharing as the project and approval request progress in parallel.

5.7 The Property Control Approval Request Form

5.7.1 Parts 1 & 2 - Departmental and Approval Request details

Property details, property function and usage, event type (renewal, break, acquisition etc.) baseline financial data and exit costs. Property data should reference ePIMS or the In-Site digital National Asset Register record.

5.7.2 Part 3 - Strategic Fit,

5.7.2.1 Make the Case for Change

This section should clearly set out the business justification for the requirement so that the background to clearly establish the property need and overall purpose of occupying the accommodation. It should clearly demonstrate how the proposal is strategically aligned to the department, the property function and wider HMG objectives.

5.7.2.2 Details of the Options Appraised

The options to be appraised to address the business need (e.g. stay put”, “consolidate and sub-let space”, “move to space elsewhere on the gov. estate”, “freehold acquisition”, “short term let eg serviced accommodation” and, “new leasehold acquisition” etc) should be set out.

This section should clearly set out that a proportionate process has been followed in exploring and evaluating options, and that an appropriate level of commercial due diligence has been undertaken to maximise HMG covenant strength and deliver maximum value.

GPOs will need to demonstrate that a full range of options have been identified and evaluated. It is expected that proposals provide flexibility, where no break options are proposed, this will need to be justified.

GPOs are advised to engage expert advice at the outset to ensure that their market awareness and negotiation position are maximised. In pursuing this approach, property organisations should ensure that they have sufficient property expertise in their own commissioning teams to properly instruct, manage and interrogate expert consultancy advice.

5.7.2.3 Details of Preferred Option

Details of the preferred option setting out:

• How the proposal is aligned with Government Estate Strategy and wider HMG policy priorities (e.g. Levelling Up, Places for Growth, Sustainability, FM, Asset Condition etc)
• That there is no alternative option available within the government or wider public sector estate
• Why the option delivers best value for the taxpayer
• How the preferred option optimises operational and delivery capability

It is essential when detailing the preferred option that the proposition demonstrates that it:

• Aligns with the GPO’s strategy (e.g. location, service delivery, resourcing)
• Aligns with relevant government policy (e.g. One Public Estate, Places for Growth, Sustainability)
• Evidences that there is no suitable alternative within the public sector estate
• Generates improved occupational efficiencies (both department and cross-government)
• Delivers value for money for the Exchequer.

Where a GPO is unable to address the above it should set out its reasoning and justification for progressing with the proposal. It is important that any special considerations associated with a proposal are clearly explained such as critical timeframes, business continuity risks or exceptional costs for example

5.7.3 Part 4 - Commercial Assurance and NPC Approval

This section should set out in detail how the recommendation demonstrates value for money, include details of the commercial deal, confirm funding and include a delivery plan.

The recommendation should be a statement which sets out how the preferred option addresses the commercial, financial and management aspects which are applicable to the proposal. Of particular importance will be the inclusion of a:

• Well evidenced justification which sets out why, in the GPO’s professional view, the transaction delivers best value (including, where appropriate, how HMG covenant strength has been sufficiently leveraged)
• An explanation describing how the preferred option optimises the GPO’s operational and delivery capability.
• Confirmation that there is no alternative option available within the the government estate (i.e. an updated check). Where alternative space on the government estate is available the controls team will adopt the Exchequer view (which may differ from a purely departmental view)

The recommendation should be accompanied by agreed detailed heads of terms and a whole life cost appraisal. Demonstrating value for money will continue to be a fundamental consideration in the NPC approval process. GPOs when submitting a property control application must show evidence of a whole life cost approach rather than just focussing on the agreed rent or purchase price as a key value indicator. This approach will be used to appraise options and the final application should include this evidence. A detailed net present cost/value calculation addressing the whole life cost of the transaction should also be supplied.

Supporting confirmation from a GPO’s appointed advisers that, in their opinion, the transaction represents best value can also be appended, where appropriate. However, this external advice does not remove the need for the GPO to validate that the transaction offers value for money.

5.8 Freehold Disposals

5.8.1 To comply with the the Disposal of Government Property (Real Estate) guidance and the Government Functional Standard for Property, GPOs must ensure that:

• Surplus freehold assets are identified for disposal and included within a disposals pipeline to allow for a review process to take place. This will allow OGP to consider the decision to dispose both within the context of the Department’s estate strategy and the wider Government Estate Strategy.
• They consult with other public sector bodies using the Register of Surplus Public Sector Land.
• The Register enables other public bodies to express an interest in acquiring the asset before it is put on the market. This is to avoid one part of Government disposing of land that another part could use to meet a need in the same area.

5.8.2 OGP will assure that GPOs are complying with these requirements by undertaking periodic scheduled reviews and spot checks.

6. Templates and Guidance

6.1 Templates

i) Approvals requests should be submitted using the PCAR form PCAR form

ii) Guidance on Standardisation of Lease Terms: Preferred Terms

iii) The Green Book: appraisal and evaluation in central government including HMT Guide to Developing the Business Case (The Five Case Model)

iv) Government Functional Standard GovS 004: Property

v) Disposal of Government Property (Real Estate) Guidance

7. Next Steps

7.1 To build greater visibility of property events we will be developing a proportionate risk based approach with GPOs to establish the forward look pipelines of property events.

Annex A - Property Asset Type exemptions

No.	Exempt Asset Types - Usage Typology
1	airfield approach lights / instrument landing systems / navigation facilities
2	armoury
3	bore hole
4	building or compound (to support road, rail, energy or other civil infrastructure scheme)
5	cell (custody)
6	coastguard station
7	communication network site
8	compulsory purchase order
9	control facility (for emergency services or national infrastructure)
10	custody facility
11	detention facility
12	firing/air weapons/electronic warfare range
13	flood defence (incl. flood management land & flood plain)
14	forest
15	garden (botanical)
16	helicopter pad
17	instrument monitoring or measuring site
18	laboratory (specific types exempt: biosafety; clean rooms; clinical & medical; R&D or similar)
19	land (for agricultural research)
20	land (for habitat)
21	land (for road, rail, energy or other civil infrastructure scheme)
22	land (rural, for training, armed forces & emergency services)
23	launch site (armed forces or emergency services)
24	nature reserve
25	park
26	port or airport and associated supporting land holding
27	power station
28	prison
29	radar station
30	radio mast
31	railway (incl. track, bridges, tunnels, viaducts, signals, level crossings, stations and associated supporting land holding)
32	removal facility (immigration)
33	rescue site (emergency services)
34	residential (secure)
35	road
36	waterway or navigation
37	weighbridge
38	woodland

1. The financial commitment to the next break opportunity or end of lease, whichever comes sooner ↩