Agenda of Revenue, Expenditure and Value Committee

Revenue, Expenditure and Value Committee

17 September 2024

Auckland Council WorkSmart Programme Closure

File No.: CP2024/13294

Te take mō te pūrongo

Purpose of the report

1. To provide a high-level summary to the Revenue, Expenditure and Value Committee on the Corporate Property Optimisation Programme. This programme was approved by the Finance and Performance Committee on 15 May 2018 and has now concluded.

Whakarāpopototanga matua

Executive summary

2. The Corporate Property Optimisation Programme (later renamed the WorkSmart Programme) was established to transform the Auckland Council legacy office portfolio to a smaller and more efficient fit-for purpose and future-proofed office network more suited to modern work-practices and better aligned to council's post-amalgamation changing organisation, structure and plans.

3. Following approval by the Auckland Council executive leadership team in February 2018, in May 2018 the Finance and Performance Committee approved the disposal of seven council owned office buildings, ring-fencing the capital receipts from divestments of those properties to self-fund the WorkSmart programme transformation (Finance and Performance Committee FIN/2018/72, FIN/2018/73).

4. The main corporate office consolidation was completed between FY2019 and FY2024 with non-financial and financial outcomes summarised as:

Non-financial:

a. Efficiency / right-sized: from circa 135,000 sqm to circa 62,000 sqm - 19 buildings down to six (includes council-controlled organisation (CCO) office buildings which were a variation to the original programme).

b. Local board offices: 10 refurbished local board offices with 11 remaining to be completed over the next six years.

c. Productivity: quality flexible workplace fitout and end user technology for our kaimahi.

d. Back-office refurbishment: 46 library and leisure centre locations complete with the remaining 32 to be completed over the next six years.

e. Māori Outcomes: dedicated mana whenua spaces in regional office hubs.

f. Sustainability: the programme achieved a 55 per cent reduction in building energy/carbon emissions (equivalent to ~1.5 million kms car trips per annum).

g. Risk profile: reduced risk profile by reducing office size and improving building asset condition.

h. Local board aligned development outcomes in the locations disposed: for example, the development agreement to dispose the Mayoral Drive carpark location delivers the Symphony House overstation development and integrated laneways in alignment with Waitematā Local Board feedback and the development agreement to dispose the Henderson Admin building delivers Laidlaw College outcomes which was supported by the Henderson-Massey Local Board

i. New art storage facility developed for Auckland Art Gallery in Wiri (FY19 variation).

j. Corporate WIFI delivered to all libraries’ front-of-house areas (FY19 variation).

k. MS Teams hardware installed at all local board and office buildings enabling staff, elected members and customers to connect remotely (FY20 variation).

l. Bledisloe House disposal (FY21 variation).

m. Relocate service centres to local library front-desk areas (FY23 variation).

n. Auckland Emergency Management relocated to new fitout at level 4 Auckland House (FY23 variation).

o. Relocating Eke Panuku and Tātaki Auckland Unlimited to Auckland House enabled the CCOs to sub-lease those locations avoiding associated lease costs (FY24 variation).

p. Support Auckland Transport sublease of level 5 of 20 Viaduct Harbour Drive avoiding associated lease costs (FY24 variation).

Financial:

q. Self-funded through disposal of surplus workspace, zero cost to ratepayers as was committed to in the business case.

r. Circa $17.0 million property operating cost savings per annum delivered, compared to $1.7 million per annum estimated in the business case.

s. Circa $184 million in estimated renewals costs avoided through disposal of old buildings, compared to an estimated $117 million in the business case.

t. Forecasted $34.66 million cash surplus released from the programme, compared with zero cash surplus noted in the business case document.

5. The programme delivered significant additional value through additional scope items being varied into the original programme (as noted above in subparagraphs i-p) and additional financial benefits to those estimated in the business case (as noted above in subparagraphs q-t).

6. Next Steps: With the completion of the main office consolidation in July 2024, the WorkSmart programme was concluded and remaining projects were transferred to the Corporate Property business as usual (BAU) project delivery team. Those remaining projects, which are self-funded from the programme and are budgeted in the Long-term Plan 2024-2034 budgets, include:

a. FY25 – FY26: Deliver Records and Archives storage consolidation to the Archives NZ facility at Mangere.

b. FY25 – FY26: Deliver consolidated Group Storage facility at Orbit Drive Albany.

c. FY25 – FY31: Progressively complete the remaining 11 local board office refurbishment projects.

d. FY25 – FY31: Progressively complete the remaining 32 back-office library and leisure centre refurbishments projects.

e. With the establishment of the Group Shared Services model, WorkSmart optimisation principles will be explored across all group office and storage facilities for further efficiencies and lease cost avoidance opportunities where appropriate.

7. An Auckland Council WorkSmart Programme Closure Summary is attached to this report (Attachment A) summarising the programme context, scope, key financials, and outcomes summary (both financial and non-financial).

Ngā tūtohunga

Recommendation/s

That the Revenue, Expenditure and Value Committee:

a) tuhi ā-taipitopito / note the high-level closure summary of the Auckland Council WorkSmart Programme.

Ngā tāpirihanga

Attachments

No.	Title	Page
a ⇨	Auckland Council WorkSmart Programme Closure Summary 2 September 2024

Ngā kaihaina

Signatories

Author

Rod Aitken – Head of Corporate Property

Authorisers

Anita Furniss - General Manager Corporate Support Services

Richard Jarrett - Director Group Shared Services

Ross Tucker - Group Chief Financial Officer

Revenue, Expenditure and Value Committee

17 September 2024

Section 17A Reviews - background, current reviews and future work programme

File No.: CP2024/12286

Te take mō te pūrongo

Purpose of the report

1. To approve the planned section 17A reviews for the current financial year, including the Terms of Reference for the Group Property Review and P27 “Te Ara Hura” project.

2. To note ideas for future reviews and broader value for money work underway.

Whakarāpopototanga matua

Executive summary

3. Local authorities are required by legislation to undertake section 17A service reviews (also known as “value for money reviews”).

4. Section 17A reviews aim to improve the cost-effectiveness and quality of service delivery to Aucklanders. They are one way we can ensure our resources are spent in a way that best meets the needs of communities of Auckland.

5. The service reviews are also expected to identify cost savings to contribute to the Long-term Plan 2024-2034 savings targets.

6. The planned reviews for the 2024/2025 financial year include Pools and Leisure Delivery Model (review complete and now in implementation), P27 Contracts, Economic Development, Group Property and Marina management.

Ngā tūtohunga

Recommendation/s

That the Revenue, Expenditure and Value Committee:

a) whakaae / approve the planned section 17A reviews for the 2024/2025 financial year.

b) whakaae / approve the Terms of Reference for the Group Property Review.

c) whakaae / approve the Terms of Reference for the P27 “Te Ara Hura” Project.

d) tuhi ā-taipitopito / note ideas for planned section 17A reviews for the 2025/2026 financial year onwards.

Horopaki

Context

7. Section 17A of the Local Government Act 2002 says that local authorities “must review the cost effectiveness of current arrangements for meeting the needs of communities for good quality local infrastructure, local public service and performance of regulatory functions”. Reviews must also consider options for how services are governed, funded, and delivered.

8. There are three legislative triggers for conducting a service review:

· when considering significant changes to service levels

· within two years of expiration of a contract or other binding agreement to deliver a service

· a service delivery review exceeds its maximum statutory life of six years.

9. Outside of the legislative triggers for reviews, councils can also initiate reviews on their own.

10. There are two statutory circumstances where a review is not necessary, even when a legislative trigger has been activated:

· when there is a contract or agreement in place that cannot reasonably be changed within two years. If something does occur that makes a change reasonably practicable, then council must review.

· if the cost of doing the service review outweighs the benefits of doing a review.

11. Reviews aim to improve the efficiency and effectiveness of delivering public services. They require a systematic evaluation of how services are delivered and whether improvements or changes are needed to deliver a better service for residents. Improvements are made through examining the below.

· Efficiency and Cost Savings: Reviews seek to identify ways to deliver services more efficiently, including by identifying inefficiencies and areas where resources are not optimally used.

· Service Quality: Reviews may assess whether the current methods of service delivery meet the desired outcomes for residents. If service quality is lacking, the review provides an opportunity to consider improvements.

· Alternative Models: Reviews must assess other potential service delivery models, including collaboration, shared services, and public-private partnerships. This can lead to innovation and modernising service delivery approaches.

· Long-term Planning and Strategy: Reviews help the council think strategically about the future sustainability of services. By reviewing services periodically, local authorities can align them better with community needs and long-term objectives.

12. Overall, section 17A service reviews promote accountability and continuous improvement, ensuring that public services evolve to meet changing community needs and deliver value for money.

Auckland Council Section 17A reviews – 2017 to 2023

13. In March 2017, the Finance and Performance Committee approved the Value for Money Programme to undertake service reviews for Auckland Council and the council-controlled organisations (CCOs). A multi-year programme was developed with final recommendations for each review presented to the Governing Body via a staggered approach. Completed reviews with the recommendations implemented included:

· Three Waters (stormwater, wastewater, water supply)

· Domestic waste

· Communications and engagement

· Investment attractions and global partnerships

· Procurement

· Information and communication technology

· Customer services

· Financial services.

14. In 2020, the Emergency Budget was required to address the unprecedented circumstances created by the COVID-19 pandemic and drought. This introduced tactical cost reductions to address immediate savings targets. Various measures were put into place, such as cutting discretionary spending, deferring capital expenditure, temporarily lowering operating service levels, and recycling assets. These actions aimed to offset the revenue shortfall and the unprecedented drought conditions. The Value for Money team was utilised during this process to support tactical cost reductions through prioritised service reviews. Work commenced on these reviews and regular reporting was provided to the Value for Money Committee.

15. Through these service reviews, a cumulative total of $13.3 million was saved from FY21 to FY24.

Auckland Council Section 17A reviews – Long Term Plan 2024-2034

16. The Long-term Plan 2024-2034 highlights a priority to deliver “better, faster, and cheaper.” Service reviews can advance this priority by improving cost-effectiveness (“cheaper”) and service quality (“faster and better”).

17. Service reviews are also expected to contribute to organisational cost savings targets. The Long-term Plan 2024-2034 provides for $27.8 million of cost savings in year one rising to $67 million in year three. These targets required the organisation to make ongoing annualised operating cost savings (i.e. permanently take cost out), rather than rely on short-term or one-off measures.

18. To meet these targets, service reviews are expected to contribute about $12 million in annualised savings by year three.

19. Reviews create opportunities but without elected member and organisational buy-in the benefits are unlikely to be realised. Service reviews need to be prioritised effectively to maximise success.

20. An agreed pipeline for service reviews is required. Attachment A shows the draft pipeline. The Value for Money team is strategically identifying future service review opportunities that have greatest opportunities for benefits, ensure compliance with S17A requirements and contribute to Long-term Plan savings targets.

Governance

21. Section 17A reviews are to be included in the Revenue, Expenditure and Value Committee’s annual work programme including approving the terms of reference for individual reviews, as well as monitoring and reporting on the implementation of, and the recommendations arising from those reviews.

Approach to Service Reviews

22. The following approach is taken by the Value for Money team throughout a service review:

Initiate	A review is initiated through a section 17A trigger or via a managerial trigger, this could include: · S17A of Local Government Act requirements: · Significant changes proposed to service levels · Major contract within two years of renewal · Six years since last review · Political direction: on direction from the elected members or long-term plan · Managerial triggers to be considered: · Chief executive strategic priority · Investment portfolio priority · Executive decision.
Prioritise	Reviews will be prioritised according to the following criteria: · Legislative requirements · Political priorities · Management priorities.
Ways of Working	The Value for Money (VfM) team has set out the following ways of working: · Understanding: through analysis, stakeholder management and key staff interviews. · Collaborative: reviews are conducted with contribution from an interdisciplinary team across the business and other relevant council teams. · Expertise: providing value through the Better Business Case model. · Achieve Goals: creating a Value for Money centre of excellence to help the organisation to meet strategic goals. · Respectful: incorporating a duty of care mindset.
Scoping and Resourcing	VfM is a small team and there is a need to prioritise activities to maximise the value it delivers: · current resourcing allows for one large review and 2-3 smaller reviews per quarter, if conditions for critical success are met (these include a clear mandate to act and clear roles and responsibilities).
Approach	Multiple approaches to a review can be taken, including: • VfM lead: VfM & Division joint team • Division lead: VfM supplemented & Division team • DIY: Division team only, using VfM methodology and resources.
Outcome	Consistent value for money delivery across the organisation aligning with strategic goals and legislative requirements, working well with both arms of governance (both Governing Body and local boards) to deliver on value for money outcomes.

Tātaritanga me ngā tohutohu

Analysis and advice

Service Review Pipeline

23. Reviews for the 2024/2025 financial year are detailed below:

FY25	Description	Status
Pools and Leisure Delivery Model	Review of the service delivery strategy and delivery model for Pools and Leisure	Implementation and Delivery – led by the department
P27 Contracts: Parks and Community Facilities	Review of full facilities maintenance contracts	Strategic Assessment
Economic Development	Review of all economic development functions across the council group	Strategic Assessment
Group property review	Review of the structure and performance of the council property portfolio management functions	Initiate
Marina management	Review of marinas across the council group	Strategic Assessment

24. Potential reviews for 2025/2026 and beyond are currently under investigation. The list of ideas below is pending confirmation through the Group Strategy, Transformation and Partnerships Department's planning process, as well as engagement with elected members:

Ideas for potential reviews: FY26 onwards
Community services	Waste Solutions
Engagement with Aucklanders	AT – Roads, Footpaths and Cycleways
Community Initiatives	Natural Environment
Resilience and Auckland Emergency Management	Environmental Services
Consenting	Urban green space
Healthy Waters	Procurement

Decision Making and Reporting

25. Initiating a section 17A review will include internal scoping and shaping of the business case, this process will identify and define decision makers. If the identified decision makers are elected members they will be engaged from the start of the process, with regular updates on progress.

26. To ensure that service reviews are prioritised according to the guidance of elected members, the Revenue, Expenditure and Value Committee will receive regular quarterly updates on the progress of current reviews, as well as potential future reviews.

Group Property Review – Terms of Reference

27. The Group Property Review was identified by the Revenue, Expenditure and Value Committee as a review to be scoped as part of the forward work program in November 2023 (Resolution ECPCC/2023/46).

28. The proposed Group Property review will cover the core functions of real estate management, the various organisations involved, and seek to resolve the challenges posed by the current state.

29. The objective of the review is to design and implement an optimal group property function that will enable improved property portfolio outcomes, and value for money from the property portfolio.

30. The program objective is to deliver the following elements through the design and implementation of an improved group property function:

· Fit for purpose operating model across the group

· Robust property portfolio strategy, planning and delivery

· Appropriate asset ownership models (e.g own versus lease)

· Improved transparency of portfolio performance

· Improved risk identification, mitigation and management

· Robust governance and decision making

· The data, systems, tools and processes to support staff to deliver quality outputs efficiently

· Property management activity aligned with mayoral and council strategic goals and priorities

· Appropriate allocation of capital and financial performance

· The council being an employer of choice for property personnel.

31. The full Terms of Reference information can be found in Attachment B.

P27 “Te Ara Hura” – Terms of Reference

32. Auckland Council’s full facilities maintenance contracts expire 30 June 2027. Staff have begun reviewing the current contracts early, focusing on both their operational details and their strategic and economic impacts throughout the contract period so far. The full facilities contracts cover the provision of Planned Preventative Maintenance (PPM) across all open space and built community assets across the region.

33. The current full facilities contracts cover:

· Parks maintenance

· Open spaces maintenance

· Sports field maintenance

· Building maintenance

· Public toilet maintenance, including toilets in town centres

· Locking and unlocking services of parks gates and public toilets

· Rubbish bin emptying

· Weed control

· Mowing

· Streetscape gardens.

34. The Te Ara Hura review will assess options for maximising the value of the contracts, including greater use and options for local procurement.

35. The full Terms of Reference information can be found in Attachment C.

CCO Reform options

36. The Mayor has requested advice on options for how CCO functions could be delivered and, in particular, if the functions can be brought in-house.

37. The advice is to support options for inclusion in the Mayoral Proposal in November 2024 and then to advise the Budget Committee on its decisions.

38. This work intersects with the reviews underway for the Group Property Review, Economic Development and Marinas. The Value for Money team is part of the CCO Reform work and will work closely to ensure that lessons and/or opportunities created by this work are considered as part of the service reviews, and that the work is phased appropriately.

Asset Optimisation

39. The Long-term Plan 2024–2034 includes an asset sales target of $300 million over 10 years (an anticipated $90 million savings to be achieved within the first three years). To achieve this target, council must regularly review its asset portfolio and ensure that assets are disposed of in a timely manner if they are not required to deliver services and not providing an appropriate return.

40. To ensure that there is a robust pipeline for asset sales identified across the group and divestment underway to meet targets, the Value for Money team will be recruiting for an asset optimisation role. Reporting on the progress towards the asset sales target will be provided through the quarterly performance report.

Tauākī whakaaweawe āhuarangi

Climate impact statement

41. Our climate commitments are set out in Te Tāruke-ā-Tāwhiri: Auckland's Climate Plan. With every service review, climate commitments are considered to ensure the decisions we make positively contribute to achieving the targets.

42. There is a commitment within the plan to reduce greenhouse gas emissions by 50 per cent by 2030 (against a 2016 baseline) and to achieve net zero emissions by 2050.

43. Reviews will seek to identify opportunities that improve cost effectiveness and reduce greenhouse gas emissions.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

44. Section 17A reviews occur across the council group. Once a service review has been triggered, then a value for money assessment will be undertaken and options for future service delivery considered. These may result in a change of service delivery to maximise the cost-effectiveness of the service. Impacts to the council group will be considered as part of reviews.

Ngā whakaaweawe ā-rohe me ngā tirohanga a te poari ā-rohe

Local impacts and local board views

45. Service reviews have different levels of impact on local boards. When a service review assessment will impact the level of service within a particular local board area, then staff will either seek a decision or feedback from the board depending on the allocated decision-making responsibility.

Tauākī whakaaweawe Māori

Māori impact statement

46. When reviewing services, consideration will be given to how council services (and any decisions to change) impact on the council’s statutory obligations derived from Te Tiriti o Waitangi, and its strategic commitments to Māori articulated through the Auckland Plan 2050 and Kia Ora Tāmaki Makaurau – Māori Outcomes Performance Measurement Framework (KOTM).

47. Generally, service reviews and decisions impact on the outcomes in the KOTM Framework as follows:

· Kia Ora te Whānau – Whānau and Tamariki Wellbeing: the council group is committed to providing relevant and welcoming public facilities and services for whānau Māori, including support for Māori-led services where appropriate:

· Service reviews and decisions consider both the impact on the relevance and manaakitanga of council services for whānau Māori, and opportunities to support Māori-led and co-designed services.

· Kia Hāngai te Kaunihera – An Empowered Organisation: the council group works to fulfil its commitments and legal obligations to Māori derived from the Treaty of Waitangi, as well as its capability to deliver Māori outcomes:

· Service reviews and decisions consider impacts on kaimahi Māori and Māori specialist roles, including potential reductions and opportunities to further support and embed specialist roles into service provision and design. Te ao Māori perspectives are considered as a part of service design.

· Kia Ora te Rangatahi – Realising Rangatahi Potential: the council group aims to support rangatahi Māori in their career development, and to participate meaningfully and effectively in council’s decision making:

· Service reviews and decisions consider specific impacts to rangatahi Māori as both employees of Auckland Council and beneficiaries of council provided services.

48. Other outcomes and areas of interest for Māori may be identified through specific service reviews and decisions.

49. Specific engagement processes with mana whenua and Māori communities will be undertaken when there is a significant change in the level of service identified.

50. Service decisions will also consider Houkura - Independent Māori Statutory Board’s Schedule of Issues of Significance 2021-2025, and where appropriate seek additional advice from Houkura’s secretariat.

Ngā ritenga ā-pūtea

Financial implications

51. The basis of section 17A is to ensure that services are cost-effective when meeting the needs of the community. This is to ensure that Aucklanders are receiving value for money from the council services that they receive.

52. The Long-term Plan outlines Auckland Council’s commitment to delivering additional permanent on-going cost savings. These savings will come from a combination of service changes and efficiency savings. If we do not achieve these savings, then rates will need to increase by more than planned ($25 million of ongoing operating savings is equivalent to about a 1 per cent average residential rates increase).

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

53. Each section 17A review has risks specific to that review. These risks are identified and mitigated as early as possible whenthe review is scoped by staff.

54. Section 17A reviews result in recommendations for how a service can be better delivered. If these recommendations are not approved and implemented, then there is a risk that the long-term plan savings targets are not met and the potential of further residential rates increases.

55. There is a reputational risk if Auckland Council does not comply with the requirements for section 17A. The Local Government Act does not explicitly set out any consequence for not complying, and therefore the consequences are most likely political or reputational rather than legal, and also depend on the nature of the non-compliance.

Ngā koringa ā-muri

Next steps

56. Staff will continue with the review of services as required by legislation or by council decision and updates will be provided to the committee quarterly.