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The role of the Commonwealth Government in Canberra as a property owner and tenant: speech to the Property Council of Australia - ACT division lunch, Canberra.



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Speech

Speech by The Hon Lindsay Tanner MP Minister for Finance and Deregulation

Property Council of Australia - ACT Division Lunch

The role of the Commonwealth Government in Canberra as a property owner and tenant

Hyatt Hotel, Canberra Wednesday 28 October 2009

It is quite timely that I am speaking with you here today as I know that within the industry there has been quite a bit of discussion of late about the role that the Federal Government plays in the property industry here in the ACT.

In saying that I would expect that there would be an almost constant interest amongst those in this room about what the Commonwealth is doing in this area, both as a property owner and of course, as a tenant.

That interest is understandable given that Canberra is the third largest office market in the country and the Federal Government makes up more than half of that.

It is for that reason that I am pleased to be able to take this opportunity to inform you of the Government’s progress and priorities as a property owner and tenant.

The Department of Finance and Deregulation manages the Commonwealth's non-Defence property portfolio; a portfolio that I can safely assume is more diverse than those held by the majority of property owners with us today.

The portfolio includes office buildings of course, along with law courts, special purpose facilities, heritage properties, vacant land and contaminated sites. As the responsible Minister it is my duty to oversee the construction, refurbishment, acquisition, ownership and disposal of these properties.

My portfolio also includes responsibility for the efficient and effective management of public resources by Government agencies, including their use of property.

I am very strongly committed to the principles of effectiveness and efficiency in public sector management.

It is in line with these principles the Government has developed a framework to improve the way agencies manage Australian Government property.

Commonwealth Property Management Framework

The Commonwealth Property Management Framework has been established to guide efficient and effective management of Commonwealth property. The cornerstone of this framework is the Commonwealth Property Management Guidelines.

The Guidelines - which are available on the Finance website from today - outline a principles-based approach to property management to assist agencies achieve:

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z value for money;

z property management planning;

z efficient and effective design;

z appropriate accountability; and

z cooperative Commonwealth property management.

These guidelines are explicit in stating that the number one principle for the Government is value for money.

Unlike a number of the State and Territory governments, the Federal Government does not use its office accommodation requirements to contribute to its broader economic development objectives.

Our focus is on the contribution that public resources make to the delivery of Budget-funded outcomes for the Australian people.

My very clear message for property owners is that to attract an Australian Government tenant, you need to convince an agency that you have the best value for money offering.

In this regard, the Federal Government is no different from any other potential tenant.

The Guidelines will facilitate a more consistent and cooperative approach to the Government’s management of property.

Under the previous government responsibility for the management of property was completely devolved to individual agencies without any real guidance.

As a result, significant disparity exists in the way we manage property across Government.

At present the rate paid by agencies for office space in Canberra varies from below $290 to above $450 per square metre. Average floor space per employee also varies considerably, from below 15 square metres per person to well over 25 square metres per person.

Whilst the Government has no intention of implementing a centralised model of property management, a degree of cooperation and coordination across Government will improve the efficiency and effectiveness of our approach.

Property costs are one of the largest recurrent expenses of running the government, but through efficiency improvements brought about by the introduction of the Guidelines we see scope for significant savings to be made.

By the third year of having this Framework in place we anticipate net savings to the Budget to be in the order of $20 million, gradually increasing towards $100 million per annum by 2025.

The Guidelines are designed to ensure the efficient, effective and ethical use of resources with a view to achieving the best outcome for the taxpayer, but I expect a greater focus on actively planning and managing property needs will also improve agencies’ performance as tenants.

Importantly for industry, the Guidelines will provide a greater degree of consistency across agencies in their property requirements

Occupational Density Target

One of the consistencies I refer to is in occupational density for the office accommodation of Government agencies. For the first time, the Australian Government will now apply an occupational density target across agencies.

The occupational density target that is contained in the Property Guidelines is 16 square metres per

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occupied workpoint.

The Government recognises that there will be circumstances when agencies are not able to achieve the target in some tenancies, but equally, we expect some agencies may be able to achieve a better occupational density.

To limit any impact that it may have on agencies and on the property market, the Government has elected to implement this measure over the long term.

The target will only apply when a major fit-out is undertaken or when agencies have the opportunity to enter into a new tenancy, which will occur as the Commonwealth’s current non-Defence leases progressively expire over the next 15 years.

Many other governments and private enterprises have already adopted a similar approach on targets for space management, so in that respect the Commonwealth continues to act more like other participants in the marketplace.

However, many of you will have noticed our accommodation density measure is different from the more common approach of square metres per full time equivalent staff.

This form of measurement has been chosen because research on the practices in other jurisdictions has indicated that there are significant practical difficulties with accurately measuring full time equivalent staff on a building by building basis.

As the roles of agency staff are also extremely varied we believe that occupied workstations provides a more useful and practical indicator.

Accountability and Efficiency

These Guidelines will be supported by practical guidance for agencies and co operative activities to allow agencies to share information and adopt better practice in their property management.

From 1 October 2010, all agencies will be required to develop and maintain property management plans that will assist forward planning and the effective delivery of Government objectives.

Although these plans are essentially for internal use, their implementation will lead to benefits to industry. Agencies will continue to provide information about their future property needs on AusTender and I anticipate that due to the planning that the Property Framework requires agencies to undertake, the information provided via AusTender will be more detailed and advanced.

Agencies will also be required to provide property details to Finance to allow reporting to Government - an important mechanism in agencies' accountability to Government for the management of significant public resources.

Importantly for the management of Commonwealth property, this reporting will provide the data necessary to create and maintain a comprehensive picture of the Commonwealth’s property portfolio.

I have been encouraged by the cooperation being displayed across Government in the development of the Property Framework and am confident this coordination will extend to implementation of the new Guidelines.

Within my department I have already seen the efficiencies that are being achieved through whole of government cooperation in procurement, ICT and other areas, and I believe the prospects for efficiencies in property management are very positive.

The Government’s property portfolio

As I indicated in my opening remarks, as the Minister for Finance and Deregulation I have responsibility within my portfolio for the management of the Commonwealth's non-Defence

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property.

The substantial majority of Commonwealth office accommodation throughout Australia is leased from the private sector.

This is generally true for Canberra too, although the Commonwealth retains ownership of a number of buildings, such as the Treasury Building and the John Gorton Building, and certain development sites in and around the Parliamentary Triangle.

I would like to give you a quick update on a few of these.

z Anzac Park West - will be occupied by the Department of Defence around October 2010

following a $45 million fit out;

z Anzac Park East - has not been refurbished and is subject to a scoping study by Finance;

z Block 13 of Section 9, Barton - currently a car park which is on Finance’s property

divestment program;

z Block 3 of Section 22, Barton - an undeveloped site on Finance’s divestment program that

includes a conservation area for the Golden Sun Moth and Natural Temperate Grasslands; and

z Block 5 of Section 1, Barton - (York Park) is presently listed on the divestment program.

Options are currently being considered and Finance has engaged in discussions with a number of potential Commonwealth tenants including the Department of Environment, Water, Heritage and the Arts.

The new Property Framework does not change the Federal Government’s policy on property ownership.

Property ownership is not the Government’s core business, and whilst there will be circumstances in which ownership will be necessary, lease arrangements will continue to be the Government’s preferred option.

Canberra as the nation’s capital

No doubt you will have seen recent comments questioning Canberra’s suitability as Australia’s national capital.

As key players in the Canberra property sector, I think I can safely assume that you don’t share these concerns.

Rightly or wrongly, Canberra is now firmly established as our national capital, and I believe it is a capital city of which Australians can be proud.

Irrespective of debates about Canberra and Parliament House, the Government has no intention of changing that situation.

Conclusion

As I have said a couple of times already today, the Commonwealth Property Management Framework, and the Guidelines that exist within that framework, are about improving the efficiency and effectiveness of the Government’s management of property.

The result of their implementation is that, over time, you will observe Government agencies in Canberra acting along similar lines as other organisations that lease large amounts of property.

While the introduction of Guidelines is primarily about improving our internal management of property, success in achieving that will be dependent on our ability to work with the local property industry.

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We need to work with property owners, developers and other stakeholders to improve our operations as a tenant, an outcome that will be beneficial to both government and industry.

-ends-

Media Contact: Website:

Nardia Dazkiw - 0418 144 690 www.financeminister.gov.au

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