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National Audit Office

Answer

At its meeting on 13 December the Public Accounts Commission considered a memorandum from the National Audit Office setting out its proposals for securing its future workspace requirements. These had been drawn up taking into account the views expressed during informal discussions between the NAO and myself, as Chairman of the Commission, and the hon. Member for Gainsborough, in his capacity as Chairman of the Public Accounts Committee.The NAO acquired its existing headquarters building in Buckingham Palace Road, London SW1 in 1984 for £11 million, based on a 127 year lease at a peppercorn rent. Its interest in the building is now thought to be worth about £22 million.The NAO's case for a significant upgrading of its headquarters accommodation rests on two main factors:"the partial refurbishment of the NAO's current building in Buckingham Palace Road, carried out prior to their taking occupancy in 1986, will shortly reach the end of its 20-year life expectancy""a full condition survey of the building in 2003 concluded that the NAO ““needed to invest significant expenditure in terms of the necessary, and in some cases urgent, renewal of existing elements of the building fabric and services, including the heating and cooling systems, windows, much of the roof covering and other features of a health and safety concern””; these remedial works would need to be carried out within the constraints imposed by the listed status of the central core of the building."Faced with these conclusions, the NAO has reviewed the options available to it to meet its future accommodation needs, including:"a programme of restoration and repair of the building in its existing configuration""a full refurbishment of the building designed to produce ““a more modern, flexible and efficient workspace””, based on open plan principles conducive to flexible team-working""the sale of the NAO's interest in the current building, and relocation to another site."Taking all these options into consideration, the NAO has concluded that a phased programme of refurbishment will provide the best value for money solution, and has approached the Commission both for approval in principle for such a course and for authority to incur expenditure on preparing a detailed design and firm costings.The cost of the refurbishment is provisionally estimated at £150 million over 30 years, as against relocation options ranging from £155 to £250 million. The NAO points out, however, that these figures would need to be offset against current annual expenditure on maintaining and operating the existing BPR building of some £4.4 million, which, discounted over 30 years, would equate to about £81 million. So the net cost of all the options should be reduced by that amount.Expressed in terms of additional net resource requirements (and thus the direct impact on the NAO's Estimate) the NAO's preferred option of refurbishment of the BPR building produces the following estimated figures for years 1 to 3 (although the breakdown between capital and revenue may well change following detailed planning):

				£ million
	Year l(2007–08)	Year 2(2008–09)	Year 3(2009–10)	Totalfor years
Capital	30	15.25	15.25	60.50
Revenue	9.05	7.07	8.78	24.90
Total	39.05	22.32	24.03	85.40

By contrast, the relocation options would involve an initial negative capital expenditure, as the cost of any necessary works would be more than offset by the proceeds of the NAO's interest in the current building. Thereafter, however, the stream of annual costs arising from relocation would be significantly greater than those for refurbishment—reflecting mainly the difference between the current peppercorn and future commercial rents.In preparation for the Commission's meeting on 13 December, both the hon. Member for Gainsborough and myself visited the Buckingham Palace Road site. We saw not only the current cramped layout and run-down condition of the building, but also the results of a trial refurbishment and conversion to open plan operation of part of the sixth floor. This reorganisation of the workspace represents a stark contrast with the rest of the building and we understand it has already shown tentative results in terms of improved staff morale and efficiency.We reported these findings to the Commission. Having taken oral evidence from the Comptroller and Auditor General and the Assistant Auditor General responsible for the building project, the Commission accepted the NAO's case for a substantial upgrade of its workspace. Specifically, the Commission agreed:"(i) to approve in principle the NAO's plans to refurbish its Buckingham Palace Road headquarters, subject to project costs being confirmed""within a reasonable range of the estimates and projections contained in the NAO's memorandum to the Commission;""in time for submission to the Commission for consideration as part of the NAO's next Corporate Plan, for 2007–08 to 2009–10;""(ii) to authorise the NAO""to incur expenditure of approximately £500,000 on the preparation of detailed costings for the refurbishment project""to include provision in its Estimate for 2006–07 for any of the relevant expenditure falling in that year."In order to ensure that the NAO's business case is as robust as possible against other options, the Commission has asked it to carry out a cost/benefit analysis of the option of relocating the headquarters building to a north of England location. We have also asked for a detailed explanation of the NAO's reasons for rejecting the option of relocating to a building of similar age on the Civil Estate in London SW1.The NAO's memorandum setting out its case for the refurbishment option, and the transcript of the evidence given by the Comptroller and Auditor General at the meeting on 13 December are available on the Commission website, at www.parliament.uk

Secondary information

Type

Written question

Reference

440 c2810-2W; 39413

Session

2005-06

Subjects

Buildings National Audit Office Working conditions

Contains statistics

Yes

Link

View this Written question on www.publications.parliament.uk