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Introduction and aim
This briefing note examines an institution’s physical environment: its estate. Investment in the estate bears on an institution’s ability to recruit students and staff and thus its sustainability. Faced with increased competition, institutions are making increased commitments to expand or enhance their estate.
The governing body’s role
Estate matters warrant the governing body’s attention as they are often large scale and costly, mission critical and may involve significant risks. They are ‘matters of fundamental concern’ and as such are part of the remit of governing bodies.
Detailed examination of estate matters may in practice be delegated to one of the governing body’s standing committees, or to a specially constituted working group. A working group may be established if, for example, there is a plan to undertake a major campus re-development or move to a new campus.
A number of institutions chose to have an estates committee. Alternatively, many institutions include estate matters as part of the remit of a ‘Finance and Resources’, ‘Finance and General Purposes’ or ‘Planning and Resources’ committee. Where a standing committee or working group looks at matters relating to the estate, they operate with delegated authority and report to the governing body, who is responsible for all final decisions.
Institutions will normally be expected to develop an estates strategy. This should be a sub-strategy of the institution’s strategic plan. Typically, the estates strategy will include an assessment of institutional needs, including data on the existing building stock, aims and objectives, investment plans and intended timescales. Strategies typically cover a five-year period, and once adopted, should be regularly reviewed to ensure they remain appropriate. A good practice guide to developing an estates strategy is available from the Association of University Directors of Estates (AUDE).
Benchmarking and survey data
By comparing the amount of space available and its condition and functional suitability, benchmarking and survey data can help inform the institution’s estate strategy. Every ‘public’ institution in the UK annually submits an Estates Management Statistics (EMS) return. This includes a detailed breakdown of the space, its condition and functional suitability and the institution’s environmental performance.1 EMS data is collated by Higher Education Statistical Agency (HESA) and published as the Estates Management Record for Higher Education Providers.
To support their EMS return institutions periodically undertake condition surveys (typically, say, every 3 to 5 years) of their building stock, and to assess whether expenditure is required to improve the condition and functional suitability of its buildings. Governors should consider whether the condition of the institution’s building stock or its functional suitability suggest the need for investment.
EMS data also allows institutions to make comparisons between their estate and that of their competitors. However, given the diverse nature of the institutions and the often very different characteristics of their estate, benchmarking should be use, with care, to ensure institutional comparisons are meaningful.
Rationale for an estates strategy
The timelines to achieving changes to an institution’s estate are often lengthy. To enable the institution to proactively address known and emerging needs, a clear and detailed forward strategy is required. In an increasingly competitive landscape where an institution’s physical environment impacts its attractiveness, increasing attention is being given to estate strategies.
High-quality and functionally suitable working environments increase the attraction of the institution as a place to work or study; while unsuitable, or poor-quality environment do the opposite. Similarly, the provision of student services, including appropriate residential accommodation - particularly for first year students - is important in helping to secure student numbers. Residential accommodation may also help to generate additional income, particularly during the summer vacation.
Relationship to other strategies
The estates strategy should reflect the institution’s academic plans, including planned changes to its student numbers, its subject/course portfolio, modes of attendance and levels and types of research activity. The strategy is also likely to try to address buildings in poor condition or functionally unsuitable, and may look to relocate departments or professional services to improve coherence and operational efficiencies. The estates strategy should also link to the institution’s financial strategy, which should clarify how any planned capital expenditure is to be financed.
The estates strategy will need to take account of the local planning authority’s views and where changes require planning permission, how this can be best achieved. Depending on the institution’s location and relationship with the planning authority, planning consent may be a significant hurdle and require careful negotiation with the planning authority. Planning consent may also depend on, for example, improved travel plans, detailing how any increased movements resulting from the granting of planning consent can be managed to minimise the increase in road traffic.
Carbon reduction plans
Institutions are giving greater attention to their environment footprint, and taking steps to reduce the amount of carbon that results from the heating and lighting of buildings. Encouragement to cut energy use has come from schemes introduced by national funding councils and bodies, changes to building regulations and as a result of institutions recognising there are benefits to reducing energy consumption. However, AUDE suggest energy usage is tending to increase as buildings become more complex, are used for longer hours and users demand better environments (warm in winter, cool in summer). These factors mean energy-saving measures are often necessary to contain the use of energy and rises in cost.2
Few doubt that long-term energy prices will rise, and many institutions are taking action to reduce energy usage. Typically, this involves constructing new buildings, which are more energy efficient, and seeking to improve the energy efficiency of existing buildings through refurbishment or investment in energy-saving devices. To reduce consumption, up-front investment is usually required. Similarly, action is being taken to increase recycling and reduce the costs of waste disposal.
The costs of running (eg heating and lighting) and maintaining (eg repairs and minor works) the built environment are significant and often form the largest category of non-pay expenditure; and the largest item of expenditure included in the institution’s revenue budget after pay. This emphasises the importance of governors checking that giving sufficient attention is being given the costs of running the estate.
An important part of maintaining the condition to the institution’s building stock is undertaking appropriate maintenance and repair to ensure building remain in a good condition. In times of financial pressure, institutions can be tempted to defer expenditure on maintenance and repairs.
If continued for any length of time a backlog for maintenance and repair can develop, eventually leading to problems. Governors need to ensure that expenditure on repairs and maintenance is adequate, including reviewing benchmarking and survey data to assess whether the condition of the estate is sound.
Procurement of utilities and services
Institutions should use their buying power to negotiate the price they pay for energy or campus services that are outsourced. Periodically when contracts come up for renewal, institutions have the opportunity to undertake ‘market testing’. I.e. test the terms and conditions on which external suppliers are willing to supply energy or services to the institution. In securing best-value contracts the institution may decide to independently tender for a supplier or, if they are a member, use the terms negotiated by one of the higher education purchasing consortium.
Past investment by the sector
Investment in estates has increased over the past decade, resulting in improvements to the condition and functional suitability, and a reduction in the age of the building stock. The functional suitability of 86% of non-residential space was rated excellent or good in 2012-13, compared to 63% in 2001-02. Over the same period, the proportion of space assessed ‘as new’ or ‘sound and operationally safe’ (conditions A or B) rose from 63% to 80%.3 The figures however suggest further investment in needed.
Future plans for investment
An understanding of future investment plans for English ‘public’ institutions can be gained from the annual financial forecasts returned to Hefce. These indicate ‘the sector is planning to invest over £15.2 billion in infrastructure projects during the next four years, an average annual investment of £3,811 million. This is nearly 50 per cent higher than the previous four-year average (2009-10 to 2012-13).4 As the level of capital funding provided from public funds is expected to remain significantly below historic levels, institutions are using either internal resources or increasingly borrowing additional resources to finance their expenditure plans.
Funding the investment
The ability (and the cost) of institutions to borrow funds depends on the general view and sentiment of the financial community towards to the higher education sector, and an assessment of the individual institution’s finances and its ability to service any new debt. A wide variation in financial performance and debt levels between institutions means their ability to acquire and service new debt equally varies.
Lenders' assessment of risk
To date the higher education sector has generally been viewed by the financial sector as low risk. There is a hint that with the increasingly competitive environment faced by, in particular, English ‘public’ higher education institutions, lenders are becoming more aware of future uncertainties as to the operating environment, and the potential for institutions to experience mixed fortunes. If the perceived risk of lending to some institutions increases, these institutions are likely to find their ability to borrow, especially for longer-periods of time more difficult, or the cost of gaining access to new finance increasing.
Questions to consider
End notes and further reading
Associate Director, Governance
Aaron Porter was appointed as Associate Director, Governance at the Leadership Foundation (LF) in January 2014. He is also a higher education consultant and a freelance journalist, having previously been president of the National Union of Students (NUS) in 2010 – 2011. He is also an associate for the LF and the Higher Education Academy (HEA), on the advisory network for the Office for Fair Access (OFFA) and CFE research and consultancy alongside a number of other portfolio roles.
During his high profile term at NUS, he was the first NUS President to be invited as an observer to the board of the Higher Education Funding Council for England (Hefce) and to address the annual Universities UK Conference in September 2010. In addition he served as a non-executive director on the boards of UCAS, the HEA and Endsleigh Insurance. He also co-chaired the Beer/Porter Student Charter group which reported to Higher Education Minister David Willetts in January 2011, and was a member of the Hefce Online Learning Taskforce and the review of External Examiners chaired by Dame Janet Finch both conducted in 2010/11.
Previous to his term as NUS President, Aaron served two successful terms as NUS Vice-President (Higher Education), helping to build NUS’ reputation with the sector. He also served as a non-executive board member for the Office of the Independent Adjudicator (OIA) and on the board of the European Students’ Union (ESU). He was also a member of the Burgess Implementation Steering Group and the National Student Survey Steering Group. In 2009, he was part of the UK delegation to the European higher education ministerial summit in Leuven, Belgium.
Aaron studied BA English at the University of Leicester and graduated in 2006. He then spent two years as a sabbatical and trustee of the students’ union, he was also the founding chair of Unions94 (the students’ unions of the 1994 Group). As a student he was editor of the student newspaper, ‘The Ripple’.
Governance Web Editor
David Williams is Governance Editor for the LF website. He has over 25 years experience of working in higher education, as both as an academic and senior manager. During this time he has worked closely with governing bodies, contributing to, and supporting their work
in a variety of ways.
As Governance Editor, David works with the wider LF community and its members to ensure the governance website offers a repository of information and signposts recent developments in the field on governance.