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ITEM EX6

EXECUTIVE – 23 JULY 2002

CAPITAL STRATEGY

Report by Director of Environmental Services

1. As promised to the 9 July meeting, a draft Capital Strategy is presented herewith for approval, subject to some editorial improvements, for submission to the Government Office by the 31 July deadline.
2. The Capital Strategy is the strategic document setting out the Council’s approach to capital planning, procurement and management of the capital programme, and underpins how the Council prioritises, evaluates and monitors it’s capital investment programme. The capital strategy is one of the key components in helping the Council deliver its strategic goals.
3. The capital strategy is closely aligned with the following strategic plans:

• The Oxfordshire Plan 2002/03 to 2006/07 –the key strategic planning document of the Council

• The Structure plan and the Community plan

• Raising Our Performance – the strategic organisational action plan
• The Financial Strategy (being developed) and the Medium Term Financial Plan

4. These plans make up the framework that further includes Service Performance Plans and the Public Service Agreement. Further background was given in the report to the 9 July meeting.

RECOMMENDATIONS

5. The Executive is RECOMMENDED to agree the draft Capital Strategy for submission to the Government Office subject to further appropriate amendment in consultation with the Leader and Deputy Leader the Council.

CHRIS GRAY
Director of Business Support & County Treasurer

Background papers: Nil

Contact Officers: Jenny Hydari, Assistant County Treasurer Tel 01865 815401

July 2002

DRAFT CAPITAL STRATEGY

1. The Capital Strategy is the strategic document setting out the County Council’s approach to capital planning, procurement and management of the capital programme, and underpins how the Council prioritises, evaluates and monitors it’s capital investment programme. The capital strategy is one of the key components in helping the Council deliver its strategic goals.
2. The capital strategy is closely aligned with the following strategic plans:

• The Oxfordshire Plan 2002/03 to 2006/07 –the key strategic planning document of the Council

• The Structure plan and the Community plan

• Raising Our Performance – the strategic organisational action plan
• The Financial Strategy (being developed) and the Medium Term Financial Plan

3. Capital refers to buildings, roads, infrastructure and major ICT.

Background

4. Oxfordshire has a capital programme of £245m over the next 4 years, and there will be opportunities to expand the programme further through initiatives like Private Finance Initiative (PFI), Public Service Agreement (PSA), and prudential guidelines – subject to affordability. This represents an expansion of some threefold in the programme in the last few years, most markedly in the areas of Education and Transport. Prior to this, capital investment has been severely constrained and the amount of repair and maintenance backlog as a result of the lack of investment amounts to some £50m, of which most relates to schools.
5. Also as a result of a highly devolved managerial and financial structure to departmental level, the programme of investment had been driven by departmental priorities. The establishment of the capital programme and asset management corporate steering group, coupled with the arrival of the new Chief Executive and the implementation of the new political structure has heralded major changes which are clearly reflected in the capital strategy.

The Oxfordshire Context

6. An explanation of some of the key factors influencing the programme which arise out of the geography and demographics of Oxfordshire and which are important drivers for the investment plan, are set out later in the paper.

The County Council’s Priorities

7. The Oxfordshire Plan is the key strategic planning document for the County Council. At the core of the document are five Strategic Goals that set the direction for the authority over a five year period. The Council’s Executive has agreed guidance for priority areas for each Strategic Goal. Underpinning each Strategic Goal are departmental objectives that will contribute to their achievement. The Strategic Goals and their impact on the capital programme are set out below:

HELPING PEOPLE TO FULFIL THEIR POTENTIAL

We will: Help children to leave school well-equipped for their adult lives Provide lifelong learning opportunities for people of all ages Work to maintain the independence of older and disabled people

The Capital Implications Use the Education Asset Management Plan and targeted use of devolved capital to raise standards and levels of achievement in schools The City Re-organisation project from 3 to 2 tier Introducing a fast, secure network facility across the County - Broadband/ OCN to extend opportunities for all through developing e-learning facilities Improving access to schools and libraries and upgrading and meeting minimum standards for space. Increasing housing options for people with learning disabilities Investing in accommodation which is suitable for supported living and our elderly clients needs

PROTECTING OUR ENVIRONMENT
We will: Look after our heritage Help rural interests and support rural businesses Reduce the amount of household waste we bury in landfill sites	The Capital Implications Redevelop the Oxford Castle site Improve public rights of way Increase recycling and composting Invest in integrated transport strategies

SAFEGUARDING OUR COMMUNITIES
We will: Help to reduce death and injuries at home, in work and on the roads Help to reduce the levels of crime in our communities Support vulnerable people in our communities	The Capital Implications Complete 25 road improvements targeted to prevent at least six accidents involving death or serious injury in 2002 and in future years as we work towards our target of a 40% reduction in deaths and serious injuries on our roads by 2010

SUSTAINING PROSPERITY

We will: Maintain and develop the transport infrastructure to ensure people and traffic move as safe and smoothly as possible Enhance opportunities for business and employment particularly in rural areas of the County

The Capital Implications Build four major road improvement schemes at Didcot, Banbury , Bicester and Witney to help reduce congestion and improve safety. We will complete them by December 2004 Begin a major review of the County’s transport infrastructure for completion by March 2004 that will help us develop a 15-year investment programme Complete the first phase of the Oxfordshire Community (Broadband) Network and create the potential for access to Broadband across the County

RAISING OUR PERFORMANCE
We will: Value our staff and give them the skills and support that they help them to do their jobs Make it easier for people to contact the County Council for help and support Work with partner organisations to represent Oxfordshire effectively at a national level Improve continuously the quality of our services and value for money.	The Capital Implications Start work on major IT development programme Improve the working environment and accessibility at County Hall and other office buildings Investigate ways to implement e-Government, modern workstyle, rationalise accommodation and records management

What we are trying to achieve

8. The Council’s key objectives in the capital strategy are:

1. In relation to the Council’s premises:

• responding to the changing needs of services to meet increasing public demands and expectations for service provision;

• improving and upgrading buildings to ensure they comply with expected standards for service delivery; and

• improving buildings to reduce revenue costs and promote economy.

ii. Investment in information and communications technology (ICT) to modernise working practices and meet the Government Modernisation agenda for public services as well as to provide the management information necessary to develop and monitor the services required now and in the future.

iii. To provide a healthier, more environmentally friendly transport system where:

• there is genuine choice between foot, bicycle, public transport and private car for all citizens, including poor, elderly and disabled people and those living in remote areas;
• the quality of transport networks is safeguarded and enhanced by effective maintenance; and
• access for people and goods is maintained or improved with a reduction in the number of casualties associated with travel.

iv. To provide more sustainable waste management in both economic and environmental terms.

v. To build learning communities and promote inclusion.

9. The outcomes of MORI countywide surveys undertaken in 1999 and 2000 have informed the setting of priorities for the Oxfordshire Plan and have been taken account of in the consideration of the capital programme. One of the key themes of Raising our performance is ‘keeping in touch’ with our customers.
10. The Council undertakes significant consultation in the development of its capital programme. At the highest level this includes input into the development of both the Oxfordshire Structure Plan and the Local Transport Plan, both of which take into account the views of consultees. The Council has appointed a consultation officer and formed a citizen’s panel of 1000 local people and this will be one of the main forums for consultation on our capital strategy.
11. Last year Oxfordshire County Council developed an innovative way to consult on the budget in a representative community workshop. This approach to consulting local people has generated much interest and been cited by MORI as good practice. It is planned that for 2002/03 the content will be developed to cover capital projects as well as revenue planning and spending decisions.
12. Key stakeholders are consulted specifically on a wide range of capital schemes. For instance the developing Education Asset Management Plan includes structured consultation with all stakeholders. The schools focus group comprising head teachers and officers of the Council is used for consultation with school on property issues.
13. The results of consultation have helped the Council identify its capital expenditure priorities. Examples include:

• The formulation of the Local Transport Plan;
• The outcome of a consultation during the Libraries Best Value review identified the aspiration of library users for upgrading of library premises including the central library to provide a wider range of books and increased ICT facilities;
• The development of school projects ( targeting devolved capital) taking into account the views of relevant stakeholders; and
• Inviting staff to suggest priorities for the use of the budget allocated for improving the Council’s buildings.

14. The key challenges facing Oxfordshire cannot be resolved by one agency alone and in recognition of this the Council is involved in a wide range of partnerships in developing and delivering its priorities.
15. Regionally, we are strengthening our links with the South East England Development Agency (SEEDA), the Government Office for South East England ( GOSE) and the South East England Regional Assembly (SEERA).
16. In February 2002 we established Oxfordshire’s Local Strategic Partnership with the objective of harnessing the participation of partners in identifying the major issues facing the county and tackling them through joint action. The Oxfordshire Community Partnership (OCP) discussed a Community Strategy issues paper in June which covered a wide range of issues having an impact on the infrastructure. The outcomes of consultation will feed into consideration of the programme and its priorities.
17. The Council has embraced partnership working across a wide range of projects.

• contracts for design of roads and buildings with the private sector;

• the joint committee set up with two adjacent Fire Authorities to explore the possibility of the provision and running of a combined Control room;

• externalising Homes for Older People to enable them to meet current and future registration standards;

• the strategy on waste management with all the District Councils in Oxfordshire;
• joint working with the District, Town and Parish Councils on the provision of a library and other community facilities in Adderbury, Wychwood, Deddington and Thame;

• joint use Leisure Centres with District and Town Councils;
• joint arrangements between Education and Social Services and both the voluntary and private sectors for providing early years centres;

• joint working with the private sector on the feasibility of a Guided Transit Expressway;
• joint working with District Councils and Service departments to coordinate bidding for Developer Contributions to enable achievement of maximum contributions;

• the Council is developing a Broadband Network. District Councils and the Health Authority have been involved in the development and will be linking to the Network in due course. We have been successful in securing up to £650K Government funding over the next two years for the Oxfordshire E-Government Partnership. The Council is seeking to attract further users to the Network from the Voluntary and Private Sectors;
• partnership working with the Osborne Group, The Oxford Preservation Trust and external funding organisations to redevelop the Oxford Castle site.

18. Examples of successful partnerships include Waste Management where we have managed to keep down our levels of landfill waste by initiatives with both our Contractors and District Councils. Also in our work with Bus Companies which has provided Oxfordshire and Oxford City with one of the most successful transport infrastructures, where by providing bus friendly measures the county benefits from a modern fleet of buses which are environmentally friendly and provide excellent access for the disabled. These measures have resulted in a steady increase in bus usage, bucking the national trend and winning several awards for the Council.
19. The Council exerts influence on others by the use of its capital resources. Oxfordshire has a booming economy and one significant reason has been the infrastructure investment in growth towns, which has drawn new businesses into the County.

Oxfordshire’s Public Service Agreement

20. The Council is currently negotiating with the Government on a Public Service Agreement. One of the more innovative targets relates to support for key worker housing. This is a joint initiative initially with the City Council. Through partnership working we will help 22 key workers access suitable and affordable accommodation The achievement of this target within the PSA will require some £1m pump priming capital.

Planning and Prioritising Capital Investment

21. The main service priorities for the capital programme are shown below:

Education – The main priority for spending is to provide basic need roofs over heads to meet increasing pupil numbers. Opportunities are taken to reinvest capital receipts within the service to provide improved facilities. In Oxford City there is a major £40m project to move from 3 to 2 tier education with support from DfEE and reinvestment of capital receipts from surplus sites. This is running to time, specification and cost.

Transport – Resources are allocated to the priorities identified in the Local Transport Plan including a study of road safety and community safety initiatives. The Council is spending at least the indicative amount on structural maintenance of roads and bridges. In addition the Council is providing significant infrastructure improvements in the County’s growth towns funded from developer contributions.

Social Services – The Council has recently transferred its Homes for Older Persons to an external provider. This will bring in private sector finance to enable the homes to be brought up to registration standard for which the Council did not have the capital resources. There is a programme to move adults with disabilities from Council run homes into the community in partnership with the Districts and Housing Associations. This is being funded by the sale of surplus homes.

Other Services – The Council has a policy of increasing the floor area in the majority of its 43 libraries and a number of innovative solutions have been identified to provide some of these improvements. The Council has also started to develop a Broadband Network as a step towards implementing electronic government.

Corporate Steering Group

22. The Council has established a Capital Programme and Asset Management Group which is a cross department group advising the Council on prioritisation of capital projects and identifying funding sources. During the last year meetings have been held with all service departments in order to establish the high priority projects in their preparation pools and seeking alternative methods of funding or crosscutting solutions with other service departments.
23. The outcome of these meetings will be fed into the planning process for the capital programme for 2003/04 onwards. Firm links will be made to the revenue planning process and the Council’s Medium Term Financial Plan; through the coming year’s Oxfordshire Plan.
24. The Council’s current strategy is to allow Education and Social Services to spend all the resources specifically allocated for their services. Environmental Services can also spend all the resources available to them for transport purposes; however some professional fees incurred on forward years schemes are met from resources for other services.

PFI

25. The group has also identified potential schemes to be taken forward under the Private Finance Initiative and work is currently being undertaken to establish the most appropriate education package for this year’s bidding round. The Executive are fully involved in the process. Projects include in priority order:

1. An Education project which best fits the DfEE priorities drawn from a long list of identified projects and is likely to embrace school development in Banbury, Didcot or Witney.
2. An innovative and crosscutting project to provide accommodation and IT for modern workstyle and E-Government which will provide flexible working facilities, rationalise existing department area offices and may deal with other preparation pool priorities including replacement libraries
3. Waste treatment facilities.

The Education project will be taken forward as a bid to the DfEE in December 2002.

Prioritisation

26. Outcomes from the Council’s best value reviews which require capital investment are used to help prioritise schemes within the preparation pool.
27. The Council will be reviewing its Project Appraisal format this year. The intention is to build from the DfEE Option Appraisal and improve our own Project Appraisal forms and procedures. As a minimum the appraisal will state how the project meets strategic goals, service plans and best value reviews.
28. Currently all projects costing more than £500,000 need a detailed project appraisal approved by the relevant Director and the Director for Business Support & County Treasurer. For projects costing more than £1m the appraisal must also be approved by the Executive.
29. The appraisal sets out both capital and revenue implications of each project. Revenue implications must generally be met from within existing Directorate resources, although ‘invest to save’ projects will be given special consideration. If revenue costs cannot be contained within existing resources, the revenue implications must be bid for through the budget planning process, and only if agreed can the project proceed.
30. The Council will benefit in 2003/04 from the discretionary element of the Single Capital Pot and the abolition of the RTIA adjustment on Basic Credit Approvals. The availability of these additional resources will be fed into the capital programme forecasting in July and the Capital Programme and Asset Management Group will recommend priorities to the Executive for inclusion in the main programme.
31. The Council will also take advantage of the additional borrowing available from 2004/05 under the Prudential Guidelines. A priority listing of projects will be drawn up by the group for consideration by the Executive. The listing will take account of the Council’s priority objectives, affordability and outcomes of consultation with stakeholders.

Funding the Programme

32. The Council plans to invest £245m in capital spending over the next three years. This spending is paid for by borrowing, contributions from developers (who pay for roads and other infrastructure), and income from the sale of unwanted land or property and Government grants.
33. The Capital programme is funded mainly by a mix of government allocations, capital receipts, developer contributions and capital grants.
34. The Council has been successful in attracting lottery funding towards some projects and continues to look for further lottery funding opportunities. The Council is keen to pursue other ‘bid’ funding sources and has recently made a expression of interest for Round 5 Invest to Save Budget for the development of a Contact Centre.
35. The Council has been very successful in achieving developer contributions and this trend is expected to continue. Joint working groups have been established with the District Councils so that we can coordinate and maximise the amount of contributions we ask the developers to make towards providing new infrastructure.
36. The Council regularly reviews its assets to identify surplus property, which is used to support the capital programme.
37. The Council has used innovative solutions to deal with some of its capital programme pressures. These include the transfer of our Homes For Older Persons to an external provider, (to lever in the capital finance necessary to bring the homes up to registration standard (contract signed in 2001)) and the Oxford City Schools Reorganisation project which was mentioned earlier.
38. The Council has also attracted some £20m of investment through partnership with the Osborne Group to open up the site of the Old Oxford Prison to the public and provision of other facilities on the site such as a hotel, retail outlet etc. This includes £4.5m funding from SEEDA, £150,000 from English Heritage, and an application to the Heritage Lottery Fund for £1.6m ( the first stage decision is expected before the end of July). Work on the site is due to start in this financial year.

Better ways of working

39. Several cross-cutting member/officer working groups allow officers below Director level to interact with members. These include work on : social inclusion, the Oxford Castle re-development, and waste management.
40. We are committed to improving access, providing better quality services and improving cost effectiveness. Raising our Performance, the Oxfordshire Plan and the Implementing Electronic Government Statement all recognise the significance of the e-government agenda.
41. Crosscutting solutions are sought where possible to provide new assets for the Council. Recent examples include the provision of joint libraries on Education School Sites and the provision of a joint facility which will include a new enlarged Library, Social Services day centre and an area office for highways engineers, developed on a former library site in Kidlington.

Value for Money and Quality

42. Oxfordshire County Council recognises that procurement and a procurement strategy are central to obtaining value for money. The recent secondment of a senior civil servant to Oxfordshire to look at procurement has provided the basis from which to develop a procurement strategy for the Council.
43. The Council has externalised its property services, including architecture, planning and estate management, highway design services and more recently has also sold its direct labour organisation (highways, grounds, vehicle maintenance). This has provided value for money and risk transfer to the private sector and allows the Council to concentrate on monitoring the quality of service it receives.
44. A Best Value Review of Property Services is currently being undertaken and is to report to members in January 2003. The Review will examine how property should be organised and managed at member and departmental level; what Property Services should be provided in-house; and how any services provided externally should be packaged and procured.
45. A Best Value Review of Construction has been undertaken and an action plan is in the process of implementation. The recommendations of the review, and the action plan are based on adopting the principles of Rethinking Construction. The Council’s Standing Orders have been revised to ensure that price and quality criteria are used in awarding contracts for construction works. It is intended that by early 2003 a partner will be selected for partnership contracts for construction works. The Council has already adopted two-stage tendering using price and quality criteria for many projects.

Monitoring and Evaluation

46. The Council has a rolling three year capital programme that is agreed by the Executive. This is prepared in line with the Council’s priorities for deployment of capital resources. Quarterly reports are submitted to the Executive to ensure effective management and monitoring of the capital programme.
47. The Council has adopted the five national Property Performance Indicators recommended by Government and has also adopted twelve local Performance Indicators designed to measure success in achieving our objectives.
48. Once the capital programme for a service department has been agreed the relevant department is responsible for the management and monitoring of its programme, although the Environmental Services Department is responsible for procuring most of the programme. Departments monitor their capital programme on a monthly basis. Any upward variations on contract prices have generally to be found from within the resources available to that service. If this is not possible the service concerned would normally bid to the Executive for additional resources. Financial control has however been good.
49. The Council has a policy of undertaking post completion reviews to assess the performance and value for money of capital projects. For building works the Council has partnering arrangements with three consultants and contractors. The Director of Environmental Services is a member of the Local Government Task Force for ‘Rethinking Construction’. The department has been successful in Innovative Demonstration Projects and is pursuing ‘Rethinking Construction’ in all its contractors’ procurement – having just completed a construction service Best Value Review.
50. Performance is measured against the Council’s and external standards for energy, day lighting, ventilation, air leakage etc. Occupiers and users of buildings are consulted and there is an assessment of how the building meets the brief, overall performance and value for money. Design features, project processes etc. to be avoided or repeated on future schemes are identified. Similarly for highway works there are processes in place for safety audit at various stages in the design process and post construction and ongoing traffic accident and flow monitoring which links to overall performance, value for money and any need to review design facilities.
51. The Corporate and Education priorities which are primarily contributed to by capital expenditure on Education projects are for the removal of surplus places and reducing condition and suitability problems. The Best Value targets for removal of surplus places are monitored each year. The surplus places removed by individual capital programme schemes can be identified and the contribution to the targets measured. A report is currently being produced to assess the achievement in the first year of reducing condition and suitability problems. This will assess how capital and revenue expenditure has been used to overcome condition and suitability issues.
52. The Education Asset Management Plan is used to identify deployment of resources particularly devolved capital grants. The funding is used to tackle the higher priority issues identified in the AMP. As other service AMPs are developed they will be used to identify key areas for deployment of capital resources.
53. The Oxford City Schools Reorganisation will improve Educational achievement in Oxford. The project is due for completion in September 2003. Education performance will be monitored so that the success of the reorganisation can be assessed.
54. Implementation of e-learning. We will monitor and evaluate the impact of these new facilities both locally and nationally on access and outcomes for learners, and review the development programme in the light of experience.
    
    July 2002

The County of Oxfordshire in Context

Oxfordshire is a county of great diversity with extensive countryside, busy market towns and a world class University City. It has always been a unique centre for commercial, creative and academic success. The county has an area of 259,846 hectares and a population of around 632,000 and is one the most successful and productive economies in the United Kingdom. In both the manufacturing and service industries the county is geared towards high skilled, high value-added occupations. Some of the world’s most advanced scientific research companies stand alongside the more traditional industries of farming, car-manufacturing and publishing.

The Council’s capital programme and resources to fund the programme are summarised below:

The Council will be considering whether to take on unsupported borrowing from 2004 under the proposed prudential guidelines. Over the next few months an assessment will be made on the schemes within the capital programme preparation pool which will be given a priority order. The Council will then need to consider how much unsupported borrowing it can afford within its revenue budget and plan tackling its preparation pool priorities against that affordability. At current interest rates every £1m of borrowing has a revenue cost of approximately £110,000 per annum (full year effect).

A medium term objective for the Council is for a gradual reduction in the level of Council Tax increases. This will be a limiting factor on the level of unsupported borrowing the Council can afford and may focus unsupported borrowing towards capital schemes that give rise to revenue savings in the longer term.

Summary of Asset Register at 31 March 2002

The County Council’s asset register is summarised below. This is set in context against the Council’s assessed maintenance backlog, which for operational buildings is of the order of the annual size of the capital programme and for infrastructure assets is approaching five times the annual programme for transport related expenditure.

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