nao building for the future
TRANSCRIPT
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REPORT BY THE COMPTROLLER AND AUDITOR GENERAL | HC 324 Session 2006-2007 | 20 April 2007
Building or the uture: Sustainable constructionand reurbishment on the government estate
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The National Audit Oice scrutinises
public spending on behal o
Parliament. The Comptroller and
Auditor General, Sir John Bourn, isan Oicer o the House o Commons.
He is the head o the National Audit
Oice, which employs some 850 sta.
He, and the National Audit Oice, are
totally independent o Government.
He certiies the accounts o all
Government departments and a wide
range o other public sector bodies;
and he has statutory authority to report
to Parliament on the economy,
eiciency and eectiveness with
which departments and other bodieshave used their resources. Our work
saves the taxpayer millions o pounds
every year. At least 8 or every
1 spent running the Oice.
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LONDON: The Stationery Ofce
13.50
Ordered by theHouse o Commons
to be printed on 16 April 2007
Building or the uture: Sustainable constructionand reurbishment on the government estate
REPORT BY THE COMPTROLLER AND AUDITOR GENERAL | HC 324 Session 2006-2007 | 20 April 2007
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This report has been prepared under Section 6o the National Audit Act 1983 or presentationto the House o Commons in accordance withSection 9 o the Act.
John Bourn
Comptroller and Auditor GeneralNational Audit Office
29 March 2007
The National Audit Ofcestudy team consisted o:
Laura Lane, Eric Lewis, Alex MacNeill, Jit Patel,Katy Losse, Ben Stubbs and Matt Rendell, underthe direction o Joe Cavanagh.
This report can be ound on the National AuditOfce web site at www.nao.org.uk
For further information about theNational Audit Office please contact:
National Audit OfcePress Ofce157-197 Buckingham Palace RoadVictoriaLondonSW1W 9SP
Tel: 020 7798 7400
Email: [email protected]
National Audit Ofce 2007
CONTENTSSuMMArY 4
PArT OnE
Departments and agencies are 7expected to construct and reurbishbuildings sustainabl
Departments and agencies spend around 73 billion each ear on constructionand reurbishment
Seeral goernment bodies share polic 8responsibilit or sustainable constructionand reurbishment on the goernment estate
The perormance o buildings on the 8goernment estate is increasingl subjectto enironmental targets and initiaties
How we approached this stud 10
PArT TWO
There is widespread ailure to meet 11
targets or sustainable constructionand reurbishment
Departments and agencies are not assessing 11the enironmental sustainabilit o projectsdespite instructions to do so
Departments and agencies are ailing to 12achiee the required assessment ratings
Eight per cent o projects would ail to meet the 12required enironmental assessment standards
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Perormance on smaller projects tends to 14be worse
The procurement route ma aect the scope 14or considering sustainabilit
Some aspects o sustainabilit are more 15widel achieed than others
Uptake o the Quick Wins is limited 16
There are a ariet o reasons wh 17departments are underperorming
PArT THrEE
Departments struggle to reconcile 19sustainabilit and alue or mone
Ke indiiduals in departments perceie that 19sustainabilit conicts with alue or mone
Departments are not carring out appraisals 19o the balance between sustainabilit andalue or mone
Departments need clearer guidance on whole 20lie costing
Sustainable buildings ma hae greater capital 21costs but can hae lower running costs
Departments are not ealuating wider impacts 23despite the potential or large saings
Departments need to use specifc output-related 24targets to achiee enironmental objecties
Photographs courtesy o Alamy.com
PArT FOur
Sustainable buildings can delier tangible 25benefts but these need to be managed
Departments tend not to defne clearl the 25benefts expected o a sustainable building
The benefts o sustainable buildings are generall 25not measured or quantifed
The most sustainabl-designed building can 27
still be unsustainable
Integrated teams increase the chances o 27benefts realisation
New technologies do not alwas delier the 28anticipated benefts
APPEndicES
1 Detailed recommendations 29
2 Methodolog 31
3 Departments within the scope o this report 34
4 Departments and executie agencies in our 35sample o projects
EndnOTES 36
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SUMMARy
4 BUILDING FOR THE FUTURE: SUSTAINABLE CONSTRUCTION AND REFURBISHMENT ON THE GOvERNMENT ESTATE
1 This report examines the extent to which
departments and executive agencies are meeting targets
to make their new buildings and major reurbishmentsmore sustainable. Each year departments and agencies
spend in the region o 3 billion on these projects. I
sustainability is handled well, it can and should provide
better value or money in the long term.
Key indings
2 The government has set sustainability standards
or the construction and reurbishment o buildings on
the government estate, but these are not being met.
Departments are ailing to carry out environmentalassessments and achieve the target ratings. In the sample
o projects we examined, 80 per cent would not have
attained the required standards.
3 The required standards will in any case not be
enough to ensure that departments meet the new targets
or Sustainable Operations on the Government Estate,in particular the targets set or carbon emissions, energy
and water consumption. Current perormance against
these targets is poor.
4 Various barriers are hindering progress towards
more sustainable buildings. These include, in particular:
n the ragmentation o policy responsibility among
government bodies or improving sustainable
construction and reurbishment on the government
estate and the absence o a coherent approach to
monitoring progress and ensuring compliance;
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SUMMARy
5BUILDING FOR THE FUTURE: SUSTAINABLE CONSTRUCTION AND REFURBISHMENT ON THE GOvERNMENT ESTATE
n the relatively small scale o many projects
especially reurbishments and the lack o suicient
knowledge and expertise in sustainable procurement
among those departmental sta responsible or them;
n
the widespread perception o a conlict betweensustainability and value or money partly because
project teams are ailing to assess the long-term costs
and beneits o more sustainable approaches; and
n the ailure to speciy expected beneits and
undertake rigorous post-occupancy reviews
to evaluate perormance against them and the
consequent lack o robust data to inorm business
appraisals or new projects.
Recommendations
5 Our recommendations, presented in ull inAppendix 1, are summarised below.
Improving sustainable construction is a government-
wide responsibility and central government departments
should take far more action to address the serious and
widespread failure to achieve the targets set. Whilst
precise responsibilities for sustainable procurement are
still to emerge, it is clear that some key organisations
including Defra, OGC and possibly DTI have a role for
providing leadership and direction on the government
estate. Between them these organisations should:
n establish a clear understanding on the division o
policy responsibilities or sustainable construction
in the public sector, in such a way as to ensure clear
accountability or this area o policy;
n work with other departments with a role in
promoting sustainable construction to ensure a
joined-up approach;
n establish a source o expertise available to all
departments to provide advice on sustainable
construction or smaller construction and
reurbishment projects;
n identiy and promote cost neutral or low cost
approaches to help make smaller construction and
reurbishment projects on the government estate
more sustainable;
n deine the level o perormance required on
the government estate, and revise and promote
the sustainability requirements in the Common
Minimum Standards;1
n
develop outcome-based perormance targetsor individual buildings (or example in terms o
energy and water use) which departments can
include in speciications or construction and
reurbishment projects;
n monitor and report on progress, including
monitoring compliance at the project level, to help
understand and hold departments to account or
perormance; and
n advise departments on the actors to consider when
assessing whether it is appropriate or a BREEAM
assessment (Figure 5) or alternative assessmentmethod to be undertaken, and commission
alternatives to a ull BREEAM assessment or use on
smaller projects or minor reurbishments.
Treasury and the Office of Government
Commerce should:
n clariy their guidance on the use o whole lie
costing, and promote this standardised approach
to all construction and reurbishment projects by
departments and agencies; and
n ensure that the development o sustainability targets
or government under the High Perorming Propertyinitiative incorporates appropriate environmental
benchmarks and measurement mechanisms.
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SUMMARy
6 BUILDING FOR THE FUTURE: SUSTAINABLE CONSTRUCTION AND REFURBISHMENT ON THE GOvERNMENT ESTATE
Departments and agencies should improve the
sustainability of new builds and refurbishments on the
government estate by:
n speciying their requirements or environmental
perormance in terms o outcomes includingcarbon emissions and energy and water
consumption in line with the targets or Sustainable
Operations on the Government Estate;
n conducting post-occupancy evaluations to assess
whether completed construction and reurbishment
projects have delivered the speciied level
o perormance;
n using integrated teams in all projects, so that
all stakeholders are signed up to the need to
deliver sustainability;
n incorporating to a greater extent the Quick Wins(products which meet environmental standards at
minimal cost) and any other eatures o sustainable
buildings which are cost neutral or have the potential
to deliver cost savings in the short term; and
n taking ull account o the governments
environmental targets and the wider social and
economic impacts which sustainable buildings can
bring when assessing value or money.
Value or money potential6 There is much more that departments can do
to demonstrate and achieve value or money through
sustainable building on their estates. Some aspects o
more sustainable building oer tangible inancial savings
or example, savings in energy and water consumption o
at least 20 million a year.2 Other aspects o sustainability
are more diicult to value or measure, and work is needed
to develop a better ramework in which these can be
assessed and justiied, and to provide data to inorm uture
projects. Some o that additional value may oer direct
inancial savings in the long run but other value will
come rom the contribution departments can make todelivery o the UKs Sustainable Development Strategy and
achievement o related national targets.
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PART ONE
7BUILDING FOR THE FUTURE: SUSTAINABLE CONSTRUCTION AND REFURBISHMENT ON THE GOvERNMENT ESTATE
Departments andagencies are expected toconstruct and reurbishbuildings sustainably
1.1 Sustainability is deined by the UK government
as simultaneously delivering economic, social and
environmental outcomes.3 In practice, it involves a
greater emphasis on the environmental implications o
policy and business decisions in addition to the traditional
ocus on economic and social objectives. Individual
building projects can have signiicant environmental
and social impacts, and buildings on the governments
own estate can also help or hinder delivery against the
UK Sustainable Development Strategy4 and national
sustainability targets, such as a 20 per cent reduction in
carbon dioxide emissions below 1990 levels by 2010.
1.2 While there is no commonly accepted deinition o
a sustainable building, the deining eature o the conceptis a signiicant reduction in environmental impacts
(Figure 1). Thinking on some o the social impacts o
buildings, or example the impact on local communities
or regeneration, is less well developed than or other
aspects, such as disabled access to the inished building.
The economic beneits o sustainable buildings can
also be considerable: reduced operating costs (through
energy and water eiciency) and improved productivity
(through the provision o better working environments)
are good examples. Sustainability can thereore be seen
to be consistent with the Treasurys deinition o value
or money as the optimum combination o whole liecost and quality (or itness or purpose) to meet the
users requirement.5
1.3 The sustainability o buildings on the government
estate is determined at several stages in their liecycle
(Figure 2 overleaf).
Departments and agencies spendaround 3 billion each year onconstruction and reurbishment
1.4 Department or Trade and Industry (DTI) data
show that central government departments and
executive agencies spent 2.3 billion on large-scale
construction and reurbishment projects in 2005-06.6
Reurbishment accounted or 60 per cent o this
expenditure (1.35 billion) whilst construction accounted
or 40 per cent (0.92 billion). However, as the DTI data
do not include projects costing less than 2 million,
we estimate that departments and agencies spent in the
region o 2.8 billion on projects in 2005-06 (o which
major reurbishment projects comprised 1.5 billion and
construction projects 1.3 billion).7
1 Enironmental eatures o sustainable buildings
Sustainable buildings can include measures to:
n reduce energ consumption and associated emissions ocarbon dioxide;
n minimise the use o resources such as water andconstruction materials;
n reduce the release o pollutants;
n maximise the use o sustainabl sourced and reccledmaterials (e.g. timber);
n promote sustainable trael choices through public transportand ccling proision; and
n consere, or enhance, biodiersit.
Source: National Audit Office
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PART ONE
8 BUILDING FOR THE FUTURE: SUSTAINABLE CONSTRUCTION AND REFURBISHMENT ON THE GOvERNMENT ESTATE
1.5 We have examined public sector construction in
previous reports.8 In March 2005 we published
Improving Public Services through better construction9
along with an associated volume o good practice casestudies.10 As well as making recommendations to deliver
potential annual savings o up to 500 million through the
implementation o good practice throughout the public
sector, we also recommended that departments should:
n consider the development of a sustainability action
plan to cover all aspects o construction activity,
including speciic key perormance indicators (such
as reduced carbon dioxide emissions and reduced
waste to landill) and monitor their achievement; and
n make decisions about construction projects
based on sustainable whole life value, in orderto demonstrate that they have considered and
understand the issues o whole lie value involved
in a construction project and the opportunities
they have to maximise its economic, social and
environmental impact.
These recommendations are reinorced by our latest
indings as set out in this report.
Several government bodies share
policy responsibility or sustainableconstruction and reurbishment on thegovernment estate
1.6 The policy responsibility or sustainable construction
and reurbishment on the government estate is split
between several government bodies (Figure 3), but in
uture this may be aected by recent developments:
n Responding to the Treasurys launch oTransforming
Government Procurement in January 2007, the
Oice o Government Commerce (OGC) will
become a smaller, higher calibre organisation.11
OGC will be given a clear ocus to drive better value
or money on major complex acquisition projects
and estates management in central government. It
will also be given powers to set out procurement
standards to be met by departments, challenge
perormance against the standards, and requireinter-departmental collaboration where appropriate.
n In March 2007, the UK Government Sustainable
Procurement Action Plan was launched in response
to the recommendations o the business-led
Sustainable Procurement Task Force.12 One o the
key goals o the Action Plan is to move towards a
sustainably built and managed central government
estate that minimises carbon emissions, waste and
water consumption and increases energy eiciency;
it thereore sets out a series o measures which
departments will need to take or construction andreurbishment projects. The Action Plan tackles the
issue o leadership or sustainable procurement
and aims to put in place lines o accountability and
reporting, notably that the Head o the Civil Service
will oversee delivery o the Action Plan and report
on progress in 2008.13
Policy on sustainable construction is also likely to
be inormed by and relected in DTIs orthcoming
Sustainable Construction Strategy, scheduled or
completion in 2007; the Strategy is also likely to inluence
construction activity on the government estate.
The perormance o buildings on thegovernment estate is increasinglysubject to environmental targetsand initiatives
1.7 In 2005, OGC published the Common Minimum
Standards or the procurement o built environments in
the public sector,14 which apply to both construction
and reurbishment projects. The standards reer to
OGCsAchieving Excellence guide on sustainability inconstruction15 which provides guidance to departments
2 How building sustainabl can reduce enironmental impacts
Source: National Audit Office
Bsess ee
The options or leasing,reurbishment orconstruction appraised
in the business caseare ke determinants
o sustainabilit
Spefato a esg
Fundamental choices aboutthe nature o the buildingare made which determineits enironmental, socialand economic impacts
costto poess
The phsical processesand materials usedin construction andreurbishment can
gie rise to substantialenironmental impacts
commssoga opeato
Eectie management isrequired to ensure that
the desired sustainabilitbeneits are deliered
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PART ONE
9BUILDING FOR THE FUTURE: SUSTAINABLE CONSTRUCTION AND REFURBISHMENT ON THE GOvERNMENT ESTATE
on all aspects o sustainability including economic,social and environmental issues. They also draw together
existing environmental policy standards, including:
n the requirement or departments to carry out an
environmental assessment on projects using the
Building Research Establishments Environmental
Assessment Method (BREEAM) or equivalent;
n the targets under the Framework or Sustainable
Development on the Government Estate; and
n the OGC Buying Solutions/Department or
Environment Food and Rural Aairs (Dera) Quick
Wins speciications or the procurement o a rangeo construction products.16
1.8 Departments have been required to conduct aBREEAM assessment, or equivalent, on all construction
and reurbishment projects since 2002, and rom
March 2003 all new build projects should achieve a rating
o Excellent and reurbishment projects Very Good.17
The target or the latter was raised in 2006, requiring
Excellent BREEAM standards, or equivalent, or major
reurbishments as well as new builds.18
3 Polic responsibilit or sustainable construction and reurbishment on the goernment estate is shared
Source: National Audit Office
dTi sposos the ostto seto a haspoly esposblty fo sstaable ostto.
DTIs Review of Sustainable Constructionin 2006 detailed sustainable constructioninitiaties across goernment since 2000. It didnot set an new policies, but presented a serieso industr-deised targets or the uture. DTIsees the Reiew as the irst phase in a processto deelop a new Sustainable ConstructionStrateg or completion in 2007.
OGc has esposblty fo osttopoemet poly, eloato a bettese of pbl estates.
In 2005, OGC published an AchievingExcellenceguide or sustainabilit in
construction to encourage consideration osustainable deelopment and illustratingthe was in which sustainable constructioncan be deliered. OGC also set outthe Common Minimum Standards orsustainabilit in the procurement o builtenironments, including construction andreurbishment, in 2005.
dcLG s esposble fo blgeglatos a plag Egla.
The reisions to Part L o BuildingRegulations, which came into orce inApril 2006, increase the requirements
or the energ eicienc o buildings.For example, an air-conditioned oicebuilding must be 28 per cent moreenerg eicient than one built accordingto the 2002 regulations. The BuildingRegulations also incorporate elementso social sustainabilit, such as therequirements in Part M or buildings to beaccessible to people with disabilities.
defa has a Pbl Seve Ageemet (2003-06) to pomote sstaableevelopmet aoss Govemet.
Its Sustainable Deelopment Unit deeloped the Framework or SustainableDeelopment on the Goernment Estate in 2001 to assess, report uponand improe departments and agencies perormance in managing theirestates sustainabl. Targets were originall published b Dera between2002 and 2004, including speciic targets on construction. Reised targetsor sustainable operations on the goernment estate were drawn up b across-departmental Sustainable Operations Board, and published b Derain June 2006. Progress towards the targets is monitored and reported b theSustainable Deelopment Commission (a Dera sponsored bod).
dcMS sposos the commssofo Ahtete a the BltEvomet (cABE), whichchampions well-designed buildingsand public space. CABE promotesimproements in the design o newpublic buildings using initiatiessuch as design champions and theexpansion o tools and standards.
Sstaable ostto o the govemet estate
Offe of Govemet commee
depatmet of Tae a isty depatmet fo Evomet, Foo a ral Affas
depatmet fo commtesa Loal Govemet
depatmet fo clte,Mea a Spot
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PART ONE
10 BUILDING FOR THE FUTURE: SUSTAINABLE CONSTRUCTION AND REFURBISHMENT ON THE GOvERNMENT ESTATE
1.9 Since 2002, the Framework or Sustainable
Development on the Government Estate (Figure 3) has
included operational targets covering energy, water, waste,
travel, construction and procurement. The revised targets,
entitled Sustainable Operations on the Government
Estate, were launched by the Prime Minister in 2006,19 onthe same day as the Sustainable Procurement Task Force
published its recommendations to government.20 While
ewer in number, the targets are more demanding in some
respects and include requirements to:
n achieve a 30 per cent improvement in energy
eiciency by 2020;
n make the central government oice estate carbon
neutral by 2012;
n reduce water consumption to three cubic
metres per person per year or all new oicebuilds or major oice reurbishments; and
n reduce waste arisings by 5 per cent, and recycle
40 per cent o waste, by 2010.
1.10 The drive or sustainable buildings is running in
parallel with several other cross-government initiatives;
departments and agencies are under other pressures to
improve the perormance and eiciency o their estate.
OGC plays a central role in the coordination o these
initiatives (Figure 4).
How we approached this study
1.11 In this study, we examined:
n the extent to which departments and agencies
are meeting the standards set or sustainable
construction and reurbishment on the government
estate (Part 2 o this report);
n how departments and agencies evaluate value or
money when designing and speciying sustainable
buildings (Part 3); and
n whether buildings on the government estate whichwere designed to be sustainable have delivered the
expected beneits (Part 4).
1.12 Our approach involved gathering inormation rom
departments and agencies about all building construction
and reurbishment projects under way in 2005-06. This
included a wide range o building types: oices, courts,
laboratories, storage centres, vehicle testing centres, job
centres, detention centres and others. Public buildings such
as hospitals and schools, which all outside the immediate
control o departments and agencies, were excluded.
1.13 We analysed a sample o projects using
questionnaires completed by project sponsors, and case
studies to explore certain issues in greater detail. We
appointed engineering and management consultants
Arup to assist us in this work. We also interviewed sta
in 18 departments, and consulted a series o stakeholdersand experts. Our methodology is set out in Appendix 2.
Appendices 3 and 4 provide details o the departments
and agencies covered.
4 OGC-led initiaties to improe the perormanceand eicienc o the goernment estate
n Gesho Effey revew (2004): Departments arerequired to delier 2.5 per cent annual improements ineicienc rom 2005-061, creating pressure to seek costsaings in construction and reurbishment projects.
n Lyos revew (2004)2: The report noted the concentration opublic sector actiit in the South East and has set in traina programme or relocating departmental unctions to otherparts o the countr3, where reurbishment or new buildingsma be required.
n Popety Behmakg Pogamme: This deelopmentwill enable departments to measure the perormance obuildings through a range o ke perormance indicatorscoering both eicienc and eectieness (such ascost per square metre and workplace productiit) andenironmental indicators (such as annual water consumptionper person and energ consumption per square metre).Data in OGCs database o goernment buildings, ePIMS,
can be analsed and benchmarked against sectoral,national and international comparators.4
n Hgh Pefomg Popety (2006): OGCs High PerformingProperty Routemap to asset management excellencesetsout a comprehensie approach to integrate propert assetmanagement into central goernments strategic businessdelier. Building operation eicienc benchmarks aim todelier annual eicienc saings o 20 per cent b 2013and continuous improement against sustainabilit targets.
NOTES
1 Releasing resources to the front line Independent Review of PublicSector Efficiency, Sir Peter Gershon, December 2004, http://www.hm-treasur.go.uk/media/B2C/11/eicienc_reiew120704.pd.
2 The Lons Reiew, Well Placed to Deliver? Shaping the Patternof Government Service, Jul 2004, http://www.hm-treasur.go.uk/consultations_and_legislation/lons/consult_lons_index.cm.
3 A relocation portal has been deeloped to act as an aid in achieingrelocation commitments, http://www.ogc.go.uk/eicienc_recources_goernment_relocation_portal.asp.
4 Property Benchmarking, http://www.ogc.go.uk/documents/OGC_Propert_Benchmarking_Pilot_Report_PDF.pd.
Source: National Audit Office
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PART TWO
11BUILDING FOR THE FUTURE: SUSTAINABLE CONSTRUCTION AND REFURBISHMENT ON THE GOvERNMENT ESTATE
There is widespreadailure to meet targets orsustainable constructionand reurbishment
2.1 This Part o the report describes the extent to which
departments and agencies are meeting the targets to make
construction and reurbishment activity more sustainable
and to carry out assessments o the likely environmental
perormance o new and reurbished buildings. Our
indings are based on our cross-departmental survey
and our analysis o a sample o construction and major
reurbishment projects in 2005-06.
Departments and agencies arenot assessing the environmentalsustainability o projects despiteinstructions to do so
2.2 All departments are required to carry out BREEAM
assessments (Figure 5) or equivalent on new build and
major reurbishment projects. We contacted all central
government departments and 14 (including their executive
agencies) reported that they had embarked upon, or
completed, construction or major reurbishment projects
in 2005-06. Assessment o what constitutes a major
reurbishment is, to a degree, subjective but departments
or the most part used a combination o value and the
nature o the work to reach their judgements.21 10 o
these departments had used, or were planning to use,
BREEAM assessments on at least one project.22 However,our analysis o departmental data or all projects under
way in 2005-06 showed that the proportion o projects
undertaking BREEAM assessments was very low:
n 35 per cent (37 o 106) new build projects
have carried out, or plan to carry out, BREEAM
assessments or equivalent; and
n 18 per cent (61 o 335) major reurbishment projects
have carried out, or plan to carry out, BREEAM
assessments or equivalent.
Only two o the assessments used an alternativeto BREEAM.
2.3 The low rate o compliance partly relects the
act that some departments apply a minimum inancial
threshold or carrying out BREEAM assessments. For
example, HM Revenue and Customs only requires
BREEAM assessments to be completed on projects with
capital construction works in excess o 250,000. In
addition, under the Common Minimum Standards,
departments are permitted to exercise judgement about
each project, and they may decide in some cases that it is
not appropriate to conduct a BREEAM assessment.
5 The Building Research EstablishmentEnironmental Assessment Method (BREEAM)
BREEAM was deeloped b the Building Research Establishmentto assess the likel enironmental perormance o buildings,and can be used on construction or reurbishment projects.Independent, certiied assessors conduct assessments in seeralo the ollowing categories: management; pollution; water;ecolog; land use; materials; energ use; transport; and healthand well-being. The credits awarded in each area are weightedto produce a single oerall score, on which BRE awards acertiicate or a BREEAM rating o Pass, Good, ver Goodor Excellent. The assessment takes approximatel one week,although the assessors ma also proide consultanc adiceduring the design and speciication stages o a project toincrease the likelihood o achieing the desired BREEAM rating.
versions o BREEAM are aailable or oices, homes, schools,prisons, health centres and industrial units, and bespokeersions can also be deeloped. BREEAM can be used to assessdierent stages o a buildings lie ccle but it is used mostl atthe design phase. BREEAM is not a panacea, but it is a helpultool: b designing a construction or reurbishment project toachiee the desired BREEAM rating, project teams can reducethe likel enironmental impacts o the building.
Source: National Audit Office
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PART TWO
12 BUILDING FOR THE FUTURE: SUSTAINABLE CONSTRUCTION AND REFURBISHMENT ON THE GOvERNMENT ESTATE
Departments and agencies are ailing toachieve the required assessment ratings
2.4 Since 2002, all new build projects should achieve an
Excellent BREEAM rating, while reurbishments should
achieve Very Good. Our analysis o departmental dataindicates that where BREEAM assessments are planned or
have been carried out or projects under way in 2005-06:
n 38 per cent (14 o 37) new build projects met (or
expect to meet) the required Excellent BREEAM
rating; and
n 44 per cent (27 o 61) major reurbishment projects
met (or expect to meet) the required Very Good
BREEAM rating.
These results indicate that, even where BREEAM
assessments have been carried out, the majority oprojects are still ailing to meet the targets. Moreover,
perormance is worse i assessed against all 2005-06
projects including those where an assessment was not
undertaken. On this basis, only nine per cent o projects
(41 out o 441) met the required BREEAM standard.
These results conceal considerable variation between
departments and some are perorming extremely well.
Dera, or example, has ensured that all reurbishment and
new build projects have achieved BREEAM Excellent
or equivalent, and several o its buildings have achieved
sustainability awards.
2.5 There has been some improvement in compliance
since the requirement to carry out BREEAM assessments
was introduced: data compiled by Dera indicates that
in 2003-04 only three out o 147 new build projects
(two per cent) met the requirement to achieve BREEAM
Excellent and only six out o 200 reurbishments
(three per cent) met the requirement to achieve BREEAM
Very Good.23 However, the level o improvement is
small. This indicates a continuing widespread lack o
commitment on the part o departments and agencies to
undertake environmental assessments.
Eighty per cent o projects would ailto meet the required environmentalassessment standards
2.6 The limited use o BREEAM assessments by
departments and agencies makes it diicult to assess
the sustainability o new build and major reurbishment
projects. With assistance rom engineering and
management consultants, Arup, we thereore conducted
a sample survey o 45 projects on the basis o a
questionnaire completed by project sponsors. Our aim
was to score projects on a similar basis to BREEAM in
order to assess how they might have perormed againstthe BREEAM targets. Scores were correlated with BREEAM
assessments, where available, to provide a BREEAM-
indicative rating (Appendix 2).
2.7 Our results indicated that 80 per cent o projects in
our sample o 45 projects would ail to meet the required
environmental assessment standards:
n only five construction projects in our sample
achieved the target o a BREEAM-indicative rating o
Excellent; and
n only three refurbishment projects in our sampleachieved a BREEAM-indicative rating o at least
Very Good.
Further details on the ratings o the individual construction
and reurbishment projects in our sample are shown in
Figure 6 and Figure 7.
Source: National Audit Office/Arup survey of 2005-06 construction andrefurbishment projects
Sustainability ratings of a sample of45 construction and refurbishment projects
6
Fail
50
45
40
35
30
25
20
15
105
0Pass Good
Per cent of sample
Construction
Refurbishment
BREEAM-indicative rating
VeryGood
Excellent
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PART TWO
13BUILDING FOR THE FUTURE: SUSTAINABLE CONSTRUCTION AND REFURBISHMENT ON THE GOvERNMENT ESTATE
2.8 79 per cent o construction projects in our sample
achieved at least a Pass rating, short o the standard, but
indicating that sustainability has been considered in at
least some aspects o the project. Reurbishment projects
on average perorm less well than new build and nearly
hal o reurbishment projects did not even achieve a Passrating. The Building Research Establishment commented
that it is diicult or some reurbishments to achieve a
high BREEAM rating due to the way credits are allocated,
although it is still possible to achieve at least a Pass rating.
2.9 Perormance across the entire population o 2005-06
construction and reurbishment projects is likely to be
worse than these igures suggest. Our sample had a larger
proportion o projects which had undertaken BREEAM
assessments than the population o all 2005-06 projects, as
we received ewer survey responses rom projects which
had not undertaken BREEAM assessments. Departments
will generally only conduct BREEAM assessments when
the project speciication states that a particular BREEAM
rating must be achieved; environmental issues are thereore
included in the design to allow this speciication to be met.
The bias in our sample towards projects with BREEAM
assessments thereore indicates that signiicantly more than80 per cent o projects would ail to meet the required
sustainability standards.
2.10 Poor perormance can be explained partly by the
timescales o construction and reurbishment projects:
some projects completed in 2005-06 will have been
designed and speciied several years ago when standards
were less stringent. However, the requirement or
departments to carry out BREEAM assessments (along with
other environmental standards) was introduced in 2002,
so the vast majority o projects in our sample would have
been subject to these requirements.
Source: National Audit Office/Arup survey of 2005-06 construction and refurbishment projects
Project cost and sustainability rating7
100
90
80
70
60
50
40
30
20
10
0
0 5 10 15
Cost million
Key:
BREEAM-indicative rating
20 25 30 35
Threshold for Very Good: Target for Refurbishments
Threshold for Excellent: Target for New Builds
New Build Refurbishment
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14 BUILDING FOR THE FUTURE: SUSTAINABLE CONSTRUCTION AND REFURBISHMENT ON THE GOvERNMENT ESTATE
Perormance on smaller projects tendsto be worse
2.11 Our sample indicated that the value o the project is
closely linked to whether or not an assessment is carried
out. O the thirteen projects in our sample costing less than3 million, only one had undertaken (or planned to
undertake) a BREEAM assessment. We also ound that
no project in our sample costing less than 3 million
would achieve a BREEAM-indicative rating o Very Good
or Excellent, although some would achieve a Good
rating (Figure 7).
2.12 The higher the project cost, the more likely an
environmental assessment; all projects in our sample
costing over 5 million had undertaken (or planned
to undertake) a BREEAM assessment. This can be
explained partly by the higher proile o such projects,and the reputational risk to departments and agencies
i minimum standards are not met. Our interviews with
departments indicated that larger projects also tend to
have more experienced, ull-time client project teams
oten including individuals with experience in building
sustainably than project managers on small projects.
2.13 Conducting BREEAM assessments or construction
and reurbishment projects comes at a cost, especially
i specialist consultancy advice is sought in addition to
the assessment. Low-cost projects with tight budgets
are less able to absorb this additional cost, whereasthe additional cost may constitute only a small raction
o large project budgets. Members o our expert panel
suggested that a barrier to entry exists or projects costing
less than 1.5 million, largely because the consultancy
ees associated with designing a building to meet high
environmental standards and gain the appropriate
BREEAM rating can be prohibitive or low-value projects.
2.14 However, several projects with large capital
investment ailed to achieve a BREEAM-indicative rating
o Very Good; as Figure 7 shows, the relationship
between the cost o a project and its likely environmentalperormance is not straightorward.
The procurement route may aect thescope or considering sustainability
2.15 There is a widespread perception relected in
our interviews with departments that Private Finance
Initiative (PFI) projects should oer greater scope toachieve the required BREEAM rating. In PFI projects,
procuring authorities examine long-term investment needs
and are not constrained by the short-term aordability
issues characteristic o capital procurement projects. This
gives PFI projects greater scope to consider sustainable
options with a higher up-ront cost i value or money gains
can be achieved over the whole lie o the procurement. In
contrast, the scope or achieving BREEAM ratings in leased
buildings is more limited as the economic interests o the
landlord may militate against this.
2.16 Our sample was not large enough to drawdeinitive conclusions about the relationship between the
procurement route and the sustainability o the building;
some leased buildings and PFI projects perormed well
and some less well. However, the act that some projects
in leased buildings have achieved a BREEAM-indicative
rating o at least Very Good, does demonstrate that
perceived barriers to achieving high ratings in leased
buildings can be overcome.
defas efbshmet of lease offes at Whtehall Plaeaheve BrEEAM Exellet
Deras oices in Whitehall Place are in a Grade II listedbuilding, owned b the Crown Estate. Dera had a long leaseon the oices, but the were in need o reurbishment. Largelas a result o its polic responsibilit to promote sustainabilit,Dera wanted the reurbishment to be rated BREEAM Excellentrather than the ver Good standard required at the time.The Crown Estate selected Kier, in consultation with Dera,to redeelop and operate the building under a sale andleaseback arrangement. But there were conlicts o interestbetween Dera and its landlord. For example, Dera would
hae preerred a naturall entilated building, but the landlordinsisted that the building should be air-conditioned. The conlictso interest were managed through discussion, compromise,and the implementation o a sustainabilit charter which wasdrawn up prior to the reurbishment project. The oices wereredeeloped a cost o 2.1 million, but Dera now leases thepropert at 75 per cent o the commercial rent.
cASE ExAMPLE 1
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15BUILDING FOR THE FUTURE: SUSTAINABLE CONSTRUCTION AND REFURBISHMENT ON THE GOvERNMENT ESTATE
Some aspects o sustainability are morewidely achieved than others
2.17 Our sample indicated that sustainable eatures are
adopted more widely in some parts o the building design
than others (Figure 8). For example:
n Sustainable timber: Over 80 per cent o projects
used timber that ulilled the requirements in
the Common Minimum Standards or legal and
sustainable sourcing.
n Health and well-being: In over 80 per cent o our
sample, workspaces were within seven metres
o a window, allowing users suicient levels o
daylight. In 60 per cent o cases, external windows
could be opened to allow resh air in a good
level o perormance as this would not have been
appropriate or some types o buildings. Over85 per cent o projects have air intake systems which
avoid major sources o external pollution.
n Energy: 87 per cent o the projects in our sample
incorporated energy eicient lighting systems and
more than hal included intelligent lighting systems
(such as daylight sensors and movement sensors).
In 66 per cent o our sample, energy consumption
could be monitored throughout the day and night,
thus helping to identiy where consumption can
be reduced.
n Water: 80 per cent o projects have installed watermeters. To improve water eiciency, 45 per cent have
implemented at least one water-saving measure,
such as low lush or dual lush toilets, movement
sensors on taps and waterless urinals. However, only
36 per cent o projects have included water leak
detection and shut-o systems.
n Transport: 82 per cent o our sample provided
acilities to encourage sta to cycle to work.
Although less than hal had developed a green travel
plan, 82 per cent o projects were located in areas
where public transport was likely to be the mainmode o sta transport.
n Waste: Almost hal (46 per cent) o the projects
in our sample had undertaken some recycling o
metals or aggregates during the construction or
reurbishment process.
n Biodiversity: 42 per cent o projects in our sample
conducted a biodiversity impact assessment study.
All but two o the projects in our sample used existing
brownield sites, rather than greenield sites, which is
likely to have had a lower impact on wildlie.
For many o these eatures (notably energy, water, transport,
waste and biodiversity) the uptake was higher or projects
which had carried out a BREEAM assessment (Figure 8).
8 Extent to which sustainable eatures hae beenadopted in projects
Sstaablty sse Pojets ahevg Pojets ota BrEEAM atg ahevg a
BrEEAM atg
Maagemet
Building Elements
Site Monitoring
Health a Wellbeg
Eegy
Taspot
Ccling Proision
Green Trael Plan
Wate
Eicient Appliances
Leak Detection
Sustainable Urban Drainage
Mateals
OGC Quick Wins
Sustainable Timber
Bovesty
Waste
Soal isses
Source: National Audit Office/Arup survey of 2005-06 construction andrefurbishment projects
Key:
Few projects Man projects Most projects
NOTE
Sustainable Urban Drainage Sstems are designed to reduce thepotential o looding and can include, or example, permeable paing toreduce surace water run-o.
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PART TWO
16 BUILDING FOR THE FUTURE: SUSTAINABLE CONSTRUCTION AND REFURBISHMENT ON THE GOvERNMENT ESTATE
2.18 Some aspects o sustainability were considered in
ew buildings in our project sample. These included:
n Energy generation from renewable sources: Over
35 per cent o the projects in our sample carried out
easibility studies into on-site energy generation romrenewable sources (such as photovoltaic cells, solar
water heating, wind turbines and biomass) but only
10 per cent o the projects went on to implement
one or more o these technologies.
n Site monitoring: Less than 40 per cent o projects
monitored the environmental impacts o the
construction and reurbishment process itsel.
O those that did, energy use and water use were
monitored by 38 per cent o projects, and carbon
dioxide emissions were monitored by 22 per cent
o projects.n Social issues: Less than 40 per cent o projects
carried out consultation with the local community,
incorporated childcare acilities, or looked to source
employees rom the local community. By contrast,
disabled access where legal requirements exist
was addressed in 85 per cent o the buildings in
our sample.
Uptake o the Quick Wins is limited
2.19 The Quick Wins are speciications or products with
lower environmental impacts than standard options, such
as energy eicient lighting and rerigeration systems. Their
use across the government estate has been mandatorysince November 2003. In our 2005 review, Sustainable
Procurement in Central Government, we recommended
that Dera and OGCs executive agency, OGC Buying
Solutions, should do more to encourage the uptake o
Quick Wins by departments.24 Since then, OGC Buying
Solutions has set up a website to provide an easy route
to suppliers who can meet these speciications,25 but we
ound that the Quick Wins are not being used consistently
in construction and reurbishment projects.
2.20 We ound, however, that more than hal o the
projects in our sample used Quick Wins or indoor wallpaints26 and energy eicient white goods,27 but the
uptake o other Quick Wins appropriate or construction
and reurbishment projects such as textiles and air-
conditioning systems is lower (Figure 9). Though some
reurbishment projects would not require products rom all
o the Quick Wins categories, this does not ully explain
why the uptake o this key initiative is so low.
Source: National Audit Office/Arup survey of 2005-06 construction and refurbishment projects
NOTE
We did not ask our sample about their uptake of the other Quick Wins, which are less relevant to construction projects.Thermal screens are used to prevent energy loss through ventilation, infra-red radiation or convection.
Percentage of projects incorporating Quick Wins9
Indoor wall paints
White goods
Gas boilers
Other indoor paints/varnishes
Floor coverings
Energy control gear
Central heating systems
Air-conditioning systems
Textiles
Thermal screens
Combined heat and power
0 10 20 30 40 50 60 70
Percentage of projects
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17BUILDING FOR THE FUTURE: SUSTAINABLE CONSTRUCTION AND REFURBISHMENT ON THE GOvERNMENT ESTATE
2.21 Given the poor sustainability perormance o
smaller projects, implementation o the Quick Wins
should provide a simple approach to improving their
sustainability. Yet more needs to be done to ensure that
this message reaches the project teams responsible or
speciying the constituent elements o projects.
There are a variety o reasons whydepartments are underperorming
2.22 Our results, set out above, demonstrate a serious
and widespread ailure on the part o departments and
agencies to achieve key targets set out in the Common
Minimum Standards including BREEAM assessment
ratings, the Quick Wins; and the cross-departmental
targets or sustainable operations (including energy and
water consumption). We have identiied reasons or thisunderperormance at both the project level and the
cross-government level, as ollows.
2.23 Departments perceptions of the utility of BREEAM
affects the extent to which assessments are undertaken.
In our interviews with departmental project sponsors and
acilities managers, individuals in nine departments (hal
o the departments interviewed) cited perceived diiculties
in undertaking BREEAM, including:
n it is expensive: even though the BREEAM assessment
process is not in itsel expensive (except as a
proportion o the costs o very small projects),28 the
cost premium associated with designing a building
to achieve a BREEAM rating can be prohibitive;
n it is more diicult to achieve a high score or
reurbishments: some reurbishments are not
suiciently comprehensive to achieve BREEAM
credits across all categories in order to achieve a
high score;
n it does not represent best practice: designers can
play to the system to obtain a BREEAM rating at
minimum cost, regardless o the level o actual
environmental beneits;
n it does not weight sustainability solutions to the
relative needs o speciic sites or the environmental
issues o dierent regions; and the score is
inluenced by location, which may be beyond the
inluence o the design team; and
n it is hard or the project to receive an Excellent
BREEAM rating i it is not in an urban setting,
primarily because o the environmental impacts
associated with travel to and rom the site. However,
the location o a project is oten beyond the control
o the project manager.
Our audit analysis and discussions with construction
consultancies echoed these views. In particular, BREEAMs
credits-based approach to environmental assessment
allows departments to select which aspects o sustainability
they will ocus on to obtain an Excellent or Very Good
rating: project teams thereore tend to ocus on achieving
the credits with the lowest overall cost. But ocusing on
the cheapest credits means that the sustainability o the
inished building may be compromised.
The effet of a al loato o BrEEAM atg
Projects can be awarded man transport credits on the basiso proximit to a major transport node. A building located ina central urban location close to a large train station wouldthereore receie a higher score than an identical building in arural location. I a project is not in an urban setting, it is harderor the project to receie an Excellent rating without making upthe lost transport credits elsewhere which can require signiicantinestment. Man departments stated that this was unreasonable.
The Building Research Establishment commented that a ailureto achiee transport credits would not preent a well designedproject rom gaining an Excellent BREEAM rating, as creditsthat are diicult to attain in an urban setting can be moreeasil addressed in a rural setting. But, in practice, somedepartments and agencies hae had diiculties. For example,the Air Accident Inestigation Branch (part o the Departmentor Transport) speciied that new acilities to be constructedat Farnborough airield should receie a BREEAM rating oExcellent. But its rural location, with limited access to publictransport and an estimated dail commute or sta o 30 milesin total, meant that there are ew alternaties to priate car use,and ew BREEAM transport credits could be achieed. Thoughshower and changing acilities were proided to encourageccling, the project could onl aspire to a ver Good rating asa result o its location.
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18 BUILDING FOR THE FUTURE: SUSTAINABLE CONSTRUCTION AND REFURBISHMENT ON THE GOvERNMENT ESTATE
2.24 Current guidance allows departments considerable
flexibility on whether to conduct BREEAM assessments.
Such assessments are required only where appropriate,
and there is considerable scope or interpreting this in
dierent ways. Some departments, or example, apply
minimum inancial thresholds while others may basedecisions on the nature o the work being carried out. As a
result, compliance with the guidance may appear low, and
there is a risk that departments may ail to consider the
scope or achieving environmental beneits particularly
in the case o smaller projects.
2.25 Departments have few alternatives to BREEAM.
Though departments can choose an equivalent
assessment, in practice there are ew alternatives to
BREEAM. Those which exist are based on BREEAM
but have been tailored or use in speciic sectors.
They include the Schools Environmental AssessmentMethodology (SEAM), which was developed by the
Department or Education and Skills and has now been
superseded by BREEAM Schools,29 and the Deence
Related Environmental Assessment Method (DREAM),
which was developed by Deence Estates (Figure 10).
Unlike BREEAM, these alternative methods rely on sel-
assessment and do not involve independent certiication.
2.26 There is little enforcement of the policies and
standards to which departments and agencies are
subject, and underperformance goes unchecked. This is
largely due to the ragmentation o policy responsibility
or sustainable construction and reurbishment. Though
DTI holds the overall policy responsibility or sustainableconstruction, its ocus is working with the construction
industry and it has no speciic responsibility or
perormance on the government estate. Similarly, Dera
while responsible or monitoring sustainable operations
on the government estate has no speciic remit in respect
o monitoring the sustainability o new construction
projects. Moreover, though responsibility or procurement
policy lies with OGC and responsibility or sustainable
development lies with Dera, it is less clear where the
responsibility lies speciically or sustainable construction
due to the variety o departments with a policy interest in
the built environment (Figure 3).
2.27 There is insufficient leadership on sustainable
construction and refurbishment. More than hal o the
departmental project sponsors and acilities managers we
interviewed indicated that this was the case. The individuals
look mainly to Dera and OGC to provide leadership, but
criticised both or not doing enough. Both OGC and Dera
have issued guidance on dierent aspects o sustainable
construction, but have limited powers to ensure that this is
adopted. They may thereore need to go urther to support
project sponsors and communicate best practice.
2.28 There is no central point of expertise on
sustainability in construction and reurbishment,
and guidance on sustainability issues was described
by departmental representatives as piecemeal.
Consequently, departments do not share a common
understanding o what constitutes a sustainable building.
This particularly aected smaller projects, where project
sponsors oten have little or no experience and expertise
in sustainable construction.
2.29 There is a widespread perception that sustainable
buildings cost more. In our review o sustainableprocurement in central government,30 we identiied that
many departments were struggling to reconcile the drive
or sustainability and the need to deliver eiciency savings
in the orm o reduced costs. We thereore examine the
way in which departments attempt to reconcile the twin
objectives o sustainability and value or money in the
procurement o their built environments in Part 3.
10 Deence Related Enironmental AssessmentMethod (DREAM)
Deence Estates (an agenc o the Ministr o Deence)introduced DREAM in March 2006 to measure theenironmental perormance o new build and reurbishmentprojects. The assessment coers our ke project stages(pre-design, design, construction and operation) and includesissues or which cross-goernment targets hae been set (suchas energ, water, waste, trael and procurement). DeenceEstates beliee that or Deence construction projects theassessment is in line with OGCs Common Minimum Standards.The web-based approach, carried out b Deence Estatesnominated assessors, is tailored to Deence construction projectsand designed to raise awareness o enironmental issues inDeence Estates project teams.
Source: National Audit Office
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PART THREE
19BUILDING FOR THE FUTURE: SUSTAINABLE CONSTRUCTION AND REFURBISHMENT ON THE GOvERNMENT ESTATE
3.1 In this part o the report, we examine the
approach adopted by departments to project appraisal
and the extent to which they have assessed long-termoperational savings which may result rom the adoption o
environmentally sound building options. We also highlight
the wider social and economic costs and beneits which
may be involved.
Key individuals in departments perceivethat sustainability conlicts with valueor money
3.2 Our interviews with departmental representatives
involved in estate management and building procurement
revealed a widespread perception that sustainable
buildings cost more and thereore could not be justiied
on value or money grounds. Common themes included:
n the relatively high capital costs o sustainable options;
n the long payback periods involved; and
n the diiculty o spending to save, given budgetary
pressures and the separation o capital and
operational budgets.
3.3 While there was some acknowledgement that
sustainable options could be justiied on the basis o asound business case, it was clear that oicials considered
the scope or doing so to be limited. It was also apparent
that PFI unding arrangements could oer greater scope
to incorporate sustainable options within projects, as the
contractor provided the initial capital in return or a share
in the resulting savings.
3.4 These indings rom our interviews were supported
by the results o our case study analysis reported below,
and were relected in the views expressed by our
expert panel.
Departments are not carrying outappraisals o the balance between
sustainability and value or money3.5 In order to investigate how departments were
assessing the value or money considerations o building
sustainably, we examined ive projects rom our sample
in greater depth. We ocused on the way in which
sustainability options were appraised at the business
case stage. Treasury guidance indicates that in assessing
value or money departments should take account o
whole lie costs. This would involve estimating both costs
and beneits over long time periods and using standard
economic approaches to appraisal, including techniques
such as calculating net present values, to assess thecost-eectiveness o options in present day terms.
3.6 Our key indings rom this work were as ollows:
n None o the ive projects examined considered
value or money implications o sustainable building
options when developing the business case or the
project. Initial business cases generally included
20-25 year cost projections, but these were aimed
at achieving approval to spend the capital sums
involved. There was relatively little consideration
o the trade-os between capital costs and running
costs or the building, or o the impact on these o
incorporating sustainable eatures to a greater degree.
n However, once projects were under way, in most
cases both contractors and clients put orward
proposals or sustainable options in relation
to individual aspects o the project. Innovative
approaches were encouraged where client and
contractor had a partnering approach to the work.
Departments struggle toreconcile sustainability andvalue or money
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PART THREE
20 BUILDING FOR THE FUTURE: SUSTAINABLE CONSTRUCTION AND REFURBISHMENT ON THE GOvERNMENT ESTATE
n The extent to which value or money assessments
were undertaken varied. We did not see any
explicit appraisals o sustainable options on a
whole lie costing basis using net present values.
In the one case where long term costs and beneits
were assessed, the approach was based on yearspay-back rather than net present value. There was
also little consistency in the assumptions used across
departments or uture energy prices.
3.7 Our 2005 report on construction31 described the
value o whole lie costing and recommended that it
should be used more widely. Given its importance in
terms o promoting a deeper understanding o value or
money, we ound the results o our case study analysis
disappointing as they suggest that there is a continuing
ailure on the part o departments to implement Treasury
guidance32 in this respect.
3.8 In the absence o systematic appraisals o costs and
beneits, our case examples indicated that the enthusiasm
o the project sponsor and the expertise o the contractor
were essential in successully delivering a sustainable
building. This was particularly true o lagship sustainable
construction projects where the need to adopt such an
approach rom the outset was paramount. In such cases,
the decision to adopt sustainable building options was not
usually justiied on a value or money basis.
Departments need clearer guidance onwhole lie costing
3.9 Our case study indings raised a number o issues
relating to whole lie costing. These included the need to
ensure a standardised approach, in particular with regard
to the key assumptions to be used (such as assumptions
about energy prices), the basis or assessment (net present
value or payback period), and the timescale over which
costs and beneits are evaluated. In particular, the long
payback periods involved in some sustainable building
options may not be adequately relected in appraisalsbased on 25 year discounted cash lows. This may make
it diicult to justiy the expense o renewable energy
options, or example, or other capital-intensive sustainable
options such as re-utilising waste water (grey water) or
rain water harvesting.
3.10 The absence o a standardised approach to whole
lie costing aects both the public and private sectors.
Dierent organisations have their own approaches, and
data is not disclosed or reasons o competitiveness. This
also means that there is no robust learning process to
inorm appraisals more accurately in terms o the beneitswhich might be delivered.
3.11 The public sector is in a strong position to lead the
way in the development o whole lie costing. The Public
Sector Construction Clients Forum has set up a working
group speciically to address this issue, responding in
part to our recommendations to OGC on whole lie
value.33 A central ocus o the Forums work is the clarity
o Treasury guidance on whole lie costing and the extent
to which this might be communicated more eectively
to departments; the Forum is now developing a guidance
note on whole lie costing. Members o the workinggroup are also participating in the development o an
international standard on whole lie costing, which OGC
considers likely to be agreed in 2007.
3.12 Even where whole lie costing approaches are used,
there remain wider concerns about the extent to which
economic appraisals in particular, the use o discounting
understate the impact o long-term costs and beneits
and militate against incorporating environmental options.
In recognition o this, Treasury guidance allows or a
stepped reduction in the discount rate or those impacts
which are more distant in time.34 It also points out thatdepartments should take account o impacts which are
diicult to quantiy in inancial terms. The Treasury is
thereore producing a simple guidance note or non-expert
economists on the meaning o value or money on a
whole lie costing basis; this will oer an opportunity
to assess whether the current approach to appraisal is
adequate in view o the scale o environmental challenges
we ace.
costto of hose blok at nottgham Pso,natoal Offee Maagemet Seve
Whole lie costing o the combined heat and power sstemconcluded that it would not proide alue or mone: it would beoperated or onl 12 hours a da and would require 17 hoursto make it worthwhile. Howeer, the recent large rises in theprice o electricit hae improed the commercial iabilit osuch schemes, and the outcome o the appraisal might thereorehae been dierent had orecasts incorporated these higherprices. This highlights the need to appriase criticall the keassumptions inoled and carr out sensitiit analsis on them.
cASE ExAMPLE 3
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21BUILDING FOR THE FUTURE: SUSTAINABLE CONSTRUCTION AND REFURBISHMENT ON THE GOvERNMENT ESTATE
Sustainable buildings may have greatercapital costs but can have lowerrunning costs
3.13 Research suggests that the capital costs o building
sustainably may be greater, but not signiicantly
so. Analysis conducted by the Building Research
Establishment and Cyril Sweett in 200535 aimed to
challenge the assumption that more sustainable design
and construction incurs substantial additional costs. By
identiying the costs associated with achieving dierent
BREEAM ratings or a variety o building types, they
showed that signiicant improvements can be achieved
or relatively little additional expense (Figure 11).
Some examples o the costs associated with measures
to gain BREEAM credits and improve the sustainability
o an air-conditioned oice building are shown inFigure 12 overleaf.
3.14 While the BRE/Cyril Sweett indings might seem to
reinorce the perception that building sustainably costs
more, it is important to bear in mind that the operational
costs o a building are typically many times the cost o
building it.36 Although the BRE/Cyril Sweett study did
not evaluate in detail the whole lie costs and beneits o
building to higher environmental standards, it highlighted
the act that sustainable building options would result in
signiicant reductions in the costs o water and energy.
3.15 Our case studies revealed several examples where
the additional capital costs o sustainable options can be
recouped during the lie o the building through savings
in the cost o energy and water. For example, in the case
o the reurbishment o Vehicle Testing Stations by the
Vehicle and Operator Services Agency (VOSA, an agencyo the Department or Transport), the use o natural
ventilation, natural lighting, and a wind turbine will result
in signiicant net savings in inancial terms together with
large reductions in carbon emissions.
refbshmet of MOT vehle testg statos by theVehle a Opeato Seves Agey
natal vetlatoPassie stack entilation (using chimnes) can be used ornatural entilation cooling rather than mechanical entilationsstems. vOSA estimated that, at the Leeds testing station, atraditional air-conditioning sstem or the ront oice wouldcost 5,000 to install and 450 per ear to run, whereas anatural entilation sstem would cost 6,000 with zero runningcosts. Natural entilation would thereore recoup the additionalcapital cost in about two ears, and also reduce carbonemissions b 2.5 tonnes per annum.
natal aylght
The test stations currentl use side windows and electric lighting,
but lighting leels are poor. Including sk-lights, which haea minimal capital cost, increases aerage dalight leelsconsiderabl and allows more eicient use o electric lighting.Together with the installation o low energ lighting sstems,vOSA estimated that oer 25 ears this approach saes 12,000in energ costs1 and reduces carbon emissions b 2.5 tonnes.
istallato of w tbes
The easibilit o installing wind turbines at some sites wasinestigated where the location was suitable. The analsis othis option at the testing station in Grantham showed that:
n A unit generating approximatel 13,000kWH o electricitper annum would reduce the orecast electricit bill or the
station b 1,040 per annum at current electricit prices,and a small surplus o electricit worth 430 per annumcould be sold back to the grid;
n At a capital cost o 24,200 and maintenance o250 per ear, the wind turbine would result in a simplepaback o 18 ears (though this would be reduced ielectricit prices increase); and
n A reduction o 5.6 tonnes o carbon dioxide would alsobe achieed.
So ar, vOSA plans to it wind turbines at two stations:Grantham and Newcastle.
cASE ExAMPLE 4
NOTE
1 Estimating that electricit costs will increase at the general rateo inlation.
11 Additional capital costs associated with achieingdierent BREEAM ratings
Type of blg Atoal aptal ost to aheveBrEEAM atgs of:
Good ver Good Excellent% % %
Naturall entilated oice 0.30.4 2.0 2.53.4
savg
Air-conditioned oice 00.2 0.15.7 3.37.0
PFI procured health centre 0 0.61.9
House 0.30.9 1.33.1 4.26.9
Source: Building Research Establishment/Cyril Sweett
NOTE
Costs associated with achieing BREEAM Good or the PFI procuredhealth centre were not ealuated.
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PART THREE
22 BUILDING FOR THE FUTURE: SUSTAINABLE CONSTRUCTION AND REFURBISHMENT ON THE GOvERNMENT ESTATE
12
Additionalcapitalcostsorimplementingsustainabilityeaturesinasmall-to-medium
sizedoiceatthedesignstag
e
Source:BuildingResearchEstablishment/CyrilSweett
Insulationtobepentane/CO
2
blo
wnormineralwool
0
Useamm
oniaasrerigerant
in
coolingplant
224,3
01
Installlow
NO
xboiler
7,0
00
Intakeandextractductsto
b
eseparatedtoprevent
recirculationoair
5,0
00
P
rovideanon-technical
buildingusersguide
2,8
00
Pro
videoccupant-controlled
blindstoallwindows
144,7
55
Lightingspeciiedtobe
between350and400lux
0
Lightingzonedor
1in4workstations
8,0
50
Install9
12litre/minshowers
0
Install6/4
litrelushtoilets
andae
ratedtaps
0
Installproximitydetection
shut-oto
toilets
9,0
09
Installmainsleak
detectionsystems
63
5
Installrainwaterrecycling
32,0
73
Allpermane
nttimber
tobecertiiedasbeing
responsibly
sourced
0
Setasidespace
orrecyclable
wastestorageandprovide
externalbins
0
Allp
lantandequipment
costsincludedortesting
andcommissioningin
line
withbestpractice
0
Providesecurecycle
acilitiesor75sta
22,5
00
Increaseluminaire
eiciency
0
Ins
tallsubmetersor
majorplantandall
loorplates
2,7
72
Include60%
heatrecovery
andeconomiser
20,7
90
Employull-t
ime
mem
berosta
during
construction
(65
weeks)to
mo
nitorsite
impac
ts,
including
waste,energyand
transport.
Price
includesadditional
skipso
rsortingand
recyclingwaste
55,6
00
Commitment
tocomplywith
Considerate
ConstructorsScheme
600
Commitmentto
un
dertakeseasonal
commissioning
7,2
00
Install100m2so
lar
thermalpanels
and100m2o
photovoltaicpanels
202,1
25
Providedaylight
sensorsinallareas
34,9
89
Increaseinsulationthicknessinroo
andloor.Increaseopaquecladding
rom
loortodeskheight
21,4
92
Temporarysite
timbertobe
certiiedasbeing
responsiblysourced
0
NOTE
Thesefguresarebasedonanair-conditionedofcewithacapitalcosto11,4
30,0
00andgrossoor
areao10,0
98m2.
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PART THREE
23BUILDING FOR THE FUTURE: SUSTAINABLE CONSTRUCTION AND REFURBISHMENT ON THE GOvERNMENT ESTATE
3.16 We have also highlighted in Part 2 o this report
the potential or making greater use o the Quick Wins.
These represent obvious areas, albeit on a smaller scale,
where project teams can use product substitution to
achieve environmental objectives at no extra cost. The
evidence provided to us by the Waste and ResourcesAction Programme (WRAP) also indicated that the use o
recycled materials could result in savings. For example,
WRAP identiied that Deence Estates 1 billion barracks
building programme or single living accommodation
modernisation could increase its recycled content rom
18 to 23 per cent with no increase in cost or risk; Deence
Estates is thereore using WRAPs web-based tool to work
towards this improvement.
3.17 However, our results also showed that the extra
capital costs o some sustainable building options can
sometimes prevent their adoption. For example, when thebudget or the construction o a house block at Nottingham
Prison was reduced rom 14.5 million to 12.4 million,
the speciication or some options (such as grey water
recycling and solar water heating) was removed with the
result that the project only achieved a BREEAM Pass as
opposed to the originally speciied Very Good rating.
3.18 Where sustainable options are not integral to the
design, it can be particularly easy to remove them again
i there is downward pressure on capital budgets. By
contrast, where sustainability is incorporated at a more
undamental level within the initial project design it canbe diicult to evaluate the extra costs involved. It is even
possible that savings in capital costs can be achieved, as
the case examples in Part 4 show.
3.19 In 2004, the Carbon Trust set up a company (Salix)
to provide ring-enced loans or investment in energy
eiciency measures, matched by local authority unding,
to be repaid rom the eiciency savings which would
result. The scheme thereore helps local authorities to
implement spend to save projects and overcome the
barriers arising rom limited capital budgets and the low
priority assigned to energy eiciency projects. In 2006,the government signiicantly increased Salixs unding and
extended its remit to include central government and the
wider public sector.37 However, inancial barriers and
accounting issues particularly in relation to borrowing
and the use o revenue savings to repay loans may limit
the extent to which departments can access the Salix und,
and the government is thereore setting up a high level
steering group to address barriers to investment.
Departments are not evaluating widerimpacts despite the potential orlarge savings
3.20 In addition to the obvious and direct costs and beneits
o a building, there are other costs and beneits which are
more oten than not excluded rom departments evaluations
notably environmental and social impacts. The beneits
o reducing a buildings greenhouse gas emissions, or
example, tend not to be included, even though the beneits
to society o doing so can be estimated easily using the
social cost o carbon.38 However, there is no standard
approach to quantiying other social and environmental
impacts such as the social beneit o sourcing goods and
services locally, which boosts the local economy whilst
reducing the carbon emissions associated with transport.
As these impacts cannot be quantiied easily, they are notincluded in evaluations o building more sustainably. OGC
consider that there is a urther barrier in that whilst these
wider impacts can be considered as part o construction
projects, under European Union rules only social and
environmental beneits to the contracting authority can be
taken into account in the procurement process. European
Union procurement law also prohibits discrimination against
suppliers rom other Member States, so procurers cannot
discriminate in avour o local suppliers.
3.21 Our case studies indicated that wider economic
impacts were also not always evaluated. Better buildingscan have signiicant impacts on sta working within them
and their productivity. Only one o our ive case examples
attempted to take this into account. The inancial beneits
resulting rom improved working environments can be
signiicant. The costs o sickness absence in the Civil Service,
or example, amounted to 450 million in 2005. Even a very
small reduction in this igure, as a result o a better working
environment, would yield considerable savings; while
substantial urther savings could result rom an improvement
in the productivity o sta while at work. These beneits are
not exclusive to sustainable buildings, but recognising and
quantiying them may make it easier to justiy sustainableoptions such as natural lighting and ventilation.
dve Vehle a Lesg Ageys appoah toqatfyg eases potvty
For the reurbishment o oices in Swansea, the drat BeneitsDelier Plan called or the reurbishment to achiee a one toie per cent improement in productiit. But this was omittedrom the inal document on the grounds that it would be diicult,i not impossible, to attribute an productiit gains to those
eatures o the reurbished building that the contractor would beresponsible or, primaril because o the large number o IT andbusiness changes made at the same time.
cASE ExAMPLE 5
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PART THREE
24 BUILDING FOR THE FUTURE: SUSTAINABLE CONSTRUCTION AND REFURBISHMENT ON THE GOvERNMENT ESTATE
Departments need to use speciicoutput-related targets to achieveenvironmental objectives
3.22 The current requirement to achieve an Excellent
BREEAM rating is based on the presumption that
sustainability should become a undamental aspect o
project design. In some speciic areas, the government
has also accepted that environmental objectives are o
overriding importance. In September 2000, or example,
the Prime Minister announced that all timber used in
construction contracts would be procured rom legal
and sustainable sources.39 This requirement transcends
any cost-beneit analysis and has become successully
embedded within project speciications, as described
in Part 2.
3.23 Our interviews with departments, and our analysis
o case studies, revealed a gap between existing policy
requirements and the targets to which departments are
subject. Though the Common Minimum Standards set out
that projects must take account o the departmental targets
or sustainability,40 many projects simply set an output
speciication or BREEAM Excellent or Very Good to be
achieved. This will not be enough to allow departments to
meet the stringent requirements in the revised targets or
Sustainable Operations on the Government Estate.41
3.24 These new targets appear particularly stretching
when viewed in the light o current perormance. For
example, the Sustainable Development Commission
reported in 2005-06 that more than hal o departments
had ailed to increase the energy eiciency o their
buildings, and are very ar rom meeting the target o a
15 per cent improvement in energy eiciency by 2010
and 30 per cent by 2020. Similarly, 11 departments ailed
to meet the 2004 target or water consumption, which
at 7.7 cubic metres per person per year is more than
double the level o the new target (Figure 13).
3.25 I departments are to make progress towards
achieving the targets or Sustainable Operations on the
Government Estate, they will need to ocus increasingly
on incorporating speciic output-oriented speciications
in new construction or major reurbishment projects,
rather than simply speciying a requirement or BREEAMExcellent. These should include speciications or
water consumption per person per year and or energy
consumption and carbon emissions per square metre.
Such an approach would also match the trend towards
more speciic assessments o building perormance,
such as the orthcoming requirement under the Energy
Perormance o Buildings Directive or all public buildings
to display energy eiciency ratings.
13 The need or new technologies to meet targets on
water consumption
Unlike energ use, the inancial incenties to drie downwater usage are weak. Howeer, the stringent operationalsustainabilit targets means that departments and agenciesmust signiicantl reduce their water consumption. Departmentsacilities managers and project sponsors eel that the requiredreductions in water use cannot be met using water-eicientapproaches (such as low-lush toilets) and education alone:there is a need to include additional water-saing technologiessuch as gre water reccling (or to retroit such technologiesto existing buildings) to meet the targets or SustainableOperations on the Goernment Estate. Een though measuressuch as this were mostl deemed not be inanciall iable atthe time o recent projects, and thereore not included, the arenow seen to be essential i the targets are to be met.
Source: National Audit Office
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PART FOUR
25BUILDING FOR THE FUTURE: SUSTAINABLE CONSTRUCTION AND REFURBISHMENT ON THE GOvERNMENT ESTATE
4.1 Perormance review is an essential part o eective
project management in construction; evaluations on
completion o a project should look at whether theoriginal assumptions have been borne out in reality,
identiy any lessons or the uture and check whether the
project has yielded the expected beneits.42 In this part o
the report, thereore, we examine the extent to which a
selection o case example buildings, which were designed
and built (or reurbished) to be sustainable, have delivered
the beneits expected o them.
Departments tend not to deineclearly the beneits expected o a
sustainable building4.2 In reviewing a series o case examples, we saw
that buildings designed to be sustainable have delivered
tangible economic and social beneits as well as reducing
environmental impact (Figure 14 overleaf). Our case
examples indicated, however, that departments tend not
to deine clearly at the design stage the beneits they
expect rom building sustainably. In particular, their
speciications lacked quantitative targets against key
perormance indicators (such as annual water consumption
per person), which are necessary or the assessment o
post-occupancy perormance against expectations. Instead,the speciications mostly set a requirement or a high
BREEAM rating to be achieved, rather than deining the
beneits which the building would go on to deliver over
the lie o the building. In the absence o these deined
expected beneits, we were unable to appraise whether the
intended beneits had been delivered.
The beneits o sustainable buildingsare generally not measuredor quantiied4.3 Post-occupancy evaluation o construction and
reurbishment projects is a well recognised and powerul