NAO Building for the Future

8/7/2019 NAO Building for the Future.

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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


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


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


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


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


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


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


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.



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PART TWO


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.



14/43

PART TWO


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


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


16/43

PART TWO


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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PART TWO


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.


18/43

PART TWO


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


19/43

PART TWO


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.

cASE ExAMPLE 2


20/43

PART TWO


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.



21/43

PART THREE


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


22/43

PART THREE


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


23/43

PART THREE


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.


24/43

PART THREE


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

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0

Setasidespace

orrecyclable

wastestorageandprovide

externalbins

0

Allp

lantandequipment

costsincludedortesting

andcommissioningin

line

withbestpractice

0

Providesecurecycle

acilitiesor75sta

22,5

00

Increaseluminaire

eiciency

0

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tallsubmetersor

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72

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20,7

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ime

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Install100m2so

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202,1

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34,9

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NOTE

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areao10,0

98m2.


25/43

PART THREE


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


26/43

PART THREE


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.



27/43

PART FOUR


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

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