Preparing Property Strategies

The preparation of a property strategy should be an essential and integral part of FE colleges’ strategic planning processes.  A completed property strategy should demonstrate that a college is able to provide accommodation appropriate to its strategic plans and business priorities. Those strategic plans and priorities should properly and comprehensively reflect those of the college’s key partners, funders and other stakeholders.

Such strategies have to be prepared in the context of a rapidly evolving skills and training landscape in which the Government is giving increasing priority to the need to respond to employers’ skills needs, This will require increased rigour and responsiveness in developing capital proposals reflecting a range of new requirements including, in particular, those of the LEPs with which FE colleges are now working increasingly closely. Property Strategies  now  also need to reflect future skills requirements and initiatives such as, for example, the creation of “National Colleges”, the impact of the recommendations of the Education Technology Action Group, innovations in  work-based learning delivery and the Government’s apprenticeship programmes.

Key Points

Key points for colleges to address in identifying and preparing property strategies include the following:

• A property strategy should demonstrate that a college is able to provide accommodation appropriate to its strategic plans and business priorities. The preparation and up-dating  of a property strategy should be a key part of all FE colleges’ strategic planning processes
• From 1 April 2015 capital funding from Government will be allocated by LEPs to which FE colleges will apply for Skills Capital Funds from the Local Growth Funds
• The LEPs are responsible for the decisions to award Skills Capital Funds from 2015-16 and for the criteria against which funding bids will be determined, issuing the funding agreement and for monitoring compliance with the terms and conditions of such funding
• Although the Skills Funding Agency (SFA) will assist most LEPs in the allocation and administration of Skills Capital Funds from 1 April 2015 it will no longer be the principal source of capital funds for the FE sector
• Applications for Skills Capital Funds to most LEPS are likely to require colleges to demonstrate that their capital project applications are driven by the strategic objectives of the college and are part of a clearly adopted property strategy for the institution
• Applications for Skills Capital Funds and the property strategies supporting them should demonstrate positive economic and educational impacts of proposed developments in line with the requirements of the LEPs, the funding bodies (principally SFA and EFA), employers and other key partners
• Colleges are advised to clarify exactly what documentation and information is required to accompany applications for Skills Capital Funds with their respective LEPs and the SFA including that relating to property strategies

The LEPs are successors in part to the former Regional Development Agencies (RDAs). Established as a partnership between businesses and local authorities their role is to determine local economic priorities and lead economic growth and job creation within their areas.

The LEPs have already replaced the RDAs as a key partner for FE colleges and from 2015-16 the LEPs also replace the SFA as the main source of Government capital grant support for new FE capital projects, although the SFA has confirmed it will continue to support most  LEPs in the allocation and administration of Skills Capital Funds.

In preparing applications for project-related capital funds, and as an integral part of their business plans, colleges will be required to continue to demonstrate to their funding and other key partners that they have a coherent strategy for the development and management of their estates, which is aligned with, and supports, the delivery of sub-regional economic growth and skills strategies.

Regional economies in England are competing for a slice of an estimated potential £2 billion pounds per year (between 2015 and 2021) of Government funds for economic development, through their LEPs. Each LEP has produced a Strategic Economic Plan (SEP) for competitive assessment by the Government in 2014 as part of the negotiations on the Local Growth Deal. In addition, many LEPs have developed a Skills Strategy, which maps out the current skills landscape and identifies skills gaps, with a particular focus on economic priorities and growth projections.

Both the SEP and where relevant the Skills Strategy and other key planning documents prepared by individual LEPs, updated as required, will be vital documents for colleges to reference in determining their own strategies, aligning their offer with LEP priorities and, in particular, for developing a property strategy.  These documents should properly reflect relevant LEP priorities such as, for example, addressing the needs of employers, enhancing learning and skills pathways and routes for progression for learners and employers, delivering their apprenticeship and other training programmes and creating realistic work-based environments for the delivery of training.

Since FE colleges were incorporated in 1993 and the ownership of their property assets was vested in them, they have been responsible for managing and developing their estates and financing that activity through a mixture of Government grants, cash surpluses generated through activities, proceeds from asset sales and long-term loans, usually from banks.  Subject to any changes that may follow the General Election in May 2015, this mixed economy model is set to continue into 2015-16 and beyond with one major change.

The Government has given the  Local Enterprise Partnerships (LEPs) responsibility for the investment of  Skills Capital funding that will provide significant investment in innovation, business, skills and employment as part of a common agenda for training, education, economic growth and jobs that will integrate effectively with the LEPs wider strategic plans.  Through their Strategic Economic Plans (SEPs) submitted to Government, the LEPs have identified their investment priorities and these were reflected in the first round of Local Growth Fund allocations for 2015-16 announced in July 2014.

Instead of applying to the SFA, FE colleges seeking capital grant support for their projects from 2015-16 will apply to their local LEPs. Under the new arrangements, LEPs are able to bid to the Local Growth Fund (LGF) for access to Skills Capital Funding through their Strategic Economic Plan (SEP). The LEPs, based upon their assessment of local economic and skills priorities, will determine how they wish to use any capital funding secured through their Growth Deal.

The Government’s rationale for making £330m of Skills Capital in 2015-16 available through the LGF is intended to demonstrate a commitment to supporting local decision-making. The LEPs will be provided with a significant amount of capital funding they can access from 2015-16 with which to influence and drive change in the areas they serve. FE colleges are expected to work in close partnership with and influence their LEPs, as one of their primary stakeholders and funders, to ensure that their skills strategies and priorities and plans for capital investment feature prominently within the relevant SEP and that their applications for capital project funding to the LEPs and the property strategies underpinning those bids reflect and support LEPs’ priorities and strategies.

The SFA, in conjunction with the local teams in the Department of Business, Innovation and Skills (BIS Local), is working closely with LEPs to support them in the development of the skills aspects of their SEPs. The SFA will also provide support through its local teams and national capital team to  most LEPs in the allocation of Skills Capital. The level of service the SFA will provide will be agreed individually for each LEP with which the SFA will have a separate “Memorandum of Understanding” tailored to meet the needs of each individual LEP.  SFA support and advice in the allocation of skills capital will typically be in one or more of the following elements:

i)   financial investment, affordability and maximisation of grant leverage – financial investment appraisal and assessment of FE College financial plans etc to ensure projects deliver financial value for money and maximise leverage of other funds whilst minimising the impact on the long term financial health of providers.

ii)   property/estates – for example, assessment of building condition improvements, value for money against FE cost benchmarks, project delivery risks, floor space assessment and rationalisation, sustainability of projects etc.

iii)   education/economic growth business case – assessment of the robustness of the supporting business case in terms of the LEP’s identified priorities.

The LEPs are now responsible for the decisions to award Skills Capital funding.  As such they will also be responsible for the criteria against which funding bids are determined, issuing the funding agreement and for monitoring compliance with the terms and conditions of funding.

Capital Application Process

The first Regional Growth Fund allocations for 2015-16 were announced in June 2014 following the first part of a 2 stage process undertaken with the assistance of the SFA. These were contained within 39 Growth Deals which set out the agreement reached between the Cities and Local Growth Unit and Local Enterprise Partnership for the allocation of some £2 billion of funds of which £330 million for 2015-16 is provided for capital funding for FE colleges and other providers of skills training. Details of these allocations can be found on the AoC’s website.¹

The arrangements for this first round of allocations are similar to those used by the SFA for its two-stage College Capital Investment Fund (CCIF) with an Expression of Interest (EoI) and detailed application stages.

It appears likely that future rounds and the preparation of detailed proposals for those are likely to reflect similar arrangements and criteria in relation to the property and estates elements and financial investment, affordability and maximisation of grant leverage to which the SFA’s well established standards and procedures will apply. At the time of writing (end November 2014) some LEPs were informing colleges in their areas of the process for applying for Skills Capital Funds for projects starting in the 2016-17 financial year.

The approach to the development of the education/economic growth business cases supporting project proposals will differ according to the requirements of individual LEPs but it is anticipated that capital funding applications will be determined using criteria-based project scoring processes similar to those used by the SFA for the CCIF’s seven rounds. It must be emphasised, however, that each LEP will organise its own application rounds and determine the criteria it will use to determine applications, albeit in most cases with help from the SFA. Such scoring criteria will reflect the quantitative outputs and impacts which LEPs and other partners will use to determine the success of programmes and projects. These might include, for example:

• Job outputs
• Jobs Created (operational and apprenticeships) and Jobs Safeguarded
• Enhancing support to business and, in particular small and medium sized enterprises (SMEs)
• Enhancing services to major (strategic) employers and supply-chains
• Supporting micros businesses and start-ups
• Economic Impact using measures such as gross value added (GVA) impact
• Gross value added impact and other economic factors such as additionality, displacement, substitution etc
• Strategic Fit (supporting other existing or planned regeneration/economic growth activity)
• Growth in the Apprenticeship programmes
• Engagement with NEET

Other factors to be considered may include, for example, State aid and de minimus issues and other potential project proposals. All of the above are in addition to the usual quantitative property criteria (for example functionality, floor space efficiency, capital and running cost criteria etc) and educational criteria (for example, learner numbers, increase in attainment, recruitment and retention, impact on quality etc) and other information and indicators that FE colleges and their professional advisers have traditionally provided.

It is very important that colleges establish close working relationships with all their key partners and funders in particular, their LEP; fully understand their LEPs’ specific priorities and strategies; and that their project proposals and property strategies in turn support the aims, priorities and targets set out in individual LEP’s SEPs.

It has been a long standing requirement of the SFA (and its predecessors) that a college’s capital project applications should be driven by the strategic objectives of the college and be part of a clearly adopted property strategy for the institution. This requirement continues with applications to the Local Growth Funds and colleges must be able to demonstrate that their project proposals are in line with the strategic aims of their property strategies.

The preparation of a property strategy is an essential part of a college’s strategic planning process. The completed strategy should demonstrate that the college is able to provide accommodation appropriate to its strategic plan and provide a proper context for new project proposals.

No specific guidance on the preparation of property strategies for FE colleges has been published by the funding bodies in recent years and, although requested as part of the application process, such documents were not specifically assessed and scored by the SFA as part of the recent CCIF arrangements, nor are there believed to be any plans to do so currently. In some cases they were provided in summary form sufficient to confirm the strategic context in which the project proposal was being put forward and a strategic summary indicating the aims of a college’s property strategy. This may well be sufficient to accompany most applications for Skills Capital Funding to the LEPS but colleges are advised to clarify exactly what documentation is required with their respective LEPs and, where appropriate, the SFA.

Nevertheless, it must be emphasized that colleges will need to demonstrate in any capital applications (ultimately to the satisfaction of their LEPs) the context of their project proposals to both their own strategies and targets and those of their key partners such as LEPs.

Some previous LSC FE guidance documents are still available. “Guidance on College Property Strategies”² published as Supplement A to LSC Circular 0202” can be found in the University of London’s Digital Education Resource Archive (DERA). Colleges may also want to consult the former LSC publication from 2007 “Guidance for Further Education Colleges on the Management of Floor Space”³  which at the time of writing this briefing paper was not available online. Copies can still be obtained from the SFA Capital team.

There are limitations to this historic guidance as it assumes standards and norms based on ‘classroom’ space or more typical laboratory, workshop or studio (for example automotive, engineering and design, hair and beauty) floor space which have not been updated to reflect the delivery of training by many colleges and other providers in specially designed “real-life” working environments; for example advanced engineering.

Subject to that important caveat and recognising that their preparation dates back to different funding, policy and regulatory environments, much of the guidance these documents contain is still relevant to current college practice and they are still cited by the SFA and consultants working in this area. Together they provide useful guides to the broad approach and categories of information and analysis that should be used to compile property strategies and most of which remain relevant to colleges’ continuing operations.

It is likely, however, that the use of new and innovative technology in learning is likely to gather pace in the years to come.  Colleges need to understand that this trend coupled with a move to less space intensive delivery for apprenticeships, traineeships and study programmes may mean that estates strategies will need to reflect technological and pedagogic innovations and, as a result, traditional floor space utilisation techniques may not adequately reflect colleges’ floor space and specific building needs in some curriculum areas.

Building Condition

Although the first round of LGF allocations has included projects which target urgent improvements in the quality of buildings and learning environments some colleges may have building condition issues which they believe may not be sufficiently aligned with LEP Skills Capital priorities or time scales. Colleges in this position should ensure that they:

• have identified the potential solution and costs, in the event of some LEP or non-LEP capital funding being made available at short notice, for example, towards the end of the financial year;
• investigate other potential sources of funding (for example European Regional Development Funds);
• look to use college funds, over time, as part of a planned investment programme to resolve such issues; and
• consider alternative ways of resolving such problems, such as mothballing poor quality space or finding alternative uses for it, collaborating with other providers and identifying the opportunities that the One Public Estate Initiative (see below) might provide.

A valid strategic concern for some colleges may be the need to identify funding to address a building of otherwise good quality but which may be unsuitable for current educational needs. For example a college may control a good quality modern building (such as  an office building or an industrial unit), which although in good condition may need funds to adapt it to provide a modern realistic working environment.

The One Public Estate Initiative

In preparing Property Strategies colleges and their advisers should be aware of the “One Public Estate Initiative” when considering their future property needs both in terms of new developments and possible alternative use for redundant assets both in their ownership and elsewhere in publically funded estates.

As part of a trial the then Government Procurement Unit (now part of the Crown Commercial Service) and the Local Government Association, a further 20 local authorities have been added to the first phase of 12 local authority pilot areas of the One Public Estate Initiative.  The intention is for the surplus assets of central government and the wider public sector (and those bodies receiving public funding including universities and colleges) to be brought together into a programme to deliver value and economic growth. City Deals and LEPs are involved in this initiative which is likely to be rolled out across the country. Colleges’ participating in this initiative should fully reflect their involvement in their property strategies.

Structure & Prospects Appraisals

FE college corporations are required to undertake Structure and Prospects Appraisals (SPAs) whenever they were contemplating a change to their college’s structure or delivery model. BIS guidance⁴⁺⁵ sets out five triggers which would necessitate a college reviewing its mission and the best model for delivering that mission:

• Change of circumstances
• Need to increase choice
• Opportunity to think afresh
• Poor/coasting performance
• Poor financial health.

Proposals to make major changes to the location of a college’s premises may be sufficient reason in their own right to trigger the requirement for an SPA. Similarly, major changes to curriculum content and delivery perhaps proposed in collaboration with key partners such as LEPs, may necessitate the consequential rationalisation and reconfiguring of a college’s estate. In deciding whether an SPA is needed “the significant factor will be the quantum of change”.  Colleges must ensure that their property strategies fully reflect the outcomes of any SPAs in which their colleges are involved and should realise that major changes in the location and nature of the estate proposed in their property strategies may contribute to the requirement for an SPA to be undertaken.

1   AoC Note – Growth Deals and College capital projects – 7 July 2014

2   Supplement A to Circular 02/20 Guidance on College Property Strategies – October 2002

3   Guidance for Further Education Colleges on the Management of Floorspace – May 2007

4   BIS New Challenges, New Chances: Next Steps in Implementing the Further Education Reform Programme

5  BIS Further education funding: structure and prospects appraisals guidance –