Mr Major’s Written Parliamentary Answer on the Property Services Agency – 23 July 1987

Below is the text of Mr Major’s written Parliamentary Answer on Property Services Agency on 23rd July 1987.

Dr. Twinn Asked the Chancellor of the Exchequer whether any changes are proposed in the financial and accounting responsibilities of the Property Services Agency and client departments for new civil works projects.

Mr. Major Under existing arrangements client Departments are responsible for defining their accommodation needs precisely, economically and in good time. PSA is responsible for deciding how best to meet these requirements – whether by using existing property, or by leasing or new construction. Where new construction is the agreed solution the capital cost of such projects (and the cost of the design resources associated with them) is generally met from the client Department’s public expenditure programme. But, with a few exceptions, expenditure on civil projects still falls on the PSA’s vote (Class XX. 19). Most Departments are required to use PSA exclusively to provide accommodation services.

From 1 April 1988 Departments will be required to meet, directly from their votes, the cost of major civil building projects which are funded from their public expenditure programmes. This will bring the treatment of such expenditure in the public expenditure survey and in estimates into line. From the same date Departments will be able to test the market, and to use agents other than the PSA for design and project management of new construction where it appears cost effective and in the interests of good management to do so. These arrangements will apply to projects estimated to cost £150,000 or more. The property repayment services arrangements will continue to govern the provision of leased accommodation, minor works and maintenance.

These changes are part of a continuing process which is designed to clarify the respective responsibilities of client and agent to ensure completion of projects to time and within budget. The introduction of payment will improve the incentive for the client Department to ensure, for example, that late and potentially expensive changes to specification are avoided. The introduction of competition, by untying Departments from PSA, will provide an opportunity for Departments to test other sources of supply as well as an incentive for further improvement of the efficiency of services provided by PSA.

Under the new payment arrangements Departments will remain accountable for the requirement; PSA will remain accountable for the services which it provides. Departments will not be required to second-guess PSA’s professional judgments. But the change in vote responsibilities will enable client Departments to discharge their role more effectively.

Under untying, Departments will not necessarily be expected to test the market from the outset or to use agents other than the PSA. The process is expected to be evolutionary for three reasons.

First, it will take time for Departments to acquire the necessary resources and skills; for some Departments, especially small Departments, or those with few building projects, it may not be economical for them to do so.

Secondly, Departments will need to satisfy the Treasury of their capacity to use alternative agencies.

Thirdly, it will be necessary to take into account the effects of changes in workload on PSA. Departments will therefore be expected to agree an advance programme of work with PSA.

PSA intends to move to a system of commercial accounting as soon as possible. When it does, PSA will be able to provide advance quotations on a comparable basis to those of outside agencies. In the interim it will be necessary for Departments to base their comparisons on the best estimates PSA can provide.

These arrangements will be reviewed in two years’ time.

The Government will take account of this reply in their response to the Select Committee on the Environment, whose report earlier this year on PSA recommended charging on a repayment basis and untying of Departments for some of the functions carried out by PSA.