A co-location is broadly an example of a pooled funding arrangement.
Pooled funding is where a small group of agencies pool funds to share the cost of an initiative in order to achieve a common goal. A full description can be found in Treasury’s cross-agency funding framework.
Pooled funding arrangements are:
Co-locations are an example of a pooled funding model with one exception – one agency needs to act as lead agency to manage the relationship with external parties, eg landlords. The introduction of the lead agency concept affects the operation of a typical pooled funding model by having one agency take on the legal and commercial risk on behalf of all participating agencies. In light of this, Treasury and GPG have developed capital expenditure (CAPEX) and operational expenditure (OPEX) principles that support a pooled funding model specifically for co-locations.
Formal partnership agreements are entered into at the beginning of the project, usually before any party enters into a relationship with a landlord – unless an agency is using a co-location as a way to get rid of surplus space.
The formal partnership agreements lock all agencies into meeting their share of the legal and commercial obligations for the life of the project and the tenancy. Changes to an agency’s share of the legal and commercial obligation throughout the tenancy are possible, but have conditions.
Co-location projects have both capital funding (CAPEX) and ongoing operational expenditure (OPEX) components.
The co-location model aims to reduce the commercial risk placed on the lead agency by:
In order to establish the financial governance, process and billing mechanisms, the co-location operating model should operate on the basis of four financial principles.