Ongoing operating expenditure (OPEX) relates to the expenditure and cost recovery for building management costs that sit with the lead agency.
There are three basic categories of costs or ongoing operational expenditure:
Fixed operational costs include services and items that have a predictable and consistent value, including:
Variable operational costs include services and items that vary depending on the occupants usage levels, including:
Additional costs per agency include services or items that are generally of a fixed nature, but excluded from the overall area allocation. This includes dedicated car parks for fleet cars or individually provided parks.
Exclusions typically include any services or items that it’s agreed will not be provided by the lead agency, but that might normally be expected to be provided in a co-location - like insurance for agency-owned equipment and fittings.
When participating agencies commit to the full term of the agreement, the lead agency is protected from any cost impact of participating agencies leaving or reducing their space requirements during the tenancy period.
If a participating agency leaves, or reduces their space during the tenancy period, they can avoid continued costs by:
Where there is a 'make good' requirement at the end of a tenancy, the lead agency will limit its exposure to the exiting agency’s portion of costs by implementing a 'make good' provision, or a non-cash accounting estimate. GPG can help source new occupants, and work alongside both the exiting agency and the incoming agency. The lead agency is not involved.
Operating costs will be recovered from co-occupants on the basis of their agreed co-location area allocation - which is based on FTE and desk numbers, plus their part of any shared spaces, for example. When area allocation changes, these costs will also proportionally change.
Services to other agencies that involve facilities management and cost recovery through leasing do not fit within the scope of existing departmental expenditure appropriations.
Establishing a shared services (or similar) appropriation ensures authority for providing these services. Similar appropriations exist in Treasury (Central Agency Shared Services) and IRD (Services to Other Agencies).
The lead agency must work with participating agencies to understand the overall benefits from the co-location project. Any model that is used should equitably allocate benefits among parties.
For example, one agency may face an OPEX increase, but as they’re participating in a co-location the project as a whole makes a saving. Part of the savings should be passed back to that agency.
The CIGA co-location model has been applied across all buildings accommodating multiple agencies. It’s based on a lead agency 100% ownership model which covers both the build (development agreement) and ongoing (lease) commitments. Under this model, the participating agencies have committed to the full term of the lease agreement, and the lead agencies have taken full ownership and responsibilities for capital and operating expenditure.
Based on the lead agency’s circumstances, some CIGA co-locations have had all participating agencies contribute their share of the capital cost by transferring assets - in cash, in kind, or both - up front. The lead agency will return accumulated depreciation on any transferred capital to the participating agencies at the end of the lease period.
Other co-locations in CIGA have had the lead agency contribute 100% of the capital investment upfront. Depreciation on the capital is recovered from participating agencies as OPEX over the life of the asset.
In all co-locations the operating costs are recovered on the basis of area allocation. These are managed through a co-location agreement and the establishment of a shared services appropriation for lead agencies.