Blunkett may sell Job Centres estate to private contractor

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The Independent Online
DAVID BLUNKETT'S Department for Education and Employment is considering selling off its entire property estate, including the country's 390 JobCentres, to private sector contractors.

The DfEE is understood to have put out feelers to potential bidders following similar moves by the Department of Social Security and the Inland Revenue and Customs & Excise.

In addition to the nationwide network of JobCentres, the department's estate includes headquarters buildings in London and properties occupied by the school inspection unit Ofsted, the Equal Opportunities Commission and a range of other bodies from the Further Education Funding Council to the Government's Student Loans Company. The DSS's estate, compromising 800 buildings covering 1.6 million square metres, was sold to Trillium, a consortium led by the US investment bank Goldman Sachs, for pounds 250m in April 1998.

Trillium has a 20-year contract worth pounds 2bn with the DSS to provide accommodation and services ranging from maintenance and security to cleaning and catering.

In a report last April, the National Audit Office estimated that the contract could produce savings for the taxpayer of pounds 560m over its 20-year life.

The success of the DSS deal has encouraged other government departments to look at handing over their estates to the private sector.

The sale of the Inland Revenue and Customs & Excise estate - the second biggest after the DSS's with 1.5 million square metres of space - is due to be completed by the spring of 2001.

A shortlist of three bidders has been drawn up and asked to submit bids by next April. The list consists of Trillium, the Japanese investment bank Nomura and a real estate fund run by George Soros.

The sale will raise about pounds 220m but there are likely to be substantial savings for the taxpayer above and beyond that as part of the long-term letting contract agreed with the successful bidder.

As a result of the DSS deal, Trillium has become the UK's largest commercial landlord. The DSS estate is bigger than the Canary Wharf complex.

Under the contract, Trillium has assumed all the liabilities attached to the estate, including rental obligations and is also liable to pay penalties on up to 60 per cent of its income in the event of poor performance. In the first year of the contract it paid pounds 760,000 in penalties, although the figure will be higher this year.

Trillium is seeking to negotiate a modified incentive regime with the DSS so that as well as being penalised for poor levels of service it can be also be rewarded for outperformance.

It is not clear at this stage whether the DfEE will chose to sell its entire estate or whether any deal would involve the same level of risk transfer as the DSS contract.