Public Sector – NAO approves DSS deal

The National Audit Office has backed a landmark agreement between the government and a consortium led by US investment bank Goldman Sachs which could become a template for future large-scale public-sector property deals.

NAO head Sir John Bourn told parliament that the deal to buy and maintain the social security department’s network of benefit offices would save the taxpayer #560m over the contract’s 20-year duration.

The deal included an upfront payment of #250m from the Trillium consortium which the NAO said had pushed up the cost of leasing back the 700 buildings.

The department will pay more than #200m a year for the 20 years.

Additionally, the department may vacate without charge up to 35% of the estate over the life of the contract.

But the NAO said ‘value for money could have been even better’ and warned the government to ‘think very carefully’ before demanding up-front payments during future sales.

The NAO also expressed concern that the government had not asked for a range of bids to compare the costs of buying flexibility and space.

The NAO report indicates that it might have been more cost effective to have given the estate away for free, as the DSS had wanted to do.

The ground-breaking deal is also seen as becoming the model on which a series of similar schemes now in the pipeline could be based. These include a plan for the sale and lease-back of buildings owned by the Inland Revenue and Customs & Excise, known as the STEPS programme.

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