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​​Co-location operating expenditure costs

Operating expenditure costs (OPEX) are recovered from participating agencies based on their agreed co-location area allocation.

Categories of operating expenditure

There are three categories of costs or ongoing operating expenditure.

1. Fixed costs

Services and items that have a predictable and consistent value, including:

  • the building management team, for example, shared reception and admin staff
  • maintenance contracts, for example, for cleaning, plants, water filtration and printers
  • insurance for the property and assets available for use by all agencies
  • depreciation for fixed assets
  • depreciation for all furniture and equipment in the property.

2. Variable costs

Services and items that vary based on use, including:

  • utilities, like power and data
  • office consumables, like printing and stationery
  • catering consumables, like tea, coffee, milk, sugar, milo
  • repairs and maintenance
  • health and safety training and assessments for the building
  • shared ICT costs, as per the shared services pricing model
  • individual agency-specific security requirements, for example, sensitive compartmented information facility (SCIF) management
  • other miscellaneous building running costs that change each month – these will be charged back to participating agencies at the quarterly wash-up.

3. Additional costs

Services or items that are generally of a fixed nature, but excluded from the overall area allocation, for example dedicated car parks for fleet cars or individually provided parks.

Agencies can agree to exclusions for things that might normally be expected to be provided in a co-location, like insurance for agency-owned equipment and fittings.

How operating expenditure costs work in a co-location

Operating costs are recovered from participating agencies based on their agreed co-location area allocation. When area allocation changes, these costs will also proportionally change.

Area allocation

Establish a shared services appropriation for lead agencies

The management of a public service department’s assets, liabilities, revenue and expenses is governed by principles and rules in the Public Finance Act 1989 (PFA).

Public Finance Act 1989 – New Zealand Parliamentary Counsel Office/Te Tari Tohutohu Pāremata

Under the PFA, departments are funded through appropriation. The appropriation gives the Minister authority from Parliament to spend public money or incur expenses or liabilities on behalf of the Crown.

This means that lead agencies that are departments will require authorisation to incur expenses and receive capital injections for the purposes of:

  • operating cost recovery and
  • receiving capital transfers from participating agencies.

Services to other agencies that involve facilities management and cost recovery through leasing do not fit within the scope of existing departmental expenditure appropriations – lead agencies will need to set up a shared services (or similar) appropriation to provide these services.

Similar appropriations exist in Treasury (Central Agency Shared Services) and IRD (Services to Other Agencies).

Case study: The Treasury - central agencies shared services – Controller and Auditor-General

The lead agency will:

  • ensure a shared services appropriation (or similar) is established as appropriate
  • set up internal financial processes and billing and payment mechanisms
  • outline the co-location’s financial processes and mechanisms in the co-location agreement.

Treasury supports a revenue dependant appropriation (RDA), on the basis of revenue being certain but expenses less so.

Allocate benefits equitably

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.

Agencies who are:

  • achieving a benefit – like lower rental – will see a baseline adjustment for future years
  • not achieving a benefit – due to higher rental – could receive a cash transfer equivalent to its portion of the overall benefit.

Case Study: The Christchurch Integrated Government Accommodation co-location model

If an agency exits the co-location during a tenancy

If a participating agency leaves or reduces their space during the tenancy period, they can avoid continued costs by:

  • negotiating an alternative arrangement with an existing participating agency or
  • sourcing a new participating agency that the other participating agencies agree to.

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.

Leaving a co-location

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