3.12 The Contributions Agency have obtained a deal that reduces the Department's exposure to the risks arising from property ownership. This reduced exposure has a value. The Department did not have this quantified because in their view such an estimate could have been a costly and subjective exercise and was unnecessary following consideration of all proposals. During our examination they estimated the value to the taxpayer of avoiding some of the risks.
3.13 Some avoided risks relate to maintaining the fabric of the Estate:
a) Health and Safety legislation may change, requiring extensive additional expenditure. Under the Private Finance deal, Newcastle Estate Partnership bear some of this risk;
b) the costs of structural risks of existing buildings on the estate and the costs of required remedial works at the Durham House and Tyneview Park properties may exceed estimates. The Contributions Agency have valued the risks transferred to NEP at £2.6 million over the life of the contract;
c) maintenance and replacement costs of other buildings may have exceeded estimates. The Contributions Agency recognise that this element of the costs of remaining in existing accommodation was conservatively estimated;
d) the inflation element of costs relating to the construction of replacement buildings should the decision have been taken to remain in the existing estate; and
e) the cost of works required to any underground infrastructure (for example, pipes and cables) and to carry out any mandatory work to rectify inferior ground conditions.
3.14 Other risks transferred to NEP relate to managing a portfolio of property and include:
a) the risk that surplus property on the estate will be difficult or impossible to sell. After signing the deal, the Contributions Agency estimated that the benefit to the taxpayer of transferring this risk to Newcastle Estate Partnership was worth £3 million; and
b) the risk that the Department incurs a large repair liability when it vacates rented accommodation. Under the Private Finance deal, Newcastle Estate Partnership will pay any repair liabilities incurred by the Department. The Contributions Agency have estimated the value of this risk transfer at £1.48 million.