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The Office of the Auditor General’s investigation into the management of the defence sector’s real estate, buildings and fixed assets

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Summary

Background and objectives of the investigation

Real estate, buildings and fixed assets are vital in enabling the Norwegian Armed Forces to fulfil their purpose and obligations. They are also of considerable financial and historical value. The Storting requires these assets to be managed efficiently and in a way that ensures their value is maintained. In 2015, the Norwegian Defence Estates Agency was responsible for a property portfolio of almost 4.1 million square metres, across 12,407 buildings. The portfolio is estimated to be worth NOK 39 billion.

There have been reports of deterioration in the condition of the properties along with a growing maintenance backlog. This investigation considers whether the management is satisfactory, effective and in line with parliamentary decisions. It covers the period 2009–2015, with particular focus on 2013–2015.

Findings

The condition of property in the portfolio is deteriorating and the maintenance backlog is growing

  • Analyses show that the condition of property in the portfolio deteriorated during the period of 2009 to 2015.
  • The registered required maintenance costs amounted to NOK 4.48 billion in 2015. Of this amount, NOK 1.93 billion related to a maintenance backlog linked to buildings that were in a critical condition and in need of immediate remediation. The maintenance backlog grew by 38 percent from 2013 to 2015.
  • Fortifications and defence installations are in the poorest condition and are in greatest need of maintenance overall.
  • The condition of residential properties has improved, but the maintenance backlog remains substantial.
  • During the period 2012–2015, the condition of a number of properties of conservation value deteriorated considerably.

Property leases do not adequately cover the cost of maintaining the value of the property portfolio

  • The leases cover the costs of management, maintenance, operation and development, as well as the estimated cost of renewals. These funds have not been spent directly on renewals.
  • The maintenance budgets do not cover the costs associated with the replacement of structures. In 2014–2016, funding was allocated by the ministry for this purpose, but only enough to cover about half of the required work identified.
  • The Ministry of Defence has stated that it will initiate a review of the rental scheme before the end of 2019. The Office of the Auditor General believes that this should be brought forward.

The Norwegian Defence Estates Agency’s management of maintenance is inadequate

  • Many of the analyses of conditions do not provide an adequate basis for the planning of maintenance.
  • Many maintenance measures are not being carried out as planned.
  • There is considerable variation in the Norwegian Defence Estates Agency’s monitoring and documentation of maintenance projects.

No guidance has been given by the ministry concerning the prioritisation of different types of real estate, buildings and fixed assets

  • The Ministry of Defence has given little guidance regarding the prioritisation of maintenance, including the types of buildings for which an inferior condition is considered acceptable.
  • Requirements concerning the average condition for the entire building portfolio give no indication as to what should be given priority.

Recommendations

The Office of the Auditor General recommends that the Ministry of Defence 

  • instigate measures to improve the condition of the property in the portfolio and prevent the maintenance backlog from increasing
  • assess how essential renewal of the property portfolio can be ensured, when such renewal is not covered by the rent with the amendments that follow from Government Prop. 1 S (2016–2017)
  • follow up to ensure that the Norwegian Defence Estates Agency establishes an adequate management system for maintenance projects
  • based on a dialogue with the Norwegian Armed Forces, initiate measures to improve the management dialogue with the Norwegian Defence Estates Agency, including guidance concerning prioritisation of the maintenance of real estate, buildings and fixed assets for different purposes
Ministry/ministries:

Riksrevisjonen, Storgata 16, P.O. Box 8130 Dep, 0032 Oslo, Norway

Phone: +47 22 24 10 00

Org.nr: 974 760 843