Funding a co-location

Co-locations can be funded in different ways. These include:

• Centralised funding model using Treasury funding.
  Cross-agency funding framework — The Treasury
• The lead agency provides capital expenditure (capex), and depreciation is charged back to the partner agencies.
• All participating agencies pooling funds to share the cost of setting up and operating the co-location.

We can provide advice on potential options that might be appropriate for a new co-location.

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Financial considerations

There are a range of financial considerations when entering a co-location agreement. Agencies will need to work closely with their finance teams to understand and plan for these in detail.

1. Capital Expenditure (Capex)

Capex applies when a new fit-out is required. Fit-out components include:

• main contractor hard fit‑out – building services; depreciated over the lease term
• sub‑divisional hard fit‑out – partitions, doors, information technology cabling, security; depreciated over the lease term
• soft fit‑out – furniture, appliances, audio-visual; typically depreciated over six years
• consultancy fees – design, engineering, project management, legal.

Depending on how the co-location is funded, partner agencies may need to contribute to capex.

2. Operating Expenditure (Opex)

Opex is recovered from agencies based on the co-location model and may vary from year to year.

• Fixed costs – shared staffing, maintenance contracts, insurance and depreciation.
• Variable costs – utilities, consumables, repairs, health and safety, ICT, security.
• Additional costs – e.g. dedicated car parks.

3. Insurance

The lead agency will usually insure the assets from material damage. Agencies are otherwise responsible for their own liability or business interruption insurance. Agencies must insure their own equipment and make sure their insurance covers co-location arrangements.

4. Exiting a co‑location

Generally agencies will need to pay ongoing opex if they decide to exit the co-location, until a replacement agency is found.

How we can help

The Government Property Office can advise lead and partner agencies in more detail about financial considerations and options for funding models for co-locations.

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