The why and how of measuring social value in infrastructure

Measuring social value in infrastructure projects: lessons from the public sector, a new insight paper by RICS and Simetrica-Jacobs, provides an introduction and overview of social value measurement

Author: Anil Sawhney and Alan Muse

08 September 2020

Social value refers to all of the impacts that an intervention, policy or project has on society and the value that these impacts have, both positive and negative. The social value of a project is the net value generated to society.

In recent years, a much greater focus has been placed on social value, evident in the UK through the Public Services (Social Value) Act introduced into law in 2012, and various other guidance and laws which followed, and through similar policy manuals globally.

The part the construction sector plays in the global economy is well known, and the social value generated by the construction of infrastructure projects is well understood across three primary pillars: economic prosperity, wellbeing and quality of life. Yet until recently, the viability of infrastructure projects has been assessed primarily on economic cost benefit.

The current issue, therefore, is not the need to maximise the social value created by infrastructure projects, but to develop a consistent definition that can be used industry-wide, and to measure social value in a systematic way.

The new insight paper by RICS and Simetrica-Jacobs, Measuring social value in infrastructure projects: lessons from the public sector, discusses how we should define social value in infrastructure and how we can deliver and measure it in a robust way.

The insight paper includes sections on:

  • the concept of social value, including how we define, assess and measure it
  • the social value of infrastructure on a project, asset, network and system level and including life cycle considerations
  • approaches for measuring social value, including cost-focused methods
  • valuing non-financial impacts
  • the role of chartered surveyors and the profession
  • various case studies of social value considerations in infrastructure projects.

The insight paper and its recommendations are based on the UK government’s The Green Book: Central Government Guidance on Appraisal and Evaluation and OECD guidelines. These are also reflected in policy manuals in the US, Australia, New Zealand, Canada and the European Union and hence are applicable globally.

Social value measurement

Social value is being measured across the infrastructure sector by, for example, using tools such as the Social Value Self Assessment Tool and HACT’s Social Value Bank, yet approaches to measurement lack consistency.

Bearing in mind that social value and inclusive growth are delivered at a local, national and international level, it is vital that a consistent method of measurement is developed and used to ensure the industry delivers the maximum amount of social value.

In its simplest form, social value measurement (SVM) is the practice of assessing the extent to which an intervention or project generates value for society and is therefore in society’s best interests. It is a highly technical field and requires good understanding in economics, mathematics, statistical analysis, survey design, data collection and ethics. Social value and SVM – defining what value is and what is in society’s best interests is – are inherently ethical and moral issues.

At present, cost-benefit analysis (CBA) is the preferred best practice method for SVM in the public sector. This method:

  • assesses the positive and negative outcomes – benefits and costs – of a project and their impacts on people’s quality of life
  • tells us whether a project will lead or has led to an improvement in social welfare, or quality of life
  • measures benefits and costs in monetary terms such that social value is estimated as a quantitative monetary amount.

In CBA, quality of life is measured in terms of the following.

  • People’s preferences:

    how much they are willing to pay for a good or service, i.e. what people want.

  • People’s experiences:

    the amount of money required to give someone the same increase in happiness that a good or service gives, i.e. how people feel.

Other approaches for SVM include cost-effective analysis (CEA), cost-utility analysis (CUA), multi-criteria analysis (MC) and social return on investment (SROI).

However social value is measured, it must give individuals in the infrastructure industry a well-rounded perspective in order to evaluate and design projects and initiatives. For example, the UN’s Sustainable Development Goals (SDGs) can be understood as a set of metrics that are relevant to people’s quality of life, in other words metrics that are relevant to social value. This helps practitioners prioritise which goals to focus on, by understanding which affect quality of life the most and which they are likely to influence, and incorporate other concerns not covered by the SDGs that are relevant to quality of life – such as family and social relationships, sports participation, culture and heritage, and crime – into evaluation and project design.

The role of chartered surveyors and the profession

Chartered surveyors from various specialisms including the land, valuation, quantity surveying and construction, project management and infrastructure pathways are employed in the infrastructure sector. As the demand for measuring and assessing social value on the sector increases, these professionals will be required to develop relevant skills and competencies.

However, until an established form of best practice emerges, social value assessments will continue to be inconsistent. Global professional bodies such as RICS can play an essential role in this area by collaborating to create international standards, a body of knowledge, training, data products, and thought leadership in the field of social value. At present, RICS is considering how to build best practice around measuring and delivering social value into future professional standards and guidance. In the UK, RICS is one of the relevant authorities working with government to develop a new Value Toolkit which will support better decision-making throughout the whole investment lifecycle.

Professionals can use their expertise – including their knowledge of project data, stakeholder engagement and project management – to ensure best practice is carried out.

In his foreword Steve Demetriou, chair and chief executive officer at Jacobs, states: “As we look ahead to a post-COVID-19 world, the tremendous potential to use social value to assess and understand societal problems and the options that are best able to address them has never been greater. And the results can help direct stimulus spending on infrastructure projects that deliver greater social returns, inclusive growth and a tangible legacy.”

Social value represents an opportunity for the infrastructure industry to adjust its way of doing business in order to improve its impact on people’s quality of life. We hope this new insight paper helps readers to develop a greater understanding of evaluating social value in order to take advantage of this opportunity.

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