Unlocking the social value of infrastructure investment

Figure 1: Outcomes of a social value approach

This means that social value is now a key consideration in public sector procurement decisions, and thus a factor in the way projects are planned and implemented. Much of this is being driven by local authorities and other public sector bodies who are using social value requirements in contracts to deliver greater social impact - in a context of austerity and the need to find efficiencies and deliver cost savings. As an example, Manchester City Council includes a social value element of 20 per cent in all contracts with suppliers. Bristol City Council takes 20 per cent as a starting point but also has an aim in their Social Value Policy to spend at least 40 per cent of its total procurement budget on micro, small and medium sized businesses, social enterprises and the voluntary sector.

Public authorities are also starting to explore how social value can inform development policy. Liverpool City Region Combined Authority was the first in the country to incorporate an evaluation of social value in its Spatial Development Strategy (SDS); Salford City Council requires all major developments to submit a Social Value Strategy at the planning application stage and Islington Council is promoting social value in its Local Plan 2019 by encouraging all development to deliver as many public benefits as possible. These decisions not only build on the requirements laid out in the Social Value Act 2012, they help support the strategic priorities of local authorities by building stronger communities, improving local environment outcomes, and delivering inclusive economic growth benefits.

Central government has also proposed a minimum weighting of 10 per cent of social value in its contracts. The government’s approach to delivering on this proposal is currently under review, but this highlights the continued commitment to maximise social value through public sector procurement, which accounts for about a third of all public expenditure.

Maximising the social value of infrastructure

Infrastructure investments provide multiple opportunities to deliver social value to the communities and regions where they take place. Major infrastructure projects can represent once-in-a-lifetime regeneration investments, and opportunities to enhance the employment prospects and skills of disadvantaged or marginalised members of society who might otherwise be excluded from the labour market. In rural areas, access to infrastructure can provide a lifeline to key services.

However, investment decisions are typically based on criteria that don’t take into account wider values, sometimes resulting in suboptimal commissioning decisions. For example, investment decisions for transport infrastructure tend to be made based on customer journey time savings and associated productivity increases, whilst the wider benefits such as improved health and wellbeing outcomes or any biodiversity net gains may be under-emphasised. This raises the question whether the current parameters for decision making are sufficient, particularly if transport and commuting patterns do not return to pre-coronavirus levels.

If infrastructure investments are to drive maximum returns to society, a holistic and long-term approach to infrastructure that focuses on responding to the needs of society is required. Applying a social value lens to infrastructure projects can help encourage people to think more strategically across the project lifecycle to consider how they could be planned, designed, constructed, operated, and decommissioned in a way that ensures not only economic and financial viability but also social and environmental sustainability.

Wider non-financial considerations and externalities (both positive and negative) should also be taken into account. These are often hard to measure, but they give decision-makers a fuller understanding of the long-term risks and benefits of projects under consideration.

A good way to start is to map social value outcomes against the United Nations Sustainable Development Goals (SDGs), 17 targets adopted by the General Assembly in 2015 to push the world towards a more sustainable future. That way, organisations can identify which outcomes materially contribute to the achievement of relevant SDGs, and assess where there may be other sustainable development issues that could influence value creation.

Figure 2: Integrating social value throughout the project lifecycle, demonstrating performance against the UN’s Sustainable Development Goals

Factors for successful integration

Given that social value is still emerging as an important infrastructure consideration, there are a number of challenges that could inhibit its widespread integration. Below are four ways to more fully embed social value in decision-making.

AECOM has developed an ‘integrated capitals approach’'AECOM's Taking a capitals approach', which allows organisations to make better informed decisions and deliver multiple, lasting benefits to communities, beyond narrow value for money considerations. This involves taking into account the many forms of capital that enrich society. In addition to financial and built capital, they include our natural environment, our human and intellectual potential, and the strength of our social bonds and civil institutions. The approach facilitates a deeper understanding of the trade-offs that are made across the capitals in decision making and can help organisations identify where to shift resources to those activities that on balance create more social and environmental value.

Benefits of a social value approach

Integrating social value into decision making and value for money calculations has several advantages. Fundamentally, a social value approach allows organisations to balance the need to achieve value for money in their investments with a commitment to generating benefits to society and the economy whilst minimising damage to the environment. It allows commissioners to set out clear and tangible objectives in their project proposals that define positive outcomes for people, society and the planet. It encourages greater engagement with suppliers, service users and other key stakeholders at an early stage. It can lead to improved design as well as better, more efficient, and innovative delivery of projects or services. A focus on social value can also encourage a wider range of organisations to enter the public services market, providing more opportunities for projects to deliver the best outcomes for communities. 

A social value approach can provide key opportunities for projects to deliver the best outcomes for households, businesses and communities and level the playing field for the most vulnerable sections of our society who are facing the biggest challenges ahead. By putting social value front and centre of decision making, stimulus spending on infrastructure can be leveraged to provide much needed employment, raise living standards, improve social wellbeing and strengthen community resilience. This will be essential if we hope to achieve sustainable economic growth and social equity in a post-coronavirus era.