Construction needs to avoid social value smokescreens

Social value can be up to 15 per cent of non-price assessments in construction tenders, but are the metrics genuine? If not, it’s a huge missed opportunity for this sector with so many multiplier effects in the economy.

One of the biggest recent trends in construction is the emergence of “social value” as a new currency in business transactions.

Governments and socially conscious private sector clients are increasingly seeking to leverage their construction and infrastructure spending power to contribute positively to the communities in which they build.

For a contractor or consultant in the construction industry, it is no longer good enough to offer the cheapest price to win a contract – you must also show that you are contributing positively to society.

Today, non-price assessment criteria can represent anything from 30-50 per cent  of tenders and “social value” requirements alone can be up to 15 per cent. Being able to deliver social value is therefore becoming an increasingly important aspect of competitive advantage in the construction industry.

The timing is perfect for someone to show leadership in this space and the construction industry badly needs some good news stories. 

Inequity and disadvantage in growing in Australia. While the unemployment rate Australia is low at 5.2 per cent, it is 9.4 per cent for people living with a disability, 12 per cent for youth (in Coffs Harbour NSW the youth unemployment stands at 23.3 per cent while outback Queensland the rate is 25.7 per cent) and for Indigenous people the unemployment rate is 20.6 per cent.

It makes no sense for our economy to have large segments of the population unemployed and as one of the country’s largest employers with a significant multiplier effect into the wider economy, we in the construction industry can play a larger role than most in addressing these growing problems (and also benefit from it by addressing predicted skills shortages).

However, the emergence of social value as a new currency in business transactions has been accompanied by considerable confusion as to what the term means and we are already starting to see companies claiming inflated social impacts for the projects they are building with little evidence to back them up. 

Beware what you claim

For example, anyone claiming that they have created new jobs and training opportunities in a local community and improved the physical and mental health and wellbeing of people as a result, need to be extremely careful what they say.

Some simple questions that might cause them to regret their claims include: What would have happened anyway?

Are these new jobs or have other people been displaced to create them?

How long do these impacts last and how fast did the affects drop-off?

Are there any negative impacts?

What instruments were used to measure mental health impacts and how were they validated and controlled?

How, when and from whom was data collected and who collected it and how was it analysed?

The assessment of social value is a minefield for the unwary. It is a young and hotly contested field of study where there remain a range of unresolved controversies and challenges to which many in construction seem blissfully unaware.

Not only are there concerns around inconsistent terminology but there are critical questions around data validity and reliability (do measures of social value measure what they purport to measure and can they be replicated).

There are also concerns about vastly inconsistent assessment methodologies, approaches to data collection, measurement and reporting and there are as yet no universally accepted international standard for measuring social value to draw from.

This means that assessments can differ markedly depending on time invested and who undertakes the process.

Typically, skills and knowledge in measuring social value vary considerably and there is very little experience of how to do this in the construction industry – where lowest price has always been the overriding definition of highest value.

There are also many unresolved philosophical, ethical and practical criticisms of utilitarian techniques such as social return on investment (SROI) which are becoming increasingly popular in the construction industry.

SROI reports can costs many tens of thousands of dollars and yet the methodologies are widely criticised since they seek to monetise social value on the basis of spurious causal claims and invalid instruments and because they seek to reduce assessments to a single ratio which causes people to think that the correct action is the one that maximises economic utility.

Many argue that such ratios grossly oversimplify the many nuances, variables and complexities in fully understanding the social value created by any intervention.

Can you trust the claims when so many failures go unreported?

Finally, there is a lack of legitimacy and trustfulness in what is reported by many organisations due to incompetent research and biased and selective reporting of good news stories over the many inevitable failures that remain conspicuously under-reported.

These generally go un-noticed because of the lack of independent certification /auditing and reporting standards.

Clients of construction and infrastructure projects need to call this out before it goes too far.

There needs to be far closer scrutiny of what companies claim they can deliver and closer scrutiny and monitoring of what they report has been delivered.

If this is not done then the laudable intent of these new policies will be completely undermined, further damaging the industry’s already tarnished public image.

This will cause us to miss out on an unprecedented opportunity to leverage Australia’s current infrastructure and construction pipeline to create a more equitable and productive and innovative society.

To paraphrase Einstein, “not everything worth measuring is measurable and not everything measurable is worth measuring.”

Over-relying on numbers can produce a dispiriting, jaundiced view of people, distort behaviour towards the measurable, stop thinking and critical thought and produce rigidity, myopia and blindness to the important things that cant be measured.

Wise organisations use a combination of quantitative and qualitative data. They use a wide range of data types and sources.

They only use quantitative analysis when it makes sense to do so, when they are able to understand the results, when they have got reliable data and when they have the expertise, time and resources to do so properly.

People purporting to measure and report social value in the construction industry would be wise to follow the seven principles of good social value measurement: involve key stakeholders; understand what changes for key stakeholders; value what matters to key stakeholders; only include what can be ‘evidenced, understand that evidence and be able to defend your claims; do not over-claim; be transparent; and verify your results.

Governments’ social procurement policies offer the necessary incentive for large parts of the industry to harness their collective energy and creativity to deliver social value to those who need it most.

The potential for this to occur will be destroyed if measurement of social value simply becomes another compliance burden and is allowed to be opportunity for contractors to misrepresent their impacts and in so doing undermine the efforts required to make real improvements in our society.

Martin Loosemore is professor of construction management,  School of the Built Environment, University of Technology. He is a visiting professor at the University of Loughborough, UK, a Fellow of the Royal Institution of Chartered Surveyors, and a Fellow of the Chartered Institute of Building.

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