Construction is central to placemaking, economic development and UK employment – all of which highlight its importance to local government, not least in post COVID-19 recovery plans. With the sector spend estimated to be £500 billion by the end of this decade there is a clear responsibility on construction to deliver tangible social impact and outcomes, especially for disadvantaged and left-behind communities.

However, our new research report, From the Ground Up – Improving the Delivery of Social Value in Construction, which is launched today by the Institute of Economic Development (IED) in collaboration with Arup, Atkins, Commonplace and Joseph Rowntree Foundation, finds there is much work to be done following our exploration of all aspects of social value in construction: procurement, definitions, activities, partnerships, monitoring and evaluation.

For LEPs and local authorities, social value plays an increasing part in the procurement process, but there are significant challenges across all aspects. There is no common, comprehensive definition of what counts as social value, to frame understanding, benchmarking or reporting, and aid comparison of tenders and to determine best practice – this has given rise to significant disparities in what counts as social value activities, and no requirement to focus on improving the wellbeing of those who are most disadvantaged. There is a high risk of social value becoming too diffuse.

Respondents from construction multi-nationals and SMEs to local authority, public sector and specialist third sector organisations reported that projects spanning geographies have multiple project stakeholders often competing for social value outputs, different frameworks with differing social value requirements, and a real lack of alignment around desired benefits and outcomes. There was clear consensus on one of the biggest barriers – the lack of understanding of what social value is – and that substantial improvements need to be made in the monitoring and evaluation of social value.

There are huge opportunities and requirements for the public sector, industry and government to step up to the plate, to ensure that every one of those £500 billion construction
pounds delivers additional social impact, and makes a major contribution to our most disadvantaged citizens and left-behind communities.

However, we need an immediate step change in procurement, delivery and monitoring impact – and are making five key recommendations.

1. Establish a Construction Social Value Centre of Excllence

To work collaboratively with industry and public sector bodies to help define social value and provide thought leadership, practical support and guidance; be a repository for social value reporting data, benchmarking, monitoring and evaluation; develop a kitemark; provide guidance on evaluation tools; and support the collection and dissemination of good practice case studies. We see this Centre being seed-funded by central government, in the same manner as the What Works Centre or Be the Business.

2. Agree a definition of social value, and what activities are within scope, for the construction sector

To allow robust comparisons of value, and help ensure that social value requirements are proportionate and appropriate, and provide measurable additionality. We recommend that environmental components are separately weighted in procurement, that the focus is on outcomes not outputs, and that good business practices (e.g. internal diversity/inclusion initiatives, prompt payment codes, training of existing supply chains, modern slavery, managing noise or disruption) should be seen as a given.

3. Green Update the Treasury Book, the Social Value Act and initiate mandatory reporting

To improve Treasury guidance on the monetisation of social value metrics and enable the assignment of different financial values to social value activities. Local authorities should be required to create a social value plan as an integral part of their economic development strategy, based on a needs assessment to provide one context for all bidders, and to monitor and report annually on social value outputs and outcomes, including their cost effectiveness.

4. Upskill the public and private sector

To work collaboratively to offer continuing professional development on all aspects of social value, from defining a strategy, embedding it in procurement and at all stages of project lifecycles, and understanding the tools to assess social value components. A greater understanding of what social value is, how to procure it more effectively, and how to achieve better outcomes, will improve capacity, capability and impact.

5. Upskill those not in the Supply Chain: SMEs and VCS organisations

To improve local SMEs and VCS organisations' ability to compete and deliver more effectively, enabling them to be more sustainable and resilient. Improving their capacity and capability to participate in supply chains will extend beyond just the construction industry, and leave a more enduring local legacy and impact. In particular, more enforcement of the prompt payment code at these levels in the supply chain will enable SMEs and VCS organisations to be more effective deliverers of social value.

Bev Hurley CBE is chair of the Institute of Economic Development