In the Hub blog last month, Ron Lang, the Hub’s Impact Director for Value, set the scene for what the next few months will look like for our transformative Value Toolkit project. In this article, I am delighted to introduce the first – and perhaps most fundamental – element of the project, developing a clear and agreed definition of value.
Defining value has been an age-old dilemma in the construction industry. What do we mean by value? How can we measure and define it? These are much discussed topics that have traditionally posed more questions than answers.
To smooth out this tangle of ambiguity, the Construction Sector Deal and key policy documents such as the IPA’s Transforming Infrastructure Performance have laid out strong ambitions to create a consistent approach to value that is accessible for the whole construction industry. The aim is clear: shape an approach to value that goes beyond a purely financial remit, bringing into focus wider social, economic and environmental factors and consider them across the full investment lifecycle.
Laying the groundwork
For the past 12-18 months, the Construction Innovation Hub have been laying the foundations for the move towards value-based decision making. Since the announcement of the Value Toolkit in July, a real sense of collaboration has grown as key industry groups have come together under this critical project to make government ambitions a reality.
Since we began work on the Value Toolkit, a flurry of activity has swept across the project. I’m delighted to share some insight into the activities of Module 1, the part of the project in which we are attempting to crack the definition of Value.
In Module 1, our aim is to provide detail to the underpinning methodology for the value definition. This includes definitions of what the ‘Capitals’ and ‘Categories’ of value cover, how success should be measured, benchmarking information for ‘what good looks like’, the method for calculating a Value Index, and at the same time, understanding how the Toolkit will be applied on programmes and projects. So not much to do! Thankfully, we have a fantastic team to deliver this part of the project.
The whole ethos of the Value Toolkit centres around creating an industry led approach to value-based decision making. Working in close partnership with industry, our Value Definition module aims to help clients to define the unique value profile for a given project and to create value indices through which informed decisions can be made.
Drawing on industry knowledge and expertise
Our five Relevant Authorities are providing the voice of industry to advise on the methodology. Each Relevant Authority is made up of experts from across industry and championed by a leading industry body.
- Natural Capital: UKGBC
- Manufactured Capital: RIBA
- Financial Capital: RICS
- Human Capital: CIOB
- Social Capital: SVUK
There are a huge number of interfaces and potential overlaps between capitals and the categories that they cover. Whilst the Relevant Authorities are championing a specific capital, we are certainly not working in silos on this project. The Hub team spans across all the five capitals to help bring the cross-learning together and take the recommendations from the groups forward.
At our Working Group meetings, we come together to discuss key issues and understand the roles each party needs to play. At the table, we also have the Capitals Coalition, who are bringing their wealth of experience to support the development of the methodology in line with other industries and international best practice in this area.
In practice, we recognise that there will be reasons to look across the capitals to apply other decision-making ‘lenses’ to the data. For example, there may be a requirement to understand how well aligned a scheme is to the Climate Change or Levelling Up agendas, or perhaps a need to assess the Design Quality of the project as part of the tender process. To enable this, there will be a need to cut the data differently than by Capitals. As part of this workstream we are also looking at the key additional lenses that may be applied and how best to work these into the methodology.
So, how are we progressing? Our first task has been to develop definitions for the Capitals and Value Categories so that Toolkit users can understand what we mean by each value grouping. As I previously found working with the ACE Sustainability Group on the “Measures for successful outcomes: the 5 capitals approach” discussion paper, this is not a straightforward task. The Capitals and Categories need to be broad enough for application across any sector or scale of project, but still clearly communicating aspects of value.
The actual value outcomes against these categories that are to be derived by the scheme will come from the use of the Toolkit. We have also identified areas where the categories interface: this may be an overlap in the issues contained, or perhaps a conflict or co-benefit between them. For example, value derived for employment and use of local supply chains are clearly interrelated. Similarly, wellbeing, communities and natural capital aspects such as air quality and biodiversity are linked. A series of planned workshops will work through these issues and flesh out the challenges. We will then take this forward in the development of the scoring mechanism and guidance for the toolkit.
Ensuring the Toolkit is delivering for clients
Understanding how the tool is to be applied in a project or programme has proven to be key to unlocking some of the challenges and questions arising from the Relevant Authorities. In very simple terms the process that we are working on now is based around early value definitions and priority setting by a Client, supported by an advisory team. It is becoming abundantly clear that to get the best out of the Toolkit, collaboration and discussion with advisors is critical.
At an early stage it is envisaged that the Client, with their advisors, will need to go through a process of defining the outcomes to be achieved by the project, both during delivery and in operation. By relating these to the Capitals and Categories and by prioritising or weighting them, a Value Profile can then be generated; providing a clear and transparent articulation of the project’s value drivers. From here, it will be possible to set out a strategy for measurement that will be applied throughout the procurement, delivery and operational phases.
The Toolkit allows demonstration of value-based decision making and as such can comfortably sit alongside existing processes and frameworks; acting to support them. For this to happen there needs to be a degree of flexibility in the method and metrics used. We are currently moving towards a menu-based approach to selecting the right metrics for a scheme.
Whilst we have a fantastic panel of experts in the Relevant Authorities, we are also aware there are others working in this space. There are several organisations we are looking to collaborate with more closely so we can align our approaches to measurement of value. We are also drawing on the academic community to provide additional expertise to the scoring method and management of the relationships between categories.
Collaboration makes perfect
I can certainly say we are finding the devil in the detail through this work! Between the Relevant Authorities, the Hub, the Capitals Coalition and other external collaborations, I’m confident that together we can conquer the details to create a beta version to test in the new year. Moreover, I’m confident that this is a well-considered, well-informed and collaborative start on the path to widespread application of value-based decision making in our sector.
Across all the involved parties, the enthusiasm and passion for this project is a real driving force that unites us all in the cause to positively shift the meaning of value. It’s truly a sign that we are on the right path to delivering a real and lasting change in construction.
Now back to work!
Dr Natalie Cropp is Sustainability Director for Tony Gee and Partners and is Chair of the ACE Sustainability Group. Natalie has a Civil Engineering background with an Engineering Doctorate in Environmental Sciences. Natalie is an experienced chartered civil engineer and has worked on a range of UK infrastructure projects. As part of her current role, she holds the position of Sustainability Manager for the Midland Metro Alliance, developing tram links across the West Midlands.