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Value Definition & Measurement

The Value Definition and Measurement stream develops and refines a unique Value Profile for a project or programme enabling clients and their stakeholders to articulate what is important to them – their core values and drivers. It then goes on to define metrics for measuring success. These, when combined with performance ranges in a Value Scorecard, help to embed the value priorities into decision making, enabling clients to compare very different options and to exercise informed choice in deciding how to invest.

This stream establishes a reference point for value- based decision making across the asset lifecycle and signposts to the market the relative importance of value drivers in future decisions. The Value Profile helps clients to demonstrate alignment with national, organisational, and regional policies and priorities, translating these into measurable outcomes that can be achieved through a specific project or programme.

Client Approach

The Client Approach stream identifies associated activities that will help clients ensure their core values are achieved in the project or programme.

These activities fall into three broad groups:

Commercial: such as selecting a Delivery Model and building a Commercial Strategy that best fits the Value Profile of a project. It focuses on how clients work with the market to effectively deliver value and address risks. It determines how to embed, enhance, and protect the Value Profile through the project lifecycle with the aim of setting up the project in a way that leverages the very best capabilities.

Risk: helping clients to identify risks and create a Risk Profile for the project. The Value Toolkit provides guidance to assist clients in moving from conventional risk transfer methods towards active and evidence-based approaches, mitigating and assigning risk in the most appropriate way.

Appointments: helping clients build a team of highly motivated individuals and organisations that will deliver all phases of a project – from the validation of the business case through to the operation of the asset.

Alignment with development of business cases

In addition, the steps of the HM Treasury Business Case process have been mapped onto these two streams. This is to provide reference points on how and when the Value Toolkit process aligns and can support with the development of business cases.   We have used the HM Treasury Green Book process to show this signposting, but other business case processes will be similar.

The Four Capitals Model

The Value Toolkit uses the capitals approach as a way of defining value. Whilst the capitals approach may be new for a construction audience, it is familiar to a corporate audience – where many construction-related decisions are made. It also aligns with HM Treasury’s Green Book, against which public sector investment decisions are made.

There is an international movement towards a capitals approach for managing impacts and dependencies. The definitions in the Four Capitals Model have been agreed upon following extensive consultation and engagement with UK and International governments, investors, businesses, academia, and society.

The Four Capitals Model used in the Value Toolkit has been developed by the Capitals Coalition and defines a capital as any resource or asset that stores or provides value to people.

The capitals approach reflects how a project or programme may have an impact on a capital, and how it may depend on a capital. For example, a project may have an impact on biodiversity and may depend on the availability of local labour. This contextualises how projects and programmes relate to the capitals and illustrates the business case for protecting and investing in them.

All capitals are interrelated, forming part of a wider system. Their effective consideration requires an integrated approach to their assessment and embedment into decision making – the approach provided by the Value Toolkit.

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Natural Capital

Natural Capital is defined as the stock of renewable and non- renewable resources (e.g. plants, animals, air, water, soils, minerals) that combine to yield a flow of benefits to people.

In the context of the built environment, Natural Capital values the natural environment, addresses solutions to climate impacts and provides benefits to society throughout the full life cycle of the built assets.

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Social Capital

Social Capital is defined as the networks together with the shared norms, values and understanding that facilitate cooperation within and among groups.

In the context of the built environment, Social Capital refers to influence and consultation, equality and diversity, networks and connections as well as the changes people experience in these areas as a result of built assets.

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Human Capital

Human Capital is defined as the knowledge, skills, competencies and attributes embodied in individuals that contribute to improved performance and wellbeing.

In the context of the built environment, Human Capital encompasses employment opportunities, skills development, individual health and wellbeing as well as an asset’s capacity to influence these factors.

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Produced Capital

Produced Capital is defined as the man-made goods as well as all financial assets that are used to produce goods and services consumed by society.

In the context of the built environment, Produced Capital encompasses a combination of capital cost, operational cost and revenue, thereby covering the whole of the direct monetary spend on the project over its whole life. The man-made elements include indicators of the efficiency and quality of design, construction and operational processes.

Value Toolkit Process

 

An Integrated Approach

By considering a clients approach to both value and risk as a project or programme develops, the Value Toolkit’s two integrated streams provide a transparent and rigorous process which will lead to better informed decisions being made more quickly.

The Value Toolkit starts with the assumption that value can be defined, but also that it is fluid and can be either created or destroyed. Therefore, the Value Toolkit provides guidance on how value can be defined and measured, but it is neutral on what value means on any project or programme. Instead, it provides a robust framework within which clients can explore their required outcomes.

The Value Toolkit process considers five phases of an investment lifecycle:

Need

Purpose: The Need phase defines the problem that needs to be solved or goals that need to be achieved. It includes consideration of whether any intervention is required or whether a ‘do nothing’ option is the right conclusion at this stage.

Key Decision: The Need phase answers the question, ‘Is there a case for change?’ At the end of this phase, the final task for the client and the Strategic Team will be to review the Strategic Objective Profile and confirm that a case has been made to start developing solutions.

Optioneering

Purpose: The Concept Design Optioneering phase considers alternative options that address the need. Outline designs are created, compared, and evaluated against the mission and the Value Profile. A recommendation is made on the preferred option.

Key Decision: The Concept Design Optioneering phase answers the question, ‘What is the preferred option?’ At the end of this phase, the client sponsor and the Strategic Team must confirm the scope of the option to be taken forward and the Delivery Model.

Design

Purpose: The Detailed Design phase develops the selected solution in enough detail to allow Delivery Organisation(s) to be procured; this may be concept or full detailed design, depending on the Delivery Model selected.

Key Decision: The Design phase answers the question ‘What is the preferred option for delivery?’ At the end of this phase, the final task for the client and the Strategic Team will be to confirm the preferred option for the delivery of the project or programme.

Delivery

Purpose: The Delivery phase commences when the contract is awarded and the solution delivered, including any further design work. Throughout this phase, progress is monitored; both to record outcomes realised in delivery and to refine predicted outcomes relating to operation.

Key Decision: As well as measuring and monitoring value through delivery, this phase ultimately answers the question ‘Has the value been delivered?’ At the end of the Delivery phase, the Strategic Team will confirm to the client the outcomes achieved. This will give the client a picture of the efficacy of the solution and the Delivery Organisation(s) at that moment in time. This may be the basis for triggering contractual incentivisation mechanisms, although these may extend well into the Operation phase.

Operation

Purpose: The Operation phase is when the solution is in use, both during and beyond the contract period.

Key Decision: The Operation phase poses the question ‘Does the solution meet the need and area the benefits being realised?’ Changing demands will often lead the client to review their asset. This may lead to further interventions or the end of the functional life of the asset (for example, upgrades, maintenance, change of use, etc.). Each new intervention should be taken through the Value Toolkit phases, which will determine the preferred viable option.

Whilst these five phases can easily be aligned to the delivery of a construction project, they are designed to be generic terms that can be applied to any intervention in the built environment, whether that be construction of a new asset, or repair/maintenance of an existing one.

For each phase, the Value Toolkit sets out a series of activities aimed at helping the client to make more informed, value-based decisions and, ultimately, to drive better outcomes. These are shown in the integrated process diagram below.

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As part of the Value Definition stream
of the Value Toolkit Integrated Process,
the Value Definition Framework provides an industry-wide approach to the definition of value.

Designed in collaboration with industry, the framework should be used to guide the identification, organisation and communication of the whole-life outcomes that are to achieved through specific projects, programmes and portfolios in the built environment.

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Platform Programme

Discover how our Platform Programme is shaping a better, more sustainable solution for the next generation of infrastructure.