I2S research highlights the opportunities for improved social benefit creation and social impact mitigation through very early consideration of community needs and social benefit in infrastructure projects and revising auditing processes to include social considerations.
Based on the paper: Avoiding harm or creating benefit? How a risk focus sidelines social considerations in early decisions for Australian infrastructure projects by Ruth O’Connor and the I2S team
“Our work highlights a mismatch between the stated aims of major public infrastructure investment in Australia to deliver social benefit for community and business, and the processes that determine and audit infrastructure delivery. Infrastructure delivery is currently focussed on risk, which investors will always need to consider. At the same time, social risks – which can be precursors of project delay – are either ignored or downplayed due to entrenched evidence privileging.”
The two minute read
What you should know:
Social benefit and social risk are inadequately considered in the early planning stages of major infrastructure projects.
Why?
- Engagement and social impact professionals rarely if ever get a seat at the decision-making table.
- Exclusion of social professionals relates to ‘evidence privileging’, especially of engineering, economic and legal expertise. Project staging is also a factor when the engagement team is not yet identified at the pre-procurement stage.
- Social risks are not considered “deal-breakers” in the same way as more traditional economic, environmental or legal risks, despite growing evidence of social risk’s implications for project budgets and delivery. Improved social due diligence is needed.
- In Australia, Gateway Review processes reinforce a (traditional) risk focus, leaving little incentive to consider social benefit creation.
I2S recommends:
- Explicitly consider social benefit creation in PDM selection
- Where absent, introduce national guidelines for social risk identification for major projects
- Establish programs to support the promotion and inclusion of social practice professionals to promote consideration of these issues and increase capacity
- Develop strategies for better communication and consistency across project lifecycles;
- In Australia, update Gateway workbooks in collaboration with appropriate experts to include requirements for social performance.
The details (keep going for the longer read):
Why do we need to consider social benefit and social risks in public infrastructure delivery?
Infrastructure projects aim to fulfill societies’ fundamental needs, including transport, health and education, water and sanitation, energy and telecommunications, and are also critical to climate adaptation and the transition to net zero. Across the globe and throughout history, these major investments are public and therefore aim to deliver better outcomes for citizens.
Despite this context, community backlash, project delay and cancellation indicate that these large investments do not necessarily meet community needs or create commensurate social benefit. I2S research demonstrates that stakeholder and community pressure is consistently among the top three factors most influential to project delays, with I2S and Infrastructure Australia cost estimates hovering between AU$30-$40 billion.
Despite the normalisation of project delays, reduced societal benefit and related budget-overruns, there is little information available about how key early decisions are made that underpin project outcomes…until now.
What we did:
I2S, working with our industry and government partners, interviewed nine procurement specialists with combined experience of > 250 years to investigate how social considerations influence choice of project delivery model (PDM). We also analysed Gateway Review processes from NSW, Queensland and Victoria.
What’s a project delivery model (PDM)?
A PDM is a legal agreement between a client (often government) and contractor(s). It provides a system for organizing and financing design, construction, operations and maintenance activities, e.g. Public-Private Partnerships. PDMs can greatly influence project cost, efficiency and delivery of social benefit. We focused on PDMs because their selection plays an important early role in determining how responsibilities and risks will be shared and embedded in major infrastructure contract arrangements.
How are social benefits and risks considered?
They rarely are. The focus instead is on sharing and managing traditional risks with the private sector. While social risks may be identified during the procurement process, they are generally given low weighting and are not rigorously assessed.
‘Unless it’s blindingly obvious that stakeholder and community engagement has to be a central piece to delivery, it would often be relegated into some kind of secondary consideration, if it would appear at all in market soundings.’ ~Expert Interviewee
Risk-sharing decisions are fundamental for partnerships between the public and private sectors. However, this is where barriers to proper social due diligence, the robust and systematic consideration of social risks and benefits, come in.
Why are social considerations side-lined?
Our research identifies four main reasons, all of which can be improved:
1. Risk-framing limits the ability to focus on and deliver social benefits
One of the key reasons social benefits are not considered relates to the focus of PDMs on sharing and managing risks, rather than on creating social e. While the ultimate rationale of public-private arrangements may very well be value for money, this should encompass social benefit creation.
Our interviews highlighted an assumption that social benefit creation was dealt with at the business case stage. This does not appear to be the case given the absence of social considerations in the associated (Gateway Review) auditing documents.
2. A view that social risks cannot be passed on to the private sector
Our research showed a belief that governments cannot pass on or reassign reputational risk associated with social risk, so those risks are simply worn without proper discussion or consideration. As one expert told us:
‘One way or another, government is always going to wear the risk’ ~Expert interviewee
3. There is inadequate use of social expertise in decision-making
A limited understanding of social risk and lack of tools and experience to manage social risk in a manner similar to traditional risks also influences this situation. A key issue highlighted by our research is that people with social expertise rarely get a seat at the table to make the case for social risk consideration.
‘So, we don’t have the engagement lead sitting at the procurement table, but we have some very, very experienced project delivery folk in that procurement team’ ~Expert interviewee
The absence of social practitioners at the early decision-making table is related to three key issues:
1) evidence privileging (e.g., technical evidence over social evidence)
2) structural and historical barriers to promotion of engagement professionals (e.g., social practice professionals rarely hold the most senior roles)
3) entrenched gender bias (the majority of social practice professionals are women, at least in the Australian context studied).
This situation is compounded by our main project auditing processes providing little incentive for proponents to consider social benefit or social risk. ‘Community engagement’ is not explicitly referenced in key guidance documents and procurement risks are audited against timeframes and costs rather than explicitly referencing social risk.
4. Social practitioners are too late to the game
Splitting major infrastructure projects into phases means the engagement team is often not yet identified or involved at the procurement phase. In Australia, By the time social practice professionals enter a project, key decisions that will shape their ability to inform and deliver social benefit and mitigate social risk have already been made, without their expert input.
Read the ‘green open access’ version of our full paper here: