Newcastle University

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Work Stream Leader: Stephanie Glendinning

Work package 2.1: Evaluation framework for infrastructure  

Lead Investigator: Stephanie Glendinning; Lead Researcher: Arthur Affleck

This WP will integrate the research outputs from WP2.2-2.4 so that the WS achieves its overall aim of developing new approaches to measure economic, social, technical and environmental values of infrastructure.  It will transform some of the more abstract concepts from these WPs by developing a common framework(s) with which to interpret this information and support decision-making. WP2.1 will build on extensive research at all three universities to develop an approach to integrate multiple measures of value and provide a basis to compare and prioritise the benefits and risks of different options. These integrated measures of value must be assessed for a range of potential ‘interdependent options’ (WP1.1) and for a range of uncertainties and scenarios of infrastructure futures (WP1.2). It must develop (at least one) framework which provides for incremental, reformist, gradualist-type changes to existing practive.  This will include compatibility with existing approaches to valuing infrastructure (e.g. an annexe to HM Treasury’s Green Book) in order to develop something which stands a realistic chance of being taken up in practice. This may not preclude development of more ‘experimental’ frame works. Additionally, more radical, revolutionary, mould breaking ‘experimental’ frame works will be developed which demonstrate an understanding of long term value and risks of different infrastructure investment options.  

Work Package 2.2: Economic evaluation of infrastructure Benefits: systems of provision

Lead Investigator: Andrew Brown; Lead Researcher: Marco Pasarella

Currently, cost-benefit analysis and multi-criteria analysis are at the heart of UK government approach to infrastructure evaluation (as represented in the Green Book and by the DfT’s WebTAG guidance). However, the ability of these approaches to value long-run economic, social and environmental factors can be improved as a matter of theoretical principle (e.g. the difficulties of moving from partial equilibrium analysis typical of cost-benefit analysis to general equilibrium analysis) and in practice developing a valuation approach and  business model able to attract private financing of infrastructure development remains challanging (see successive National Infrastructure Plans). Consideration of recent general developments within economics suggests two avenues for improving the valuation of infrastructure. Firstly, a range of approaches in economics have relaxed one or two standard economic assumptions whilst retaining all others, thereby promoting new interdiscipliary insights through incremental develoment of standard economic theory. An example is happiness economics which returns economics to a psychophysical utility theory, drawing on developments in positive psychology and neuroscience. Secondly a range of more radical approaches in economics have become visible since the recent economic crisis. Many of these are located within the tradition of ‘political economy’ (sometimes called ‘heterodox economics’). It is from this tradition that the System Of Provision (SOP) approach is located. The SOP approach entails examination (both qualitative and quantitative) of the array and sequence of activities, technologies and institutional arrangements that come together in the provision of particular products or services. This interconnection is sometimes termed a ‘value chain’ or ‘commodity chain’, or ‘global production network’ (though these terms are undeveloped as regards value theory). A SOP is analysed in terms of objective processes of social value production and distribution, eschewing the purely subjective value theory of standard economics.

The WP will theoretically develop or deepen the SOP approach by tracing its theoretical roots in value theory and the politcal economy tradition. Having done this, the WP will develop the implications of SOP for improving, developing or even replacing cost-benefit and multi-criteria analyis of infrastrcuture. In parallel, the WP will consider the implications of the SOP approach for the comprehension of the nature of business models. Different approaches to economics and value implicitly suffuse the business model literature, and the SOP approach will be drawn upon to help make explicit and assess the web of often tacit economic presuppositions beneath the surface of the literature. The analysis of business models will also draw on the close connection between financialisation and systems of provision developed in the FESSUD project (which runs along side the iBUILD work on SOP and financialisation). This will link to work on business models in a range of other work packages across iBUILD. It will help locate local infrastructure business models and governance arrangements (the local growth agenda) within the context of the broader processes of variegated financialisation, national, international and global. A further area of the application and development of SOP is envisaged in this work package: there are interesting synergies between SOP concepts and engineering and environmental science approaches such as whole life costing, life cycle analysis, material flow analysis, input-output modelling, and concepts such as urban metabolism. It will be interesting to compare ‘stock-flow consistent’ modelling in heterdox economics (consonant with the SOP approach) with life cycle analysis and related literature, as well as to compare conceptual approaches across various disciplines.

Work package 2.3: Whole life design, urban mining and reuse of infrastructure components

Lead Investigator: Phil Purnell; Lead Researcher: David Dawson

The infrastructure is a vast repository of valuable materials and components, the composition, quality and location of which varies as the technology mix embedded therein evolves in response to political, environmental and economic pressure. Roll-out of new technologies such as wind turbines and solar panels introduces rare earth metals; obsolescence of IC engines leads to an output of platinum; requirements (and thus stocks and flows) of materials such as aggregates, copper and steel inexorably rise. For some materials (e.g. Cu, Cr), the stock in the infrastructure is already comparable to the reserves left in the ground[1]and thus urban mining might be an economic reality. In this project we will build on the work of the EPSRC “Undermining Infrastructure” sandpit project to assess how the value of the infrastructure as a mine will evolve over the next 50 years and examine how this value might be extracted as an investment opportunity e.g. by exploring leasing of structural performance over a given time period rather than buying beams. As legislation moves us towards a zero operational carbon paradigm, reducing the embodied carbon of structural elements will become the focus of attention. Increasing pressure on resources and waste disposal will require more efficient use of materials. Both these aims can be enabled by reusing structural elements – beams, columns, slabs, piles, foundations – while simultaneously reducing primary materials cost. In this project, we will investigate combinations of business models, technology, design and asset management paradigms that will enable reuse of structural elements. Challenges will include; archiving of element property data; forensic determination of properties of legacy components; radical architectural design for modular systems amenable to retrofit, adaptation or upcycling; storage, inventory and pricing of elements, and so on.

Work package 2.4: Social and Environmental Accounting

Lead Investigator: Jane Gibbon; Lead Researcher: Arthur Affleck

The research will assess and provide evidence of efficiency and delivery, and performance management, and collect evidence of changing attitudes and behaviours, whilst enabling the sector to start to value better what it does, how it does it and what impact this makes.

Social and environmental accounts provide crucial information to understand the wider value that is provided by infrastructure and its services – thereby opening up alternative business models.  By including social and environmental value within infrastructure appraisal, decision-makers are better placed to understand and demonstrate how taxpayers money can be directed towards improving people’s lives, opportunities and the environment.  Both EU and UK law require value for money within all public sector procurement decisions, and the UK Public Services (Social Value) Act (2012) requires social and environmental criteria to be included. The expectation of the UK’s localism agenda is to enhance local economic growth through LEPs with local authorities commissioning low carbon, resilient, sustainable infrastructure. The portfolio of possible infrastructure models developed in WP1.3 used to support this transition need to be capable of including relevant social and environmental information.   information. 

Social and environmental accounting can provide suitable techniques for inclusion within innovative business models. The information provided through social and environmental accounting systems will enable infrastructure providers to be better able to respond to the pressures of alternative financing solutions through the use of broader information systems. The breadth of information will support improved understanding and valuation of infrastructure benefits by identifying and including relevant social and environmental information within accounting and decision systems. The scope of accounting should concern itself with more than only economic events, include a broad purpose beyond reporting financial success and not only be expressed in financial terms whilst enabling accountability to a broader group of stakeholders. Thus providing information to enable valuation of infrastructure’s contribution to social, political, environmental and macroeconomic wellbeing,

The techniques can be included within the case studies in WS4, in particular the low carbon technologies, electric vehicles and resilience as a service. The method includes approaches to looking beyond input price and costs associated with projects or contracts and looks at the outputs and outcomes of activities such as collective benefit to a community through both quantitative and qualitative information. The collected information is systematically recorded at either project or organisation level through a social bookkeeping system, analysed and then reported to all relevant stakeholder groups. The information needs to be both verifiable and able to undergo an audit in order to be credible.

Current examples of organisations using information from social accounting within innovative business models can be found in financial services, leisure trusts, community transport, supported housing, health and well being services and development trusts, see for example, Shared Interest Society, Vancity, Jesmond Community Leisure, Norcare, Ouseburn Trust and Cybermoor.