Quantification of social costs associated with construction projects: state-of-the-art review

Communities that surround an operating construction site often find themselves subjected to negative impacts such as annoyances and economic losses. The latter often called ‘‘social costs’’, refer to the monetary equivalent of consumed resources, loss of income and loss of enjoyment experienced by parties not engaged in the contractual agreement, solely due to a construction process. Social costs take many forms including loss of revenue, productivity and time, consumption of non-renewable resources and accelerated deterioration of secondary roads. Social costs, while widely acknowledged, are rarely considered in the design, planning or bid evaluation phases of construction projects in North America. This is attributed to the difficulty associated with quantifying social costs using standard estimating methods and the fact that these costs are borne by the community rather than the contractual parties. This paper outlines 22 sources of social costs associated with construction projects in urban environments. The concept of ‘social indicators’ is introduced as a mean to link adverse impacts generated by construction activities and valuation methods. Thereafter, seven methodologies developed in the fields of economics and actuary are presented and their suitability for quantifying specific classes of social costs associated with construction projects are investigated. The capacity of current bid evaluation methods to account for social costs is also examined. It is concluded that a methodical approach for the incorporation of social costs in the bid evaluation process will be a key step towards a more sustainable-oriented construction industry. A generic framework for the development of such an approach is presented. Finally, the concept of developing a standard reference document to estimate social costs is examined and a sample format proposed. 2004 Elsevier Ltd. All rights reserved.