By Professor Marnie Hughes-Warrington, Deputy Vice-Chancellor (Academic).
Boom cranes loop and roller wheels squeak as they turn over road base. The rhythmic clinking of scaffolding’s rise is punctuated by the hum of jets of water dampening down the dust.
The buzz of construction is captivating. People bound up the library steps to look through the windows punched into plywood hoardings; peek through the gaps in fence fabric; peer out of their office or the tea room window to check on progress. They even show me videos of the diggers, which I love.
Construction’s tempo is that of an S curve, starting slowly, accelerating dramatically and then levelling out as completion approaches. Andante. Accelerando. A tempo. Its partner beat is the syncopated, inverted U curve of workforce on site, the peak of which in our project will be just under 500 workers.
This tempo is not autonomous, for the hum and clink of construction flow echoes the tides of cash flow. Cash flow monitoring for a university budget is complex because major sources of income such as student fees and grants may be received in large blocks, as against more evenly spread expenditure needs.
Construction project cash flow is recognised as even more complex again because of the need to order and pay for materials and workforce in sequence when there looms the possibility of delays such as those caused by weather. Some things have to be ordered long in advance because of manufacturing and shipping times. But you might also find yourself having to order trees, for example, long ahead of their planting so that they grow to the size that you want at opening. Storing trees and other materials on site might not be possible if adverse weather conditions mean that you are not ready for them.
In addition, construction projects present uncertainties that might only be resolved after a project commences. You might not get a full picture of the ground beneath a building until you demolish it. Façade materials may become unavailable, and new kinds of materials may appear. Other large construction projects may compete for worker attention.
And all the while you have to keep the projected costs per week, per month, per quarter, and so on, as close to actual costs as possible. If you have money to pay for the project invested, you don’t want to move it to the lower rates of more accessible—liquid—accounts before you have to, or pay for things when they are at their highest price, or too far ahead of when you can use them. Importantly, too, you have to manage variations. Some are unavoidable, but you have to steer clear of tinkering and endless iterations if you want to finish on time and within or close to budget.
Mastering construction cash flow is very like playing buzz wire, where you move a grip mounted loop along a bent wire as quickly as you can, without touching it. Overcorrections and contact trigger a buzz, which is meant to feedback designed to improve your efforts.
Monitoring your line of cash flow travel is done through tables and charts that combine historical data from other, similar, construction projects, and mathematical models. Construction cash flow research suggests that you have to keep an eye out for six main groups of factors that can impact on the successful completion of a project: financial management; sub-contractor issues; suppliers and materials (eg price change); communications skills (eg contractor-sub contractor disputes); prior construction (eg incomplete) and during construction (eg rework arising from mistakes).
But not all factors are created equal, as work by Tarek Zayed and Yaquiong Liu in 2014 highlights. The bigger the project, the greater the risk in managing payment timing and bottlenecks, and the gap between prior construction cost estimates and actuals. That’s far away from the ‘windows haven’t turned up’ narrative arc of Grand Designs, but pretty fundamental to also getting university budgeting—from operational management to start up monitoring—right. Yep, maths. Leapfrog algorithms and stochastic modelling. People may rattle on like echo chambers about the need for us to step up the pace in maths education, and to value maths more, but when you see a construction project buzz it is apparent in a concrete way that maths is critical. Maths is the music of construction. Remember that the next time you hear the sounds of a digger.
This blog’s shout out is for Robert Hitchcock, Sam Jordan, Phil Heaney and Chris Grange, for bringing me to up to buzz-less speed on construction cash flow.