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Construction Payout team focuses on
paying out funds in year programmed

Continuing with the theme of highlighting 2018 Leadership Summit presentations, this week we bring you Team #6 - Construction Payout.

VIDEO: Watch the team's opening pitch at the summit.

Originally set up as a Tiger Team (a team of few individuals who are assembled to quickly look at and solve a problem), the Construction Payout group formed in an effort to improve ITD’s ability to forecast, pay out, and close out construction projects.

The overall objective of the team was twofold and consisted of both short-term and long-term goals. Short-term, the strategy was to identify and implement a plan to accelerate current project payouts. Long-term, the charge was to implement a plan to improve project payouts to, or near, $370 million annually and provide sustainable solutions to maintain that rate.

Team member Todd Hubbard explained that “bids were coming in for construction projects, and money was being obligated to those specific projects, but for one reason or another, the projects weren’t getting built within that year so the allocated funds were just sitting around waiting for construction to commence.”

Although some may think a surplus of funds in the bank hardly equates to a cash-flow problem, that is exactly the case.

“We want to spend money the year it’s programmed, and on what it’s programmed for,” said Hubbard. “Accountability is important, as it allows us to do what we said we were going to do.”

Throughout the process, the team identified specific causes and issues relating to the construction payout problem. Although they recognized that there were other contributing factors, the group focused on district infrastructure project issues. In particular, the Construction Payout Team found that the following factors needed to be addressed in order to improve the payout process:

- Projects need to be bid-ready by established dates (e.g., FY 20 projects no later than October 1, 2018).
- Projects need to be advertised within the established window (i.e., optimize bidding and award sequencing based on funding availability and construction planning).
- Project construction needs to be managed to ensure it occurs in the programmed year (i.e., stop deferred construction of projects, plan for construction windows in the programmed year, and stick to that schedule).
- There needs to be a timely release of unused funds and close out of project.

So what results were garnered from this team’s journey? Well, in FY16, ITD’s state construction project payout was $131M with a total project payout of $280M. In FY17, the state construction project payout was $210M with a total project payout of $249M. However, after the Highway Leadership Team’s approval to proceed with the implementation of the aforementioned recommendations, the FY18 state construction project payout was $328M with a total project payout of $410M. That’s an increase of $118M for state construction projects and an overall increase of $162M in just one year.

“It was exciting to see the results,” said Hubbard. “It’s the most construction money ever paid out by ITD in any given year and we’re on track to increase that amount in SFY 19.”

As exciting as the numbers are however, there’s still more to be done. The team is working to prioritize delivery and construction payout by developing visual management tools that are current and visible, and use metrics that tie directly into ITD’s mission and are both tracked and reported on.

Construction Payout Team
Champion/Facilitator: Dave Tolman
Team Leader: Randy Gill
Team Members: Bradley Wolfinger, Erik Kokernak, Jason Brinkman, Justin Wuest, Scott Redding, John Bilderback, and Todd Hubbard.