The Kansas Department of Transportation (KDOT) was facing one of the most basic financial dilemmas: can current obligations be fulfilled with available resources? Facing a ten-year, $6 billion highway maintenance and restoration project, the KDOT needed to be able to have clear visibility over the impact of declining cash balances, budget cuts, and weather-related expenditures. Their old data system consisted of a plethora of spreadsheets requiring manual inputs and changing data could take up to six weeks. All signs pointed to a redesigned system that could respond to cash flow shifts quickly, accurately, and easily. Their dilemma led to the creation of the Cash Availability and Forecasting Environment (CAFE) and the overhaul of their project managing system.

The KDOT needed a cash flow forecasting system that could provide the agency with transparent management of cash forecasting models and assumptions and produce timely forecasts to increase visibility across multiple departments. Due to the large number of variables affecting future cash flows, the necessity to quickly realize the impact of a change to any one of those variables required a system that could run extensive contingency plans. Additionally, the CAFE system would have to be connected to the updated project management system, which was being updated to enhance and streamline the communication of interrelated data between adjacent departments.

KDOT’s first step was to hire an independent consultant to guide the process of transforming their project management and forecasting systems. The project managers and cash flow forecasters collaborated to determine the needs for the new system. The two sides ensured the success of the new system by recognizing the “big picture” that the two divisions had to be separate yet connected. The agency selected a vendor that had complex statistical process that took into consideration curvilinear data rather than just linear data, which means data could be more precise. The vendor could create complex models that could incorporate external factors automatically. The vendor worked with KDOT administrators to ensure that the project management system was compatible with the CAFE cash forecasting system. Additionally, it was important that the new system included an intuitive user interface for model builders and users and have great analytics. Because CAFE is accessible through a web browser, the vendor could easily make adjustments, upload the new system for agency to critique, and let the agency provide feedback. This refining process was ideal for the back-and-forth exchanges necessary to create the finished product.

KDOT’s success relates to their future cash payouts, thus signifying the importance that the models representing these payouts are accurate and timely. Payout curve models determine the sum of the KDOTs cash needs. The original system had 13 different curves with tables and lacked uniformity, making drawing conclusions difficult. The new models had to be able to accommodate fluctuations in variables and adjust for changing biases. The payout model used today in CAFE was made by using historical data from every payout scenario available to KDOT. CAFE automatically applies the payout model to every project and managers can alter variables such as delayed start time or cost estimates to see how the scenarios play out.

The culture of KDOT’s communication prior to the implementation of CAFE was ancient. Project data used for cash flow forecasting was distributed on CDs only once a month and that was after the bids were in place. The manual requirements of the previous system significantly reduced the data sharing that was even possible. CAFE automatically updates when changes are made with project data.

Changes made to the project management system (PMS) automatically change in the cash flow system and are changed in all forecast models thus, eliminating the tedious manual inputting of data, which only slows response time and leads to errors. Managers can instantly see future cash flow reports produced for any cash payout over the lifetime of a project or just one day. They can also test contingency models and create payout curve adjusted for biases, seasonality, project length, and other variables. CAFE can also help the municipality determine when a bond issuance would yield the highest payout.

The implementation of CAFE allows project managers to understand their impact on the KDOT’s cash balance. Although under the prior system project managers acknowledged their actions had consequences on the cash flow, it is difficult to comprehend the capacity of those consequences without the right data system in place. Now when project managers ask KDOT cash flow analysts if they can change the start time of a project for example, CAFE can make that decision instantly. CAFE has proven to efficiently handle cash and predict future cash availability for KDOT. Without CAFE, the state agency would not have been able to plan and support the 10-year $8 billion program for highway maintenance and preservation.

 

1. The planning stage of creating a new ES may be the most important stage. What did KDOT do in the planning stage that led them to success in the long run? 2. Comment on the flaws in the communication practices of KDOT's previous system. What was the issue with distributing the cash flow informa- tion after the bids had already been placed? 3. Explain why the payout curve models in today's CAFE use historical data from every KDOT project available. 4. Why was the integration of CAFE to KDOT's proj- ect management system important?