A new or upgraded building in a school is a significant capital works investment. Whether the project has been driven by growth in enrolments - or a step toward providing the best facilities possible for teachers and students, there are key considerations that school leaders and project managers should do to manage capital works investments effectively.
Capital works are often a significant component of a school’s spending. For example, capital expenditure on building and works in independent schools across Australia accounted for 78 per cent of total spending in 2020. When managed effectively, capital works investment in schools can increase the value of a school’s assets and provide a better learning environment. It also presents opportunities to preserve cash flow in other areas. This article outlines key factors that school leaders should address when managing capital works investments in schools.
Schools typically have strong governance processes, meaning that a robust procurement process is often in place. As part of your school’s specific procurement requirements, procurement officers should assess the commercial suitability of potential construction companies. Key factors that school leaders should review and consider when choosing a capital works provider include:
Like any construction project, keeping timelines realistic and the project management approach agile and responsive is key. According to the Project Management Institute (PMI), 25 per cent of projects fail due to inaccurate time estimates, while 28 per cent fail due to inaccurate cost estimates. Throughout your project, your designated project manager and their team should maintain close management of timeframes with contingencies included to allow for interruptions. This will ensure realistic completion dates are set, enabling better stakeholder management and the ability to establish and communicate reasonable expectations with school leaders, teachers, students, and parents. Further, managing a project effectively can also strengthen cash flow management.
Developing new buildings or carrying out significant capital works in a school requires a large CAPEX investment. Whether this investment is proactively budgeted for, or the works are urgent due to situations such as weather impacts and accidents (where insurance should cover the majority of works), a school can preserve its cash flow by leasing suitable assets.
Independent Schools Australia estimates that 22 per cent of CAPEX in 2020 was dedicated to furniture and equipment, which are items that can be leased. Leasing can also reduce the amount of CAPEX a school needs to invest in assets such as computer equipment and laptops. Not only does this preserve cash flow, it also helps schools access the latest technology without needing a large upfront capital investment. The cash flow made available through leasing can then be used to deleverage or be redirected into other investments.
The construction of a new building or significant capital works is an exciting time for a school. To ensure your capital works projects run smoothly, ensure the factors above are addressed while considering strategies to preserve cash flow and reduce CAPEX in other areas of the school’s balance sheet. Leasing equipment and devices and introducing systems to effectively manage these leases is a strategy that can reduce CAPEX and partially offset the cost of larger projects.
Quadrent’s asset leasing and financing solutions for the education sector help schools ensure they always have the best systems and hardware available for their teachers and students. Contact Michael Adams today to learn more about how Quadrent’s solutions can support your school in effectively managing its assets and expenditure.