Compound Interest on Bad Data

A cost data problem at the bottom of a programme does not stay at the bottom. It compounds upward from every tier of the supply chain, and by the time it reaches the summit it has stopped being a spreadsheet problem.

Cost assurance is usually framed as a client's concern, the programme worrying whether the numbers rising up to it are true. Sit with a tier one contractor on a billion pound job, however, and the identical problem stares back, one floor down. It is not a client problem. It is structural, and it repeats at every level of the pyramid.

Main contractors typically subcontract eighty to eighty five per cent [VERIFY: confirm sourcing for subcontracted percentage figure] of the work, in packages worth forty to eighty million pounds apiece. Each tier is a client too, wrestling with the same data mismatches and the same month end scramble. Go down again: tier two, tier three, tier four, each managing its own forecast and its own exposure to creep.

Why it compounds rather than adds

Picture one miscoded cost at tier three or four. The tier three inherits the misclassification, builds a forecast on top of it, and passes a version upward. By the time it reaches a tier one supplier, nobody in the chain can see the original error, yet everyone is planning cash and resource around its consequences. Like compound interest, a small percentage going wrong at the bottom, repeated at every layer, produces a total at the top wildly out of proportion to any single mistake.

Every handover between organisations is a place where data must be mapped between systems never built to talk to one another, adding fresh discrepancy on top of inherited discrepancy. Cash flow timing that is merely awkward at the top becomes genuinely dangerous at the bottom, where reserves smallest.

The fix, encouragingly, runs in the same direction as the harm. Assure the cost data at the bottom, close each month cleanly, and cleaner certificates travel up the chain on time. The benefit compounds upward exactly as the damage did, only in the right direction.

Where it stops being about money

At tier three or four, survival that quarter can turn on whether a payment certificate is correct and arrives on time. Get the assurance wrong upstream and an acceptance or payment decision can make or break a real company and the people in it.

The figures here are hard to read. Office for National Statistics data put suicides among construction workers at around thirty four per one hundred thousand in 2021, several times the rate in the wider working population. The Chartered Institute of Building's 2025 update on mental health in the built environment found more than a quarter of respondents had experienced suicidal thoughts in the past year. The causes are many and mostly not commercial, running through isolation, culture, stigma and insecure working. The CIOB and charities including Mates in Mind and the Lighthouse Club have been clear that financial insecurity and commercial pressure sit somewhere in the mix.

Getting the cost data right is not only a financial discipline. Several tiers down, it is a duty of care.

We tend to justify cost assurance on the money: the exposure avoided, the final account defended. All true. But assured data also means fewer wrong certificates, fewer late payments, and fewer avoidable shocks landing on the smallest and most vulnerable businesses in the chain. Cost assurance done well is quieter month ends for people you will never meet. It will not solve construction's wellbeing crisis alone, but it removes one entirely avoidable source of harm, which is worth doing on its own terms.

This document was produced with AI assistance. In accordance with the Human Oversight requirements of this AIMS, all AI-generated content has been reviewed, validated and approved by the Director of Black Pear Advisory Ltd before issue.

Dr Martin Perks FRICS FQSi MICW MAC

Director, Black Pear Advisory Ltd

Worcester, UK  |  +44 7771 865271