ROI and BIM: Where is My Money?
The BIM Elephant returns, asking the popular question, “Where is my ROI from using BIM?” My colleague Damon Socha and I dive in to offer a different perspective.
“Show me the ROI of BIM” is the mantra of project executives and AEC business owners throughout the industry. BIM return on investment is elusive and fraught with varying opinions. So let’s view it from a higher perspective; “BIM should not be viewed as a directly relatable money saving application, but a risk reduction strategy.”
Let’s have a heart-to-heart about BIM and its counterpart, virtual construction. Where is the money? You will spend hundreds of thousands of dollars on hardware, software, training, manpower, infrastructure and a variety of miscellaneous costs just to put a good system in place, and, on paper, you will have no real savings to show for it. That number goes right to your bottom line! Your BIM/estimating team will put out “ghost number” conceptual estimates that show you saving a few hundred thousand dollars in change orders on various jobs. How did that financially help the contractor or designer? Conceptual does not show up on the bottom line. Furthermore, you lost what profit you could have gained on the change orders.
Sure, you’ve convinced the owner that you’re BIM-savvy and he may give you the next project, but that is certainly not a guarantee. Yes, the schedule and project flowed better, but how do you know that wouldn’t have happened anyway? What difference did your well-paid BIM employee, sophisticated computers, and expensive software provide? Was there a real benefit? Can you quantify it? Where is the concrete evidence?
The truth is that BIM and virtual construction implementation is expensive and will be a cost to the bottom line of any company. You will not likely make any more money using it that will directly relate to its use. The systems, software, and hardware will disrupt the work flow, require constant upgrade, and change the way that you do business. Unless you sell BIM services for a living, expect it to show on the bottom line in red. There is no directly relatable capital in virtual construction or BIM. So the question begs, if it provides no direct monetary incentive, why engage in this disruptive practice?
The answer gets to the heart of what we do as designers and contractors. The reality of what we do is not execution and management of design and construction contracts. Yes, we design and construct buildings but the reality is that we are risk managers. Virtually anyone could design or construct a project if it had no risk. Owners hire and pay “experienced” designers and contractors to manage project risk. We are risk managers and the better we manage, the better our profit and final product.
How does BIM and risk management interact? There is no better tool that exists to mitigate the risk of a project than virtual construction and project management software. Virtual construction provides the opportunity to test theories, investigate problems, and build projects long before we experience schedule constraints and a loss of productivity. The risks of a project can be identified well before reality sets in and we are faced with the glaring result that our assessment was incorrect. Far better to have reviewed the assumptions in a world where cost and schedule are virtual and theoretical, than to test our theories when time and money matter.
So where is the money? The problem with the answer is really the framework of the question. The contractor or designer is looking for a hard cost to offset the use of the tool. Can you reduce your personnel? Can you reduce the General Conditions? What project costs will be offset by the use of virtual construction?
The framework of the question should be how can I reduce my exposure on this project? How can I better protect the fee? What tool will enable me to assure myself and the owner of success? As schedules become shorter, fees reduce, and the risk increases, AECO teams must turn to virtual technologies to identify and resolve risks before they become litigation.
Each project has its own unique and inherent risk and will need different approaches to most effectively implement the technology. BIM and virtual construction should never be used cart blanche for every project in the same manner and approach. If approached based on the identified risks, these tools can be a powerful way to reduce exposure, increase production, and maintain the profitability and schedule of a project.
So, the answer to the question of “Where is the money?” is quite simple. Without the effective implementation of virtual construction technologies, “where is the money” will become “what happened to my profit?” Projects will be marginally effective and minimally successful at best. Instead of asking “What is my ROI”, perhaps better to ask “What is my LOF, Loss on Failure?”