icccbe 2010

© Nottingham University Press Proceedings of the International Conference on  Computing in Civil and Building Engineering  W Tizani (Editor)

Return on investment analysis of building information modeling in construction B Giel, R R A Issa & S Olbina University of Florida, USA

Abstract Building information modeling (BIM) involves the creation and use of a three-dimensional (3D) virtual model that replicates the design, construction, and operation of a building. This technology’s recent emergence and the evolution of virtual design and construction (VDC) in the architecture, engineering, and construction (AEC) industry is fundamentally changing the process by which buildings are designed and constructed. However, the perceived high initial cost of implementing BIM has deterred many industry professionals from putting the technology to practice. In many cases, an owner’s acceptance of BIM is crucial to the success of a company’s capacity to finance VDC goals. In order to determine the cost savings of implementing BIM and show the returns on the investment (ROI) of paying additional fees, this study presents data gathered from two case studies on two sets of similar projects, one a recently constructed BIM-assisted project and the other an earlier project without BIM. The potential savings to an owner choosing to invest in BIM as an additional service were estimated based on the measurable cost benefits associated with reduced schedule overruns and reduced change order costs. This research confirmed that BIM is a worthwhile investment for owners. In the two case studies presented herein, the ROI of BIM varied from 16% to 1654%. Though an owner’s decision to invest in BIM should be weighed heavily against the scale and complexity of a project, this research suggests that vast savings may be realized regardless of a project’s size. Keywords: BIM, cost-benefits, construction, return on investment, virtual design and construction

1

Introduction

The advent of BIM and VDC has allowed the AEC industry to radically transform the process involved in designing and constructing buildings. To many construction professionals the reduction of change orders, RFIs, project delay, and accelerated discovery of construction conflicts is a great enough incentive to invest in the software, manpower, training, and time required to implement BIM. However, the high initial cost of implementing BIM has resulted in its relatively gradual adoption by contractors. Often, an owner’s willingness to pay for BIM may be critical in obtaining funding for VDC initiatives. In order to convince owners of the benefits of paying additional fees, data on the possible cost savings of implementing BIM on construction projects must be collected and analyzed. This research aims through case studies to help justify the initial investment in BIM by determining the return on such investment.

2

Background

Amidst the plethora of research publications demonstrating the benefits of BIM and its applications, little empirical data has actually been published about the cost savings that BIM may result in or how those savings are being benchmarked. In 2006, it was estimated that BIM resulted in the potential savings in construction costs ranging from 15-40% (Holness, 2006). Holness (2008) also noted that the Construction Industry Institute estimates savings of 3-7.5% associated with improved coordination and fewer conflicts. In a survey of industry professionals conducted by McGraw Hill, 48% of respondents indicated that they were tracking BIM’s ROI at a moderate level. The survey also indicated that users who measure ROI focus on six primary areas including: “improved project outcomes such as reduced RFIs and field coordination problems, better communication through 3D visualization, productivity improvement of personnel, positive impact of winning projects, lifecycle values of BIM, and initial cost of staff training (McGraw-Hill Construction, 2008, p. 27).”. Holder Construction has perhaps been the most public about its active quest to measure BIM’s ROI in recent years. Since 2006, the company has been actively measuring ROI based on the tracking of construction clashes discovered in Autodesk NavisWorks on over 30 BIM-assisted projects. The ROI values for several projects Holder has undertaken in BIM range anywhere from 140% to 399,000%. Table 1 lists the ROI that Holder has achieved on several of its BIM-assisted projects. Table 1. A Sample of Holder Construction’s BIM ROI (Source: Azhar et al., 2008).

3

Methodology

Two comparative case studies of involving pairs of similar projectswere conducted. In each study, a project completed without the benefit of BIM was compared to a similar “BIM-assisted” project based on project data derived from RFI and change order logs and interviews provided by a mid-sized general contractor labeled “Company X” to protect its confidentiality. A return on investment (ROI) analysis was then conducted on each project based on BIM preventable direct and indirect costs and conclusions were made about the potential cost savings to an owner choosing to invest in BIM as an additional service.

4

Case studies

4.1

Overview

Company X is a medium-sized commercial construction management firm, with annual net revenue of over 100 million dollars. In 2007, it began offering virtual design and construction as an additional service to its clients. Due to staffing constraints, the development of all BIMs were outsourced to a modeling sub-contractor, while Company X's in-house VDC manager oversaw the management and utilization of all modeling tasks. The chosen software platform used by Company X has been

Autodesk Revit Architecture, Structure, and MEP. So far, Company X has not been able to utilize BIM in an ideal design-build scenario. In the BIM-assisted projects described in these case studies, parametric modeling took place after the design phase was completed when the contract was awarded to Company X.

4.2

Case study one

4.2.1 Project descriptions Two similar projects constructed by Company X were compared to determine the cost savings associated with BIM's implementation. Project A was constructed prior to Company X’s use of BIM, whereas Project B was completed at a later date with the use of BIM. Projects A and B are comparable in terms of size, scope, contract value, delivery method, and construction type. As shown in Table 2, for the purpose of this study they can be considered equivalent. Table 2. Project A and B Results Project A (Pre-BIM) $7,128,000.00 $376,837.67

Project B (BIM-Assisted) $8,844,073.00 $271,851.83

Contract Value: Cost of Change Orders: Schedule Duration: 12 months 12 months Schedule Delay: 7 days 0 days Delivery Method: Negotiated Bid Negotiated Bid Contract Type: GMP GMP Square Footage: 123,000 SF (3) 81,000 SF bldgs. Use: Com. warehouse w. leasable mixed-use space Com. warehouse w. leasable office space Construction Type: Tilt-up wall with steel framing Tilt-up wall with steel framing Scope: CM - all concrete-work self performed CM - all concrete-work self performed

4.2.2 Estimated return on investment (ROI) The estimated return on investment (ROI) of BIM that could have been realized by the owner on Project A was determined based on an analysis of what BIM preventable conflicts occurred and their associated direct and indirect costs. The primary function of the BIM on Project B was to facilitate the creation of a more exact set of specialized tilt-up panel shop drawings. Thus, the direct costs preventable by BIM on Project A included the cost of subcontracting out that task as well as three unique change orders. Two change orders catalogued the required fix of the wrong placement of several joist and girder bearing embeds in numerous tilt up concrete panels. In addition, a third change order noted the direct clash of a girder with an overhead door opening. The indirect costs of schedule overruns associated with BIM-preventable issues were estimated based on four major cost categories. First, the daily cost of the contractor’s General Conditions was estimated based on the past records of Company X. Then the daily cost for developer administration and the architect’s construction administration time was estimated based on the contract size. Lastly, the daily cost of interest on the owner’s construction loan was also considered. These daily costs were then used to calculate an estimated total cost of BIM-preventable time overrun for Project A. Table 3 indicates the cost breakdown used in calculating the projected ROI for Project A. From this analysis, the return on investment of implementing BIM on Project A was estimated to be roughly 36.7%. It was also discovered that 4% of the total cost of change orders on Project A may have been completely eradicated, if BIM had been used. The calculated ROI for Project A was then used as a model rubric for the measurement of BIMassisted Project B. Due to a lack of recorded data on the direct costs avoided on Project B, its ROI

was estimated based solely on indirect costs. It is estimated that BIM may have prevented up to seven days of schedule overrun on Project B. Thus, as summarized in Table 4, its ROI was 16.2%. Table 3. Project A: BIM ROI Cost Category Total direct cost of subcontracting out panel shop drawings: Direct costs in preventable change orders: Embed fix change order: Girder and joist seat fix change order: Girder and door opening conflict change order: Total: Indirect costs of 7-dayBIM-preventable time overrun: Daily cost of contractor time overrun (General Conditions) ($855/day):

Amount $16,650 $928 $8,499 $5,664 $15,091 $5,985

Daily cost of 5% interest on construction loan for time overrun ($976/day):

$6,832

Daily cost of developer administration for time overrun ($446/day):

$3,122

Estimated cost of architect's contract administration for time overrun ($149/day): $1,043 Total: $16,982 Total Estimated Savings: $48,723 Cost of BIM (0.5% of contract value) $35,640 Net BIM savings: $13,083 ROI: 36.7% *Note: The cost of investment was approximated at 0.5%, as furnished by the owner for BIM services in the contract. A 5% CAP rate was assumed on the Owner's construction loan for the purpose of this study. Table 4. Project B: BIM ROI from Indirect Savings Cost Category Total direct cost of subcontracting out panel shop drawings: ($0.13/SF X 243,000 SF) Indirect costs of 7-day BIM-prevented time overrun: Daily cost of contractor time overrun (General Conditions) ($888/day): Daily cost of 5% interest on construction loan for time overrun ($1212/day): Daily cost of developer administration for time overrun ($544/day): Daily cost to architect's contract administration for time overrun ($181/day): Total: Total Estimated Savings: Cost of BIM (0.5% of contract value) Net BIM Savings: ROI:

4.3

Amount $31,590 $6,216 $8,484 $3,808 $1,267 $19,775 $51,365 $44,220 $7,145 16.2%

Case study two

4.3.1 Project Descriptions The methodology used in Case Study One was used in Case Study Two on two similar conventional post-tensioned concrete condominiums constructed by Company X. Projects C and D are comparable in terms of size, scope, contract value, delivery method, and construction type and for the purpose of this study, as shown in Table 5, are considered to be equivalent. 4.3.2 Estimated return on investment (ROI) Multiple BIM-preventable issues occurred on Project C. Perhaps the most noteworthy was a major drafting error in the site plan that left the original building’s footprint falling outside the existing property lines and resulted in a $24,862 change order. There were several change orders that resulted from 2D error in the construction documents due to dissimilarities between the architectural and

structural drawings and discrepancies with the plumbing drawings. In addition, multiple BIMpreventable direct clashes were uncovered on Project C which also resulted in change orders. Some of the most significant conflicts resulted from limited plenum space and errors with the designed ceiling heights. Table 6 illustrates a detailed listing of all direct costs associated with these preventable change orders on Project C. Table 5. Project C And D Results Contract Value: Cost Of Change Orders: Original Schedule Duration: Schedule Delay: Contract Type: Delivery Method: Square Footage: Use: Number of Stories (Towers): Number of Units: Type of Construction (Towers): Type of Construction (Garage): Scope:

Project C (Pre-BIM) Project D (BIM-Assisted) $41,757,618.00 $44,400,000.00 $5,097,222.00 $513,632.00 601 Days 652 Days 426 Days 0 (60 Days Early) GMP GMP Negotiated Bid Negotiated Bid 439,760 SF 456,594 SF Mixed use- res. condo/ garage Mixed use- res. condo/garage 14 Stories 7 Stories 311 218 Conv. formwork w. Conv. Reinf. Conv. formwork w. cast in place tables Post- tens. conc. w. conc. cols. (DB) post tens. conc. w. steel cols. CM - all conc. self- performed CM - all conc. self- performed

In addition to Project C's multiple BIM-preventable direct costs, its schedule was delayed a total of 426 days past its original 601 day duration. This resulted in two delay claim settlements between the owner and contractor. Though some of this delay was the result of outside variables, a large proportion of Project C's schedule overruns may have been eliminated by BIM. Analysis of the two delay claims conducted by Company X found that a total of 221 delay days were attributed to BIMpreventable issues including: the drafting error in the building's boundary survey, major structural dimension conflicts, conflicts between the foundation and sidewalks, the relocation of columns due to grid misalignment, and limited plenum space in the ceilings of most units. Table 6 also summarizes the indirect costs associated with Project C's 221 day BIM-preventable time overrun. The data revealed Project C’s predicted BIM ROI to be roughly 1,654% and uncovered that 9.3% of the total cost of change orders may have been prevented by BIM. Due to a lack of direct cost data, Project D's ROI was also estimated solely on indirect savings. The daily costs of time overruns saved by the owner on Project D were instead calculated using its 60 days of early completion. Project D's ROI was estimated at roughly 300%, as summarized in Table 7.

5

Conclusions

Overall BIM proved to be a worthy investment for the owner in both case studies. In Case Study One, it is apparent that the implementation of BIM was perhaps a greater benefit to Company X than the owner. The qualitative benefits of reduced time overruns and lower change order costs were measurable; however, the savings seen on a project of this size were relatively minor. In Case Study Two, the ROI analysis proved that BIM’s return was significantly higher on a larger more complicated project. These findings suggest that the scale and size of a project should be weighed heavily by owners choosing to invest in BIM as an additional service. However, the measurable benefits associated with reduced RFIs, fewer change orders, and reduced project delay uncovered on both BIM-assisted projects are perhaps reason enough to invest in the technology. Table 6. Project C: BIM ROI

Cost Category Direct costs in preventable change orders: (COR 00004) Revised boundary survey: (COR 00013) Added beam in shear wall: (COR 00014) Shear wall # 1 revision: (COR 00015) Movement of (2) columns due to grid mis-alignment: (COR 00025) Addition of (16) 3" deck drains: (COR 00095) Readjustment of fire sprinkler heads for ceiling height changes: (COR 00092) Window reorder/install due to conflict with exterior columns: (COR 00104) Sliding glass doors mislabelled as window type: (COR 00146) Revised ceiling heights to conceal drop panels: (COR 00151) Additional framing of roof drains: (COR 00178) Re-routing of mechanical ductwork around electrical panels: (COR 00213) Additional soffits to accommodate return air ductwork: (COR 00231) Additional fire sprinkler heads adjustment for dropped ceiling: (COR 00175) Demolition and repair of elevator door beams: (CO 17) Materials escalation due to 221-day delay based on survey and structural plan errors: Total: Indirect costs for 221-day BIM-preventable time overrun: Daily cost of contractor time overrun (General Conditions) ) ($5,425/day): Daily cost of 5% interest on construction loan for time overrun ($5720/day): Daily cost of developer administration for time overrun ($2466/day): Daily cost to architect's contract administration for time overrun ($822/day): Total: Total Estimated Savings: Cost of BIM (0.5% of contract value) Net BIM Savings: ROI: Table 7. Project D: BIM ROI of Indirect Time Savings Cost Category Indirect costs saved by 60-day early completion: Daily cost of contractor (General Conditions) ($5,425/day): Daily cost saved in interest (5%) on construction loan ($6,082/day) : Daily cost of developer administration ($2,466/day): Daily cost to architect's contract administration for time overrun ($822/day): Total: Total Estimated Savings: Cost of BIM (0.5% of contract value) Net BIM Savings: ROI:

Amount $24,862 $787 $3,396 $419 $19,158 $1,777 $2,632 $2,208 $13,062 $19,081 $2,722 $14,115 $1,285 $66,812 $300,000 $472,316 $1,198,925 $1,264,120 $544,986 $181,662 $3,189,693 $3,662,009 $208,788 $3,453,221 1653.9% Amount $325,500 $364,920 $147,960 $49,320 $887,700 $887,700 $222,000 $665,700 299.9%

References AZHAR, S., HEIN, M., and SKETO, B., 2008. Building Information Modeling (BIM): Benefits, Risks and Challenges. McWhorter School of Building Science: Auburn University, AL. HOLNESS, G., 2008. BIM Gaining Momentum. ASHRAE Journal, 50 (6), 28-40. HOLNESS, G., 2006. Building Information Modeling. ASHRAE Journal, 48, (8), 38-46. MCGRAW-HILL CONSTRUCTION, 2008. Building Information Modeling (BIM): Transforming Design and Construction to Achieve Greater Industry Productivity, in Building Information Modeling Trends SmartMarket Report. McGraw-Hill: NY.