Building Contractors: How to Use BIM to Prevent Budget Disasters

What happens when trust breaks down between developers and general contractors on a job site? The short answer: things get ugly.

We’re talking GCs-get-sued ugly. Payments-refused ugly. Work-halted-and-projects-in-jeopardy kind of ugly. Which is extremely bad news for everyone involved.

Just look at what happened with Miami Panorama Tower. In December, the developer took their general contractor to court over tens of millions of dollars of missing money. They accused the contractor of funnelling the money out of the project funds and onto their balance sheet, keeping cash flow issues hidden from investors.

The contractor eventually accounted for the cash – but the developer didn’t drop the suit. Apart from the (alleged) deceit, the developer was furious that the contractor had failed to pay their subcontractors on time, leading to work stoppages and delays that pushed the project over budget and missed subsequent deadline.

An outcome like this is a disaster for developers and contractors alike, but it happens all the time. With so much riding on a project, tensions are high. If developers suspect that they’re being taken for a ride, it’s hardly surprising if arguments escalate to lawsuits.

There are also perfectly good reasons why delays happen or costs arise mid-project. Extreme weather events, perhaps. Interruptions to the supply chain. Hiring shortages. A global pandemic (imagine!).

This makes it imperative that contractors make every effort to stay on schedule and within budget while they can, limit the potential impact of unforeseen circumstances on the project, and keep building owners in the loop.

A useful starting point is Building Information Modelling (BIM).

What is BIM?

BIM is a digital process that helps all stakeholders along the chain collaborate on a construction project. Architects, GCs, engineers, and developers can access a 3D model of the building, tracking its progress from conception to completion.

The BIM model usually includes up-to-date procurement, logistical and financial information, too. Sophisticated BIM tools allow you to track the status of a project – and its dependent, interlinking factors – in real-time.

How does this improve the accuracy of project budgets?

Without BIM, you’re stuck with plain old physical drawing plans, or at best a PDF. You have to painstakingly quantify the project, analyzing how much every element will cost before you supply a cost estimate to the owner. This can take days.

BIM reduces this task to hours. You visually map and manage how you’re going to build the project. You examine every part of it closely for potential challenges and risks. The BIM model can help you with up to 80% of your quantification, leaving you to attach a monetary value to the quantities and build your estimate.

Armed with complete, detailed, up-to-date information from the model, you can source far more accurate quotes from your subcontractors and suppliers. This reduces the risk of misunderstandings and nasty surprises later on.

All of which improves your ability to correctly estimate the project’s direct costs. You’re less likely to make mistakes, omissions, or miscalculations that you’d otherwise have to explain to a disgruntled owner once budgets are agreed upon and work is underway.

Of course, no projected budget is perfect. You can’t predict the future. You’re still at the mercy of external elements and human errors.

This leads us to the next benefit of BIM: efficiency.

How does BIM make your project more efficient?

Complete visibility over the model helps you to think critically about your project planning, seeking out streamlined processes and engineering value wherever you can.

Plus, everyone who needs it has access to the same information. They can see where you’re at with the project and can plan or adjust schedules accordingly.

Communication becomes quicker and easier. When you hit a roadblock, you don’t have to frantically arrange 10 separate in-person meetings with subcontractors and owners to talk through the problem. They have a visualization right in front of them, so you can cut to the chase and get moving on solutions.

This enables you to react to problems swiftly, accommodating change orders with minimal delays. Change management is typically a complex business, but if you have a BIM tool, you can efficiently and cost-effectively evaluate change orders as they come in, calculating how to do this with the least possible impact on your schedule.

BIM also helps anticipate issues and bottlenecks. With a visual, 3D representation of the project in front of you, it’s more straightforward to think through the process, figuring out the impact of switching around jobs.

This helps you plan, organize your teams and ensure you stay on top of orders for materials and equipment. You don’t lose sight of additional labor requirements or indirect costs.

Have you ever loaded mark-ups into your estimation system, for example, only to forget all about them until halfway through construction, when you realize you haven’t updated this for inflation? Tiny oversights like this eat into your profit margin – if that is, you don’t surprise the building owner by lumping them onto your bill at the last minute.

With BIM, this simply shouldn’t happen. Information is properly organized, visible, regularly updated, and connected to your working model. The combination of improved accuracy and efficiency delivers tremendous savings, helping to offset any budget or scheduling overruns that are out of your control.

Transparency is key

We’ve talked about the benefits BIM delivers to GCs. But the building owner or developer can access this information, too.

The owner can check what’s included in the estimate, track progress and see extra costs as they emerge. They know if they’re getting what they paid for, on a month-to-month basis. If the budget has expanded, it’s not a nasty shock at the end.

This is especially important as, without BIM, there’s no reliable way for a building owner to tell if the project is in trouble.

Sure, the GC should be conducting financial analysis throughout the project. They should be tracking the cost performance index (CPI) and schedule performance index (SPI) and submitting these figures regularly. But monthly isn’t enough. Unless these are updated in real-time, it’s easy to manipulate both CPI and SPI, allowing contractors to conceal problems until the final months of the project.

Not that it does anyone any good to fudge the numbers. Once you get to the end of the project, there’s no hiding the truth. Suddenly, the owner is confronted with an inaccurate budget – and the prospect of soaring costs and months added to the schedule. Ultimately, any contractor who takes this gamble is hurting themselves by risking a lawsuit, not to mention their reputation.

Far better to have total transparency with the owner, all the way through. Keeping an open line of communication – even if it’s bad news – means the building owner is forewarned and forearmed. They know you’re not trying to pull the wool over their eyes, so they’ll likely be more concerned with fixing the problem than punishing someone for it.

Offering the building owner real-time schedule tracking, BIM and data-driven Advanced Work Packaging (AWP) tools means you unequivocally establish trust. They know your pay applications are accurate. They can see for themselves that you are where you say you are on the project. You can’t fake the financials and the actual progress on the job – and they know it.

This fosters dialog, leading to better relationships between owners, GCs, and trade partners.
Final thoughts: getting ahead of the problem

The beauty of BIM is that it’s a win-win for GCs and owners. It gives you a way to manage risk and budgets more effectively and demonstrate your conscientiousness and honesty to building owners at the same time.

But here’s the thing: you must be genuinely committed to transparency. You don’t have to share everything with the owners, but unless you’re sharing enough to put their minds at ease, what’s the point?

Here’s the other thing: more and more owners are catching on to BIM. Increasingly, building owners expect contractors to be transparent. And they have every right – they’re paying for the project, after all.

This means that, very soon, contractors may have to use BIM on their projects or they’ll fall behind. You must not be seen dragging your heels; you run the risk of looking like you have something to hide. Especially if your competitors already offer BIM as standard.

If you haven’t already, it’s time to get your house in order. No one wants to end up fighting over budget issues at the end of a project or losing profits to lawsuits. With real-time tracking and BIM, you stop it before it starts. You protect yourself – and you end the project on a positive note.

Discover how Hexagon integrates BIM into our Smart Build technology here >