Taking Advantage of Virtual Construction to Mitigate Risk and Protect Profits

Virtual Construction or Building Information Modeling (BIM) has become an effective layer in construction from design to prefabrication to field layout. It is especially useful for contractors in saving time, increasing quality and providing better control of scheduling by making traditional construction processes more efficient. Understanding where virtual construction fits into the overall build process is important to manage this new layer effectively as well as understand the risks that it can add to a project.

Contractors initially using BIM for prefabrication and post co-ordination field drawings need to account for any differences compared to the contract budgets. Certainly, the goal is to create budget savings thru this process, but there may be budget increases due to issues such as mechanical equipment interferences requiring re-routing of your equipment or any unforeseen engineering issues that may affect your scope of work. In either case, it is important for a project manager to understand what has been changed and why and to properly document it. The short-term advantages are in having the right information to manage the project successfully, and the long-term gains are in protecting the project from delays, claims and other such issues that waste time and erode profits.

BIM’s Objective

BIM was originally designed to create architectural 3-dimensional (3D) renderings of a project before any construction. It also quickly became an excellent tool for contractors to coordinate equipment interferences or clash detection for better collaboration between trades. BIM’s objective is to create a 3D virtual model of a project to review construction designs and work out any changes before incurring actual construction costs to ensure budgets, schedule and quality are maintained once construction is underway. Project managers can use this model for early detection of undesirable issues that may be discovered during this virtual design process. The earlier an issue is identified, the quicker corrective action can be taken, mitigating any potential risk and loss of profits.

The Importance of a Work Breakdown Structure

Best practices in project management include utilizing a Work Breakdown Structure (WBS) format. A WBS has a direct relationship with the 3D design model where the model is essentially an enhancement of the WBS providing a project manager another useful perspective of the project.

An important function of BIM is the detailed real-life model that becomes the basis for a deliverable project plan. Project workflows become more efficient, and deliverables are measurable when adhering to the plan. A WBS has traditionally provided a process of itemizing project tasks that become the construction model for each project.

The Project Management Body of Knowledge (PMBOK) defines the work as a composite structure that orients the hierarchy of work to be performed by the project team. Therefore, it is prudent to create the WBS at the pre-construction stage to help ensure thoroughness of the design and budgets and serve as an early foundation for effective scheduling and cost estimating. As a project moves to the construction phase the hand-over of the project details lies within the WBS and can be further utilized to extract valuable information to expedite the construction workflows. Budgeted costs developed from the WBS also become the basis of the projects Schedule of Values (SOV) used for progress billings.

Bidding a project like it would be constructed is the basis of WBS. Contractors communicate their work thru their prices and the more a project is detailed based on the way it is constructed, the easier it is for others to understand and communicate with you.

Accounting Cost Codes

Accounting cost codes are used by operations to track actual costs and specifically labor costs across a generalized list of installation cost codes. When cost codes are used in conjunction with a WBS greater detail can be extracted about the specifics of a project. For instance, if there are two buildings part of a project, knowing how much cable for each building allows purchasing and labor tracking to be more effective. As actual costs accumulate during construction, the WBS is further used to track budgeted costs to actual costs. A WBS is an invaluable tool for a contractor to develop a plan and then execute and measure against that plan providing effective QA/QC between estimating and project management.

Estimating

Estimating software has become the catalyst for contractors in creating a WBS as the basis of each estimate. Project tasks can be separated into systems like horizontal cabling, intra and inter building backbones, MDF’s, IDF’s, fixtures, feeders, fire alarm, etc. A hierarchy of sub tasks can then account for the physical layer of construction like buildings, floors, floor heights, itemized construction phases or areas. Detailed bills of material, labor hours and costs can be accounted for each task to ensure completeness and accuracy of the design or estimate. As BIM continues to evolve, 3D construction modeling designs can now generate bills of labor hours and material for more accurate cost comparisons to budgets and virtual designs. At this point, the budgets can change and the communication channel between estimating, virtual design and project management is thru the WBS and cost codes. For example, you can capture the delta in estimated budgets to post co-ordination field drawings for any task of the WBS including who, what, where, when and why all need to be documented.

As mentioned earlier, the short-term effects are potentially missing opportunities to recover additional costs and the understanding of the real cost to manage the actuals more effectively. The long-term risks are delaying the project, affecting other trades, back charges and litigation claims and loss of profits.

The Positive Effects of Virtual Construction and Estimating on Project Management

The actual labor hours on a project are dependent on many variables during construction and mitigating the risk of labor has proven to be one of the biggest factors in maintaining budgets and profits in construction today. The ideal marriage between 3D modeling and development of a WBS is the term 3D. 3D models provide many of the essential elements that can affect the labor on any project. For instance, the difficulty or ease of an installation will be influenced by multiple aspects (e.g., floor height, which level, and compounded when multiple buildings of varying construction). The installation costs can also be affected by the requirement of premium time for any of the areas of the project. Therefore, it is critical the budgets take into account these physical and logistical variables to ensure the budgeted versus actual labor costs are as close as possible to ensure and maintain profitability.

The WBS is the link between virtual construction and estimating and can be used as a repeatable process that a contractor can use historical bid analysis that can improve their operations by learning what they perform well at and what they need to improve on. The WBS is the process and estimating software, virtual design software and the project management software facilitate making the process more efficient. When virtual design software is used with the WBS process, a contractor’s overall operations will have better communications and a more efficient workflow between the estimating and project management departments.

Although there is a wealth of correspondence, files, and drawings associated with any project, project managers need to collect all this information. Forgetting to write or send an email could have severe impacts on a project concerning schedules, delays and costs that not only affect our work but other trades as well. Without thorough, diligent documentation we are putting ourselves at risk to be blindsided by anything involving money. This is the unfortunate nature of contracting and diligence in documentation is our greatest offense and defense.

Software in Construction

Advanced software has been developed over the years to create 2D and 3D virtual construction models for more efficient workflow and collaboration from design to completed construction. eSUB’s project management software is also leading the industry in providing subcontractors a mobile cloud based solution that focuses on protecting the profits of subcontractors thru diligent project documentation. Documenting all phases of a project from pre-construction to completed construction is critical for effective decisions and the key to successful projects.

As mentioned, the objective of virtual construction is to find ways to save in construction costs or identify risks in potential budget overruns before construction. These changes need to be documented and logged with any correspondence related to these changes such as drawings, pictures, scope, schedule, and price also included. If and when a disagreement occurs on a project, especially when it effects who is paying for what, simple he says-she says is not effective either as an offense or as a defense.

eSUB works as a central repository for a contractor’s team of project managers, field foremen, accounting and corporate management to all work together in an online environment. Core construction documents such as drawings, daily reports, RFI’s, change orders, submittals and meeting minutes can all be created and logged for status, reminders, and approvals that establish standardization and professionalism across all project managers.

The eSUB founders were claims consultants for 25 years with their practice focusing on protecting the interests and profits of subcontractors. eSUB’s project management software provides the same security and not only designed to create an efficient document workflow but also, and more important, is in how, when and where a document was created and the wording of the document itself. In fact, these built in best practices are essential for successful claims. The good news is that the true benefit comes in actually avoiding conflict, risk, and litigation. Documentation is not conflict but a form of good communication and good business practice that builds credibility, trust, and relationships in the long run.

The worst type of project is where costs run out of control with nothing to measure losses or gains. eSUB can load your WBS and company cost codes so that they can be easily tracked against the labor and costs that are being captured daily in the field. As budgets change due to virtual design modifications identifying them, documenting the changes and updating the budgets allow the ‘where I am now at this point in the project’ look, from the convenience of any mobile device. Performance and efficiency of the installation crew can also provide early warnings of project tasks that might be falling behind.

Conclusion

Without solid budgets to start with, project management is merely reactive. Without diligent documentation throughout the entire project, from pre-construction to completed project management, the project and company can be left open to risk, failure and lost profits.

The earlier issues are discovered on a project, decisions are more effective, and losses of profit are mitigated. Virtual construction can provide additional early detection and pin pointing of issues for project managers that can affect cost and schedule. Issues that can not only affect the success of a project but the success of the company. Project managers for years were left with minimal advances in technology with accounting, estimating and CAD getting all the technology to make their jobs easier and more effective. Now contractors are finally given ‘tools of their trade,’ to make their jobs and their projects more successful. Virtual construction technology can provide project managers early issue detection. eSUB project management technology can provide an automated and standardized documentation process that collects the documents in a manner that protects a subcontractors profits and avoids claims.

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