My friend John is a successful independent contractor. Years ago, when email had finally established itself as a prominent communication method and the world was certain it was here to stay, John wasn’t so convinced. His phone was his only communication tool with clients. Using his computer to manage his accounting was as far as his technology endorsement reached.
Desperately I tried to convey the importance of email for his customer relations and the success of his business, to which he typically responded, “I don’t want to pay for that internet, and if people can’t be bothered to pick up the phone, I can’t be bothered to work for them.”
After he tired of my pestering…and several clients asking for information via email, he relented. Just a few months later, he sheepishly admitted that he noticed a marked spike in business - which was more than paying for the monthly internet cost.
Don’t Fear the Future
Many construction firms harbor that same reluctance towards building information modeling (BIM).
BIM, as defined by the National Institute of Building Sciences, is “a digital representation of physical and functional characteristics of a facility. As such, it serves as a shared knowledge resource for information about a facility, forming a reliable basis for decisions during its life cycle from inception onward.” In short, it’s a live information file of a structure – before, during, and after the build.
BIM provides more than a simple three-dimensional (3D) representation of a facility, which extends to spatial relationships, aesthetics, light analysis, acoustic properties, geographic information, and properties of building components. It permits all parties access to data regarding scheduling, estimating, real-time conceptual modeling and cost planning, trade verifications, sustainability, LEED tracking, facility management applications, and much more.
It Works Hard for the Money
In a time when construction is suffering a productivity crisis, access to vast standardized information about a structure and real-time analysis of revision implications throughout every stage of its development can boost productivity and trust for all parties involved – in fact, up to a 30% bump in productivity.2
However, this new building technique elicits misunderstandings and apprehensions from many firms, such as it’s a 3D model only, it’s not cheap, it requires training to use, and it may not appear to directly or positively impact project costs. Though the latter three points bear some truth, the benefits arguably offset them.
A Mckinsey report study revealed that using BIM rewarded 75% of businesses with shorter project life cycles, positive return on investments, and material and paperwork cost reductions.4
Benefits of BIM:
- Augmented coordination and collaboration
- Bettered conflict detection and risk management
- Enriched building life cycle management
- Preconstruction visualization
- Improved coordination & clash detection
- Accelerated drafting
- Improved overall project quality
- Amplified scheduling/sequencing
- Increased prefabrication
- Enhanced review & approval cycles
- Faster delivery
- Export improvements3
Takin’ Care of Business
All these gains bear a common critical element: they help improve processes, techniques, and even the end product itself – a building is a construction company’s product.
Why is this important? Because the activities surrounding BIM potentially qualify for valuable research and development (R&D) tax credits. When a business performs qualifying activities in an attempt to develop new or improved processes, products, techniques, and software, they acquire tax credits for a dollar-to-dollar reduction in the company’s federal tax liability - if the activities pass the R&D four-part test:
- Business Component
The activities must be related to the development of a new or improved business component for a permitted purpose of function, performance, reliability or quality to be held for sale, lease, or license, or used by the company in its trade or business.
- Elimination of Uncertainty
The activities must be intended to discover information to eliminate uncertainty regarding the capability or methodology for development or improvement of a product, process, or the appropriate design.
- Process of Experimentation
The activity must have been subjected to a process of experimentation consisting of evaluating alternative designs, testing hypothesis, and/or systemic trial and error.
- Technological in Nature
The activities undertaken must fundamentally rely on principles of physical, biological, computer, or engineering science.
The Future's So Bright…
The money returned on tax credits can help a firm offset the cost of BIM software and any training required. With the possibility of bolstered productivity, product quality, and such tax-saving potential, firms shouldn’t shy away from BIM.
In fact, with the federal government’s burgeoning BIM requirements for building development, and state and local governments following suit (Wisconsin and Texas set the stage with BIM deliverable standards), “there’s no time like the present,” as they say. 1
For a firm to render all possible tax credit savings, it would be wise to consult a tax professional well-versed in the R&D landscape.
1. Government BIM Requirements, Quarry Group, 2019
2. How to Integrate BIM Into Small Practices, Capterra, 2014
3. The Value of BIM for Life Cycle Management in Critical Facilities: When Time, Quality & Cost Matter, 2012
4. Imagining Construction’s Digital Future, McKinsey & Company, 2019