Calculating the Real Value of Virtual Design and Construction Technologies

construction tech

The AEC industry has been rather slow on the uptake when it comes to cutting-edge digital technologies, in part because there is significant confusion over how to assess the ROI.

What compels the average company to integrate new technology into its operations? There are surely dozens of reasonable answers, but most of them rest upon a fundamental business principle: ROI. The value of a new piece of equipment boils down to how much more efficient it is than the old piece of equipment, and what level of savings such increased efficiency will deliver.

In the architecture, engineering, and construction (AEC) industry, ROI calculi are complicated by the fact that no two projects are exactly the same. Unique terrain, physical constraints imposed by surrounding infrastructure, volatile raw material markets, and varying regulatory considerations are only some of the most common variables with which AEC professionals must contend while planning and executing a project.

As a result, the AEC industry has been particularly slow to adopt the kind of cutting-edge virtual reality (VR), augmented reality (AR), and virtual design and construction (VDC) tools that have the potential to revolutionize the way we execute construction projects.

The problem isn’t that members of the construction industry are against new technology on a fundamental level; rather, for building in particular, it’s difficult to calculate a tangible return upfront, which makes investment seem inherently risky. As a result, many choose to “play it safe” — after all, no one wants to be held responsible for sinking resources into something new that doesn’t work out.

However, I’d argue that there is a demonstrable ROI to innovative design and building software solutions — members of the construction industry simply need to reframe the way they think about the benefits these technologies have to offer.

How to Approach Digital Tech ROI

This tripartite approach to ROI is absolutely essential to understanding the real value of digital construction technologies. The extreme diversity among AEC projects does indeed hamper attempts to exhibit a concrete ROI with respect to hard costs, meaning we must focus our attention on soft costs – what we might call “procedural efficiencies” or “productivity” – and mistake prevention in order to confirm the value of high-tech tools.

According to research conducted by The Economist’s Intelligence Unit, AEC insiders fully recognize the potential of new technology to reshape their industry. Just over 37% of respondents – a plurality – cited “more rapid uptake of emerging technologies by contractors, suppliers, and clients” as the adjustment offering “the greatest potential for improving productivity in the construction sector.” More specifically, 36% – again, a plurality – mentioned VDC and BIM technologies as those that “can have the greatest impact on improving productivity in the construction sector over the next three years.”

Technology’s Underground Success

These high hopes certainly appear to be well-placed, as similar technologies have already delivered extraordinary results in construction-adjacent sectors. For instance, Hong Kong’s world-class subway system uses an artificial intelligence (AI) platform to schedule and manage the 2,600 weekly engineering projects carried out by its 10,000-person infrastructure maintenance workforce.

In addition to analyzing the system’s entire slate of projects in order to combine work and facilitate material and equipment sharing, the AI platform also ensures that workers are made aware when any of the hundreds of municipal regulations governing things like nighttime noise levels in residential areas are relevant to the task at hand.

Andy Chun, the architect of the AI platform, reveals that his innovation has greatly simplified the management of subway engineering processes, explaining, “Before AI, they would have a planning session with experts from five or six different areas. It was pretty chaotic. Now they just reveal the plan on a huge screen.” Between reduced planning time and more efficient work schedules, Hong Kong’s subway system saves $800,000 a year, thanks entirely to its AI platform.

A More Nuanced Understanding of Positive Outcomes

This is the type of technological success story to which AEC professionals in every sector should pay close attention. By using it to maximize operational efficiency and prevent waste, Hong Kong has leveraged technology into sizeable returns. It may not have been the most straightforward ROI calculation, but hey — $800,000 is $800,000.

And, according to a SmartMarket Report financed by McGraw Hill Construction, such healthy returns are readily available to anyone willing to take the technological leap. Indeed, among those AEC firms that have adopted a BIM tool, 86% report improved design visualization and presentation, 85% report being able to identify and resolve design conflicts up front, 82% report reduced rework downstream, and 81% report reduced errors and omissions in construction documents. Taken together, these improvements resulted in reduced overall project durations for 69% of the firms surveyed.

These are undeniably positive outcomes, but none of them represents a reduction in hard costs. However, soft costs and mistake reduction are just as important when calculating the ROI for a new technology. Designing and constructing a building is a complex, strenuous endeavor, but tools incorporating AI, VR, AR, BIM, or VDC are more than capable of mitigating the attendant difficulties.

So here’s my question: when a VDC program helps you notice a potential issue during planning stages — thereby helping you avoid countless hours of work (and the associated stress) involved with reactively solving problems during an active construction project — it may not show up as a concrete number on the budget sheet, but does that make it any less real or valuable?

Herein lies the real value of AEC technology: by boosting the efficiency of high-level tasks and, just as importantly, guarding against otherwise unavoidable missteps, technology dramatically reduces the risk of encountering unexpected costs. Many AEC professionals factor the hours of extra work into their expenses, simply accepting the fact that unforeseen problems are unavoidable. However, with smart and innovative technology on your side, this need no longer be the case.

And once you start adding up those hours spent addressing avoidable problems — 10 hours here, 14 hours there — then multiplying the total by an architect, a foreman, or an engineer’s hourly rate, it becomes clear as day that yes, cutting-edge AEC technology more than pays for itself.

Note: this article originally appeared on LinkedIn Pulse.

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