Building Information Modelling (BIM) is changing the planning, design, building, and operation of infrastructure. When Cost Benefit Analysis (CBA) is added to BIM investors get both transparency of value and understanding of risks in complex infrastructure projects. CBA-BIM has the potential to open up the infrastructure market to more private investors.
There is no doubt that we have under-invested in infrastructure 1 and a catch-up is required. Government fiscal constraints and the fact that the public benefits have not been well articulated to taxpayers mean that the public purse has not been opened to finance the infrastructure deficit. The private sector could fill the infrastructure funding gap 2 and certainly investors want to invest in infrastructure – especially in impact projects – those with a social and/or environmental benefits. But currently impact investors lack a means of understanding the financial risk and a common set of metrics to value social and environmental benefits.
BIM is a method for organizing and exchanging data on the physical and functional characteristics of infrastructure projects. BIM standardizes data, organizes it into useful information, and opens projects up to scrutiny. And with powerful visualizations it puts projects into context. BIM’s standardization of information allows it be used throughout an infrastructure project – from when only proponents care, to when planners, economists, engineers, architects and designers are involved, and to when bankers, lawyers and financiers enter the picture. BIM sounds like something for engineers and architects, why should investors care about BIM? The opportunity to add economic, financial and risk data into BIM can help infrastructure investors by:
• Providing the missing common financial metrics for infrastructure projects;
• Reducing risk and aiding in understanding risks for financial decision-making; and,
• Allowing for bundling of smaller infrastructure projects into similar risk-return packages that can be aggregated into pension-fund sized tranches.
In a public-private partnership, investors may be getting a return from an infrastructure project’s operations, or their funds may be tied to delivering the project on budget and schedule. Investors should be interested in BIM because it is cutting the project setup costs as it moves between project phases and is handed off (for example from planning to design, or construction to operation). BIM is also reducing the cost of design iterations and construction document errors because professionals can design, visualize, simulate, and analyze the project digitally—before they build it. 3
Because BIM forces standardization, procurement agencies like the transparency this affords them when comparing competing projects. It is the increased standardization and transparency of infrastructure projects brought about by CBA-BIM that should be the real benefit to infrastructure investors. This is why the finance community should be pushing for the use of CBA-BIM.
BIM can incorporate time or schedule as the fourth dimension and cost or budget as the fifth. CBA-BIM adds more dimensions – benefits, beneficiaries, and risk extend BIM and make it useful to the finance community. From a BIM model you can see who wins, who loses, who bears risks, where and when. Also when metric and risk measurement is done the same way across projects with the same inputs different projects can be evaluated and bundled together.
Converting CBA and risk analysis to work with the spatial relationships in BIM is quite natural. For example, property values vary with the distance to a feature (such as a park) or to a detriment or risk (such as a pollution source).
A new transit stop can reduce travel time and cost for transit users and drivers. It can increase job opportunities for those without cars. Transit can provide access to centralized, and less expensive, healthcare. It can also increase property values by making a neighbourhood more walkable. And more walking or cycling to transit reduces personal and public healthcare costs. All of these public and private benefits depend on distances – from houses to transit, from houses to businesses, from houses to healthcare and daycare centres.
Figure 1: The Canada Line transit line in Vancouver shown in a whole city context in an Autodesk Infraworks BIM framework.
This allows analysis of, for example, distance to city attractions, low-income housing, and jobs/business areas.
Pension funds want to tap into the inflation protection, low correlation with financial markets, and long time horizon of infrastructure investments. Impact investors want to understand the sustainable and community benefits of infrastructure. BIM provides transparency and standardization to infrastructure professionals. CBA-BIM offers investors the same standardized lens on the financial, stakeholder, and sustainable risk and returns. And for project proponents CBA-BIM allows for bundling of projects of the same risks so that smaller projects can be combined.
John Parker is the Chief Economist for Impact Infrastructure LLC. He has over 30 years of experience as an Economist, led the Canadian economics business for HDR and co-pioneered with John Williams, the development of the Sustainable Return on Investment (SROI) framework.