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A software technology called Building Information Modeling--BIM--has been used for more than a decade in the design and build world, but it is now only becoming apparent that it promises to change how all things risk management are done in the architecture and design world. Some people in the industry would just as easily switch out "promises" in that last sentence with "threatens."

"We think that it's more than a piece of software technology," says Lorna Parsons, managing director of the construction industry programs at Victor O. Schinnerer & Co., an underwriting manager of professional liability programs. "It's not only the technology, but around the technology, the different players will probably assume different roles, different risk, and it may very well require us to reorder the insurance depending on how the industry decides to practice."

"It has potential for good and evil," Parsons explains about BIM. "It has huge amounts of potential to go either way."

PROMISES

Howard W. Ashcraft Jr., a partner based in the San Francisco office of law firm Hanson, Bridgett, Marcus, Vlahos & Rudy LLP and frequent lecturer on the technology, uses a very simplistic but apropos analogy to explain why BIM is so appealing, though.

"Just the same way that spellcheck keeps us from making spelling errors," he says, "BIM is going to stop a lot of very simple errors that are very troublesome right now in the construction industry."

Making sure things don't go wrong in the first place, Ashcraft says, is the best risk management strategy of all.

"I would rather avoid the problem, avoid the failure," he says, "than have the failure and have good contract documents, because you will still have litigation if we have a failure."

The technology is like any model--a type of software that acts both as a massive repository of data and a visual tool that can transform that data into three-dimensional images (some even say 4-D or 5-D) of whatever is being constructed.

"The result of this--it's not just to create a nice model that you can show the client on the screen and fly around and do all of these wonderful things with it," says Jim McGarry, chief financial officer at Little Diversified Architectural Consulting, a top-10 design firm in Charlotte, N.C. "Really what you're doing with this technology--you're building it in essence before it's built."

That means that errors and omissions, whether negligent or expected, which wouldn't normally be discovered until actual construction was under way, now reveal themselves on screen in the studio beforehand. BIM offers conflict-checking routines that can alert the designers ahead of time that something won't work.

"What we're seeing though is a great opportunity to just very simply find out if you have drawing coordination problems," says McGarry.

This speaks to another fundamental risk management benefit of the technology--communication. Lack of communication among all stakeholders is one of the major issues of any construction and design project, if not the major one.

"The big No. 1 overall overriding issue is lack of communication," says Velma Lane, senior vice president at Van Gilder Insurance Corp., in Denver, Colo.

BIM allows unprecedented coordination among all stakeholders. Owner, architect, engineer, contractor, subcontractor--all have access to the model, at the same time if need be, opening up an unprecedented avenue of communication.

"BIM by its very nature is a collaborative technology," says Ashcraft. "It gets most of its power, a lot of its power, by the fact that people can share information freely, people can interact with the information freely and to the greatest extent possible, people can use the same information for their various purposes."

THREATS

Detractors are quick, however, to point out how each of these benefits has a dark side. With such easy collaboration, for instance, Parsons says, BIM also opens the door for one stakeholder to dominate the project with its needs. Value engineering, where an owner cheapens down a design, is already an issue in a 2-D world, but with BIM, it could become more pervasive.

"BIM gives a lot of ability to dismiss the architect at some point," says Parsons.

Skeptics like J. Kent Holland Jr., attorney and managing principal of ConstructionRisk.com LLC, which provides construction and environmental risk management services, can rattle off the technological issues of using a collaborative software product.

What happens if one of the parties doesn't have compatible hardware or adequate broadband to run the model? What if the server with the model on it crashes? What if one of the party's IT systems allows a hacker to come in and butcher the data? Will all of the parties be aware if one of them makes changes to the design?

There are whole separate lists of identity theft and security questions if a design firm hosts the model on its server. "I'm frightened to find that a number of our large clients are actually hosting it on their own servers that they have all their employee information on. They're letting people inside their business, and it's not clear what protection they've taken," Parsons says, adding that firms in this case might even need coverage similar to what an IT-provider company might need against viruses or hacker vandalism.

Then there are the more fundamental questions that no one has an answer for: Who owns and controls the model? There may be no precedent in the design and build world to go on.

"The problem is that our legal systems are all based on the idea of definite responsibility, such that I know what I'm responsible for, I know what you're responsible for, and if something goes wrong, we can apportion responsibility and liability along those lines, and all our contract documents are built around that same basic set of concepts of trying to define where the edges are with liability, and not surprisingly, insurance tracks those boundaries," Ashcraft says. The "bright lines" of apportioned liability in today's laws and contracts disappear on a BIM project.

BIM IS BUILDING

The risk management and legal experts interviewed for this article agree that BIM fails to fit in any of the contracts and project delivery standards out there, and that could leave architects on the line with more risk. Yet builders and designers already use the models on projects, despite the unanswered questions, and its application will only increase.

"A lot of the insiders in the industry predict that in the next five to 10 years BIM will be mandatory and the standard of the industry," says Parsons. She notes that already the U.S. General Services Administration, the federal arm in charge of securing private-sector architects and engineers for public structures, is making BIM mandatory on all its jobs. Big private projects have gone BIM, says Parsons.

Smaller firms, such as Hall's GH2 Gralla Architects, aren't using it yet. It's too costly, suggests Pavloff. But larger firms are. McGarry says his firm is in the process of migrating 100 percent to BIM. "We're not there, but we're trying awfully hard to get there."

They're doing so, however, on an ad hoc contractual and legal basis. "We have the use of new technology that has been, if you will, shoehorned into old forms of contract, and it hasn't worked well," says Ashcraft. The lawyer knows of significant contract issues that have already arisen on projects because of BIM, though he won't go into specifics. "I only know what people involved have told me, and I've been told I'm not supposed to talk about that."

As for insurers, they seem to be all over the place. "It runs the gamut from 'we're monitoring,' to 'we think our coverage does what it needs to do, we don't need to endorse anything more,' on to 'we don't know what you're talking about,' " says Pavloff.

She says carriers are trying to "get their arms around the risk," though she knows of only one insurer that's "ahead of the game." It has a special endorsement in its E&O policy to add broad technology-related coverages. No other carrier can say the same. For his part, Ashcraft says he's skeptical of the insurance industry's understanding of BIM.

Wherever they're at, insurers have their work cut out for them.

"At this point I'm a little bit leery of insuring, or at least issuing a project policy, on a project using BIM," says Holland, adding that at the very least, "if BIM is being used on a big project, insurers need to know that and consider it in their underwriting."

While carriers figure out how to underwrite the risk, it seems firmly on the shoulders of the architecture and design community to solve the contractual, technological and other risk management issues building around BIM. A thorough risk assessment is in order at design firms, according to Pavloff--not just on professional liability issues, but everything from insurable first- and third-party risks, to operational and financial risks.

And in the meantime, firms better control their exposures by continuing to shoehorn BIM projects into their contracts as best as they can.

MATTHEW BRODSKY is associate editor of Risk & Insurance®.

November 1, 2006

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