Virtual Design and Construction (VDC) has become a core function on many construction projects, but how it is budgeted remains inconsistent. Depending on how contracts are written, VDC costs may be reimbursable through the project's Cost of Work ("below the line") or absorbed by the General Contractor as overhead ("above the line"). This distinction can have significant implications on profitability, transparency, and even how VDC is prioritized throughout the project.
The Historical View: VDC as Overhead
When VDC first entered the industry, it was treated as an internal advantage—a way for GCs to plan smarter and look more competitive during pursuits. It wasn’t a contractual requirement, and most owners didn’t know to ask for it. These early efforts were often seen as optional "bells and whistles," benefiting primarily the contractor performing the work. Naturally, VDC costs landed above the line, paid from the GC's fee or general conditions.
Today, that framing is outdated. VDC now benefits the entire project team. Coordinated models reduce field conflicts. Site logistics visuals support field execution. 4D phasing models help align schedule and trades. Owners, design teams, trade partners, and permitting authorities increasingly depend on these deliverables. Yet contract templates haven't caught up—and when VDC isn't scoped clearly, it still defaults to overhead.
The Shift Toward Project-Side VDC
What used to be an internal planning tool is now part of the project's critical path. These are project-side VDC deliverables: federated models, clash reports, coordination logs, 4D visuals, and documentation tied to the BIM Execution Plan. They support execution, not just internal decision-making. When deliverables like these are shared across the project team and drive field outcomes, they should be considered part of the Cost of Work.
Many GCs have started to take this seriously, scoping VDC as a reimbursable service—especially on GMP or cost-plus contracts. In these cases, VDC costs are defined, budgeted, and tracked like any other part of the build.
Contract Structure Matters
Whether VDC is above or below the line depends heavily on the contract type:
- GMP / Cost-Plus: VDC can be reimbursable if scoped. If included in the Cost of Work or general requirements, these costs are covered by the owner.
- Lump Sum: VDC costs are baked into the GC's lump-sum price. Added VDC effort must be justified through change orders.
- CM at Risk: Similar to GMP; VDC can be reimbursed if identified and scoped early.
- Design-Build: VDC is typically considered a design-side or contractor-side expense unless the owner specifies otherwise.
- IPD: VDC is often shared as part of pooled project costs, especially when supporting shared goals.
If VDC is not scoped, it's not reimbursable. "If scoped" means the VDC services are described in the contract—defined by their deliverables, responsibilities, and sometimes budget. Without that language, they default to overhead.
Change Orders and VDC Effort
Change events are a natural part of project delivery, but they often require additional VDC effort: model revisions, rerun clash tests, meeting coordination, updated visuals. When VDC is above the line, these hours are absorbed unless wrapped into broader change order pricing. If VDC is scoped below the line, added effort can be tracked and justified for reimbursement as part of the project.
Tracking VDC time and outputs is essential either way, especially when owner changes trigger a ripple of coordination needs.
A Recommendation to Project Executives
Project Executives should consider tasking their VDC Managers to plan VDC activities with the intent of being scoped below the line. That begins with defining what VDC will deliver, who it will serve, and how much effort will be required. From there, those costs can be built into the GMP or cost-of-work budget.
This allows VDC to be discussed transparently during contract negotiations with the owner. When VDC is treated like any other reimbursable service, expectations are clearer, deliverables are tracked, and the value of VDC is easier to demonstrate.
In Closing: Something to Consider
This article doesn’t prescribe a one-size-fits-all solution. Project types, owner preferences, and team dynamics all vary. But the question is worth asking:
- How is VDC structured on your current project?
- Is it funded in a way that supports transparency, accountability, and delivery?
- Should we, as an industry, revisit how VDC is positioned in contracts?
I welcome your insight, whether you're a Project Executive managing budgets or a VDC professional navigating coordination. Let's start the conversation!