Over the course of any major capital project, an overwhelming volume of data is produced, from contract terms to project specifications to change orders and more, typically in the form of paper documents. Keeping track of it all manually is difficult and time consuming, and sharing project data with key stakeholders is another major challenge.
One solution coming to the fore is Blockchain-based “smart contracts,” which keep a meticulous and immutable digital record of all project terms, deadlines, milestones and payments. When changes are made, the record is universally updated in real time, and the revised contract becomes instantly available to anyone needing access.
“When it comes to incorporating blockchain technology in construction, the results can be transformative – from streamlined materials management and reduced overhead costs to increased forecast accuracy and scenario planning,” Michael Matthews, Vice President of Strategy & Consulting at Enstoa recently wrote in Construction Executive.
Blockchain is perhaps most commonly known as the technology underpinning cryptocurrencies like Bitcoin and Ethereum, but the technology has far-reaching implications for a broad range of industries from healthcare to banking to manufacturing, and of course, construction.
Most construction companies these days use some form or another of software to manually track projects and stay organized. But with so many tradespeople, vendors and subcontractors involved in a typical project, synchronizing and disseminating the information gathered under those distinct software silos is no easy feat. By the time usable data is extracted and curated from one program, sent to another, interpreted by a supervisor and explained to their team, it might have already changed. This glaring inefficiency in communication causes project bottlenecks, particularly when action is taken on outdated information or answers to questions are not immediately available.
By keeping a digital record of all relevant project data on a distributed ledger system like blockchain, everything becomes fully referenceable in a unified environment, from manufacturing to materials, shipments, work orders, project specifications and changes, and of course, outstanding payments to vendors and contractors.
Specific project tasks can be assigned and monitored using blockchain, which are added to the chain as new “blocks” waiting to be completed, in essence creating a separate digital contract for each item assigned. Upon meeting the criteria laid out in the smart contract, proof is submitted and payment is triggered automatically, all without the need for an attorney or even any paperwork. Once the boxes are checked off, that information becomes accessible to all project stakeholders. This adds a layer of transparency to contracts and streamlines the payments process, reducing the chances for any misunderstandings or delays on the payment side since everything occurs on a common platform.
Matthews writes that this transparency benefits firms at every step, particularly when it comes to reducing common contract and materials headaches firms often face.
Dispute resolution becomes faster. Inventory management is streamlined and it’s possible to order and receive goods only as they are needed
“Dispute resolution becomes faster. Inventory management is streamlined and it’s possible to order and receive goods only as they are needed (aka “just-in-time planning”), which dramatically reduces waste. All of this adds up to lowered costs and accelerated schedules, construction’s two biggest drivers of value.”
Time is money in construction, and any confusion that can be eliminated by using smart contracts means fewer delays and less resources squandered quibbling over minor contract disputes. Leveraging the blockchain to digitize contracts can help firms improve workflows and communication, reduce waste and stay on schedule.