How Blockchain and Construction Will Build a New World
When we think about industries set for disruption by blockchain, construction probably isn’t top of the list. After all, the traditional image of a building site seems far removed from crypto, coding, and hackathons. But there are potentially enormous benefits for putting blockchain and construction together.
This article will round up some of the possible use cases for blockchain in the construction industry.
Blockchain and Construction Supply Chains
A bad workman blames his tools, right? Maybe that’s a bit harsh, though. After all, the construction industry is dependent on the availability of quality supplies and tools, at the right time and in the right place. Given that the sector is highly fragmented with many different players, big and small, supply chains are a big deal.
Purchase orders, delivery notes, and invoices are often still paper-based. Firms frequently don’t know if the supplies they need are in stock when they start a project, which leads to delays and incurs costs.
These aren’t even the worst consequences. UK government contract Carillion collapsed at the start of 2018, affecting the jobs of around 43,000 people as a result. Sources pointed to its poor supply chain management as being a critical factor in the collapse, through lousy credit management and a lack of visibility over projects and required supplies.
The blockchain is already proving its ability to transform supply chains, in one instance through the partnership between Walmart and IBM. Using blockchain to manage construction supply chains could create a single source of truth regarding the availability and provenance of construction supplies, as well as tracking payments.
The industry is taking notice of this use case for blockchain and construction. Recent announcementshave now confirmed that Probuild, one of Australia’s largest building firms, has partnered with US blockchain construction innovator Brickschain for managing its global supply chain. The announcement confirms that “Probuild has the vision that Blockchain, IoT and Big Data can revolutionize the construction supply chain.”
Blockchain and Construction Project Management
Construction projects rely on various parties to work together to complete a building based on pre-defined specifications. Each party expects payment based on work done. Therefore, the peer-to-peer connectivity of blockchain, combined with smart contract functionality, brings excellent opportunities to streamline construction project management.
One study into the potential of blockchain in construction project management found that “[o]n the construction site blockchain can improve the reliability and trustworthiness of construction logbooks, works performed and material quantities recorded.”
Industry publication Construction Manager (they don’t mess around with fluffy, ambiguous names in this business) also reported on the development of two prototype applications combining blockchain and construction.
TraderTransferTrust is a payment system built on blockchain that triggers payment only on the completion of work done. Physical proof of work, if you will. ConstructCoin is another project from the same development team. It aims to create a marketplace of information about the construction industry.
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The Construction Blockchain Consortium (CBC) is an industry group set up by its members to investigate the potential for how blockchain and construction could play together. While the above use cases are transformational, the CBC outlines some cultural shifts that may occur in the industry as a result of using blockchain.
The building industry has become highly litigious. The CBC highlights how using blockchain to foster a culture of collaboration and ownership could help to reduce incidences of parties suing one another for shoddy work or delays in project completion. Further, the consortium believes that a less litigious environment “should encourage a less ‘defensive’ approach to decision making and thereby encourage innovation.”
Digitized Land Acquisition and Building Rights
In their paper about the future of smart cities, McKinsey points to the current bureaucracy involved in land acquisition and building rights as a barrier to agile construction. The paper goes on to explain how digitized solutions will speed up the process of obtaining land and building approvals.
Blockchain-based land registries provide a vast improvement over today’s paper-laden processes. Blockchain allows for speedier approvals with no loss of paperwork or waiting for multi-party signatures on physical documents.
Additionally, in countries, land disputes are all too common. A permanent, unalterable record of ownership has distinct advantages in proving ownership. India is among the countries that have been trialing the use of blockchain in land registrations.
Most buildings are subject to inspections at some point or another. Structures used by the public need checks to ensure adherence to safety standards. Building surveys often feature in sales of real estate, as they reveal any structural faults that may impact the valuation.
These inspections are often conducted in a fragmented way. An inspector or surveyor may have limited or no visibility of records from previous checks. This makes the process heavily dependent on the specific inspector, and errors or oversights may happen.
Blockchain offers the opportunity for a piece of real estate to come with its own permanent record of past inspections. Blockchain data is immune to tampering by any party who may have an interest in ensuring structure passes muster. Similarly, blockchain could also record any structural or maintenance work undertaken on the property over its life cycle.
More Agile Planning
Currently, there is a lengthy process to procure public funds for investment in infrastructure. Governments must justify the need to spend taxpayer funds on a particular initiative. This means that new infrastructure investment can take months or even years to come to fruition.
As we move towards the smart cities of the future, increased connectivity and availability of information could significantly speed approvals for new infrastructure investment. For example, a government body may quickly build a case showing increased traffic flows in a particular area, using sensor data from a blockchain. This enables faster construction investment in road improvements, traffic calming measures or other means.
Blockchain and construction may seem unlikely partners at first. However, like so many other sectors, construction depends on trust-based interactions with other parties along with solid record keeping. Therefore, assuming the industry can adapt, blockchain could provide significant value to the builders of the future.