Blockchain in construction – its all about data, trust and productivity – New Technology


Governments have often used the construction industry to
kick-start the economy in times of recession, to sustain growth and
stimulate employment. In Australia, construction generates over
$150 billion in revenue (about 8% of the GDP) and employs over a
million white-collar and blue-collar workers. But a new challenge
has emerged as the construction industry modernises – a
‘new-collar’ workforce, embracing new technologies and
skills, must now be prepared to lead a modern construction
sector.

Challenges for the industry

The construction industry faces many challenges. Infrastructure
projects are complex, and stakeholders must manage projects through
a highly-fragmented supply chain of contractors, designers,
materials and equipment manufacturers, suppliers, and transport
providers – all while meeting a raft of regulatory
requirements. Overlaying this are complex contractual frameworks to
deal with risk allocation and project management, along with
performance security and insurance requirements. And increasingly,
project financiers and insurers are calling for more robust
performance assurances.

In Australia, there has been recent push by governments towards
collaborative contracting. Higher than expected bid costs, project
delays, contractor claims arising from risk allocation under their
contracts and inappropriate risk transfers have made it difficult
to achieve single point accountability for project performance.

The added layers of design review, quality assurance and
contract management processes – and the additional resources
required to implement projects – have reduced sector
productivity.

These factors have in part fed into the industry’s
regularly-reported quality and compliance shortcomings, with the
potential to erode both the value of constructed projects and
public confidence in them. They are also challenging the
industry’s traditional regulatory and governance
frameworks.

Industry experts have been working to overcome these challenges,
improve efficiency, and deliver projects on time and on budget.

A technical solution?

There has been much focus in the construction industry on the
use of technology to lift project productivity. However,
initiatives such as drones, 3D printing, Building Information
Modelling (BIM) – which allows the
integration of design processes – robotics, the Internet of
Things (IoT), virtual reality and the like have delivered only
modest to moderate gains. The construction eco-system remains
stubbornly fractured and dysfunctional.

Re-imagining processes to improve information transparency, and
to lift the industry’s approach to traceability and
responsibility for work product, will help project stakeholders
properly consider risks and costs and to allocate responsibility
for them. It will also lead to better-informed decision making.

Implementing this will require a reframing of trust levels
between stakeholders. This includes reconsidering the whole supply
chain– from design, procurement and sourcing of materials and
manufacturing, through quality assurance to the incorporation of
materials into infrastructure to complete its lifecycle. Emerging
technologies are being applied in other industries to unlock these
challenges – it is clearly time for construction to do
likewise.

Key to these technological improvements are the capture,
digitalisation and best use of data. However, trust is still a
paramount concern. Can Blockchain technology help?

Blockchain – what is it?

Blockchain technology is increasingly being developed and used
in a number of industries, including in the banking and agriculture
sectors. It is a form of distributed ledger technology that enables
the reliable integration and use of data that records or relates to
transactions or processes.

Information is stored across a network of computers and
protected by cryptographic technology – in essence, embedded
algorithms that are stored chronologically and cannot be
changed.

The technology allows approved stakeholders to access
information in the ledger with a high degree of trust and
transparency, through a verified and secure chain of records.
Stakeholders can readily add to, and access, complex layers of
design review, quality assurance processes, project management
transactions and payment records.

Blockchain technology can deliver savings through the reduction
of intermediaries and intermediate steps in a process – for
instance, multiple layers of review and sign off in design review
and quality assurance. By reducing risks, associated costs such as
insurance and legal expenses can also reduce.

What problems can blockchain technology solve?

Payments

One of the construction industry’s challenges is to ensure
that timely payments are made to stakeholders. Regulatory
frameworks and requirements such as the security of payment
structure, defects bonds, retention trust and project bank accounts
are attempts to bolster protection for payments made downstream to
subcontractors and workers.

Blockchain technology will improve the accountability and
integrity of the payment process by enabling secure, traceable
payments. It will allow government bodies responsible for
monitoring this and enforcing sanctions against violators to be
alerted to incorrect information, and contraventions of
regulations.

Work health and safety management systems

Site events (such as safety incidents, failures of materials,
site conditions and weather conditions) are currently logged
manually or via sensors and IoT tools. Blockchain technology can
provide a secure source of WHS and site information, with greater
accountability.

Supply chain management

Blockchain technology can be applied to all stages of supply
chain management – from design to materials procurement,
incorporation and construction.

Imagine secured data identifying the origin of materials, their
compliance with specifications and quality checks, and
incorporating delivery/packing notes from the place of manufacture.
And tracking the materials through shipping, customs and delivery
to a site, then site inventory and incorporation of the materials
into the structure – along with the location of those
materials.

This level of accountability for products and services will
deliver a high level of transparency to stakeholders. It will
encourage the right behaviour and trust – as the saying goes,
‘you can run but you can’t hide’. An efficient supply
chain ecosystem will reduce redundancy, as less inventory will be
required to deal with contingencies.

Building Information Modelling

A combination of BIM and Blockchain will allow high volumes of
data to be collected from different design packages, presented to
stakeholders in a dashboard format, and securely shared between
them. Project progress can be monitored and updated, and work hours
(whether man hours or machine hours) registered and compared.

BIM will allow an audit trial of a design review and approvals
process, identifying IP ownership, any clashes between approved
design and construction quality, proposed modifications and their
impact on design and construction.

Some European governments, and the US FAO, already require BIM
level 2 usage for government procured projects. Their goal is to
eventually progress to 7D-BIM (which allows monitoring and
management of a facility through its life cycle from construction
to asset management) when time, cost and performance data are
available.

Smart contracts

Blockchain technology allows the creation of ‘smart
contracts’. These are self-executing digital contracts that
automatically transfer currency or an asset once the underlying
code establishes that a predetermined condition has been met.

Smart contracts can be used to automate payments, track
intellectual property rights, and transfer ownership of materials
and equipment. They can also reduce ‘paper-shuffling’
between intermediaries. A payment between two parties in one
location might automatically cause an order to be sent to a
supplier in a different location, for production and delivery of
materials relating to a different aspect of the project.

Effective carbon tracking

Australia’s Data 61 helps industries like construction to
engage in the global digital economy. Data 61 works with industry
and the nation’s key institutions to identify opportunities for
sectors to achieve market impact above their ‘normal
weight’.

Australia’s construction sector represents approximately 3%
of global construction activity. Leadership in the use of new
blockchain solutions could help the sector meet this challenge.

Using blockchain technology, many distributed data collections
can feed into a common platform. Tracking both embedded carbon
(making buildings) and operational carbon (using and maintaining
them) is an increasing challenge for construction –
blockchain could help solve this problem, as the industry adopts
greater accountability for its environmental impact.

Where to from here?

A number of organisations are already initiating test and
prototype blockchain or data-related projects to assist the
construction sector.

For example, to drive the development of construction
procurement and material provenance, Tata Steel has initiated a
blockchain pilot project together with SAP, IBM and Arup as members
of the Construction Smart Contract Committee. This aims to create a
transparent chain of custody for all resources, with the pilot
focusing on steel construction materials.

On another project, Maersk and IBM are creating a
blockchain-based register to track shipping containers.
1

Various research bodies and universities in Australia and
overseas are already researching the use of blockchain technologies
in a range of industries including construction. Western Sydney
University is undertaking various projects including integrating
blockchain data with BIM for construction supply chains, developing
a benchmarking methodology and a blockchain-based waste management
platform for construction projects, and a methodology for
estimating embodied carbon through a distributed ledger platform
for construction supply chains.2

It is important that the integrity of the blockchain technology
is preserved and not subject to cybersecurity threats.

Governments can take a lead – using their purchasing
powers to set standards. Although the use of BIM is increasing,
Australia still lags behind other countries. By comparison, the
United Kingdom government (among others) has introduced a strategy
requiring Level 2 BIM usage for all government-procured
projects.

Data 61 estimates that Australia could save over $25 billion per
year by adopting more integrated construction regulatory compliance
systems – reducing reporting inefficiencies and duplication.
This will require the creation of a new platform of pre-competitive
system infrastructure.

As more blockchain research and pilot projects are rolled out,
it is only a matter of time before this exciting technology
delivers the project efficiencies that are promised. Stay
tuned!

Footnotes

1
https://www.psimetals.de/fileadmin/files/downloads/PSI_BT/Events/2017/I40/9_1a_Vos_Tata_Digitilization.pdf

;
https://www.ice.org.uk/ICEDevelopmentWebPortal/media/Documents/News/Blog/Blockchain-technology-in-Construction-2018-12-17.pdf

2
https://www.westernsydney.edu.au/scem/school_of_computing_engineering_and_mathematics/research/centre_for_smart_modern_construction

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.



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– Australia

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