A Solution looking for a Problem

How Blockchain will transform the Construction Sector

Introduction

What is disruptive, fragmented and works with insanely minimal margins? Even the dogs in the street know the answer is construction, an industry which should do better. This is an obvious observation but one which is rarely broached. What to do, and how to do it, are also questions commonly asked, but the tradition of ‘this is how we always do it’ and ‘resistance to change’ loom large.

What is needed is a method to actively engage stakeholders beyond handover, and more importantly to reward such an endeavour. If there is an incentive towards continued-engagement, the benefit and potential is breath-taking. Key to this is performance, and key to performance is measurement. So, if you propose a building that will save 20% in energy use for the next twenty years, a method is needed to avert green-wash to deliver the goods. Such a situation could mean a pay-out of 5% of that saving for each year that the building delivers, whether it is measured in energy bills or monitored and sensored on a building dashboard. A repeating paid-out dividend is an incentive not known in the industry today.

Once established, better practices prevail, and the user gets the building that he/ she requires. To verify and validate such a process blockchain enters the frame. Blockchain offers a trusted framework for the data validation. It records performance, in a decentralised, immutable opensource manner. Moreover, it creates a single version of the truth, eliminating latent redundancy and adversarial conflict.

To implement this new environment, a smart contract is needed. It uses if/then structures to administer the work. They provide protocols that verify, simplify and enforce performances. Once a party executes a task or when a milestone is achieved, a payment can be triggered. Using BIM, supplies a vehicle to this end, but this means that the model needs to become a digital twin. A digital twin needs a custodian, and this will be the architectural technologist.

Automating this process will also open the industry up to integrating the Internet of Things (IoT) and Radio Frequency Identification (RFID). These technologies will make buildings proactive throughout their life and inform right up to their demise, whether it is transformation or decommissioning when their life cycle closes. This makes the whole process sustainable in its purist sense. Construction accounts for nearly 40% of carbon dioxide produced on this planet and the first step in reducing this amount is to be able to measure it and determine in an evidencebased method how to tackle it. Changing how we do it and rewarding it makes sense.

Margins

Jason Farnell stated that the ratio of risk to reward in contracting is seriously imbalanced, or that the margin contractors expect to earn from projects is insufficient for the uncertainty and risk exposures they face in delivering them (Farnell 2018). Carillion one of the UK’s largest contractors collapsed with £1.5B in debts caused by underbidding contracts with low margins (iBuild 2022). The industry expects 2-5% profit margins, the reality is closer to 1.5-2%.

Eurotunnel had difficulties in motivating the suppliers once the contract had been awarded. The root to this situation can be found in the negotiation of the contract, essentially between banks and contractors. Here two cultures collide, on the one; the banks prefer to move the contractor to a fixed price, which reduces their risk. On the other, the contractor works on the basis that the estimates have to be low, to ensure that the project gets commissioned.

‘In banking you bid high and then trim your margin: in contracting you bid low and then get your profits on the variations’ or as another said ‘the project price... was put together to convince the governments, it was a variable price, a promoter’s price. What it was not was a contract price’ (Winch 2002).

Risk

‘Imagine a world where all communications throughout the process are clear, concise, open, transparent, and trusting; where designers have full understanding of the ramifications of their decisions at the time the decisions are made; where facilities managers, end users, contractors and suppliers are all involved at the start of the design process; where processes are outcome driven and decisions are not made solely on first cost basis; where risk and reward are value-based, appropriately balanced among all team members over the life of a project; and where the profession delivers higher quality design that is sustainable and responsive. This is the future perfect vision of Integrated Practice’ (Broshar, Strong, and Friedman 2006).

This was stated at the AIA conference on BIM in 2006. Thom Mayne was even more outright with his paper: ‘Change or perish,’ if BIM was not embraced (Mayne 2006). Essentially, BIM was seen as a method to coordinate and collaborate, easing the adversarial culture that abounds within construction, and so reducing risk.

Performance

Seeing buildings as proactively contributing to how buildings use and react to demands means making buildings perform. Just as in the automotive industry consumers look at running costs as much capital costs and this will come to the construction industry. To reduce the cross referencing in practice several issues need to be resolved, some are to use the carrot and offer professional services compensation, to offer project delivery performance incentives and/ or business enterprise performance optimisation incentives. By doing this mutual respect and trust can be nurtured, benefits and reward can be encouraged, more collaboration comes into the innovations and decision-making. These included wind simulation, solar gains, thermal performance, and daylight factor amongst others. The adjudication parameters include architecture, energy frame, the environmental impact, the collaborative process, the application of software and mutual co-operation together within groups, polished off with an eyecatching presentation, good argument and strong validity.

Blockchain

Blockchain is the oil that greases the cogs making machines function. Building Information Modelling (BIM) was the ether that made collaboration and surgery happen. Back in the Middle-Ages, Barber surgeons tended the wounded after battle and if amputations were required, others forcefully held the incumbent down, with a stick between their teeth as limbs were sawn off. As hospitals grew in society, operating theatres initially were placed beside the mortuary, at the periphery of the complex, so that the screams could not be heard during operations, and if unsuccessful, the surgeon could continue in the morgue, to see what went wrong.

Fast forward to the invention of anaesthetics, and the whole process changed, the patient was out-for-the-count, the surgeon relaxed, and the procedure became eminently more do-able. The result made surgeons respectable, though still not recognised in equal measure, (they are still referred to as mister and not doctor).

Blockchain brings this same paradigm to applications and platforms and can be the ether that makes all move softly over each other. It will also bring respectability and recognition to those who use it and implement it. It can be both passive and active in push/pull situations, either protecting data, verifying data or promoting data usage.

Through Blockchain technologies, value creators, such as designers and learners, can display or transfer value to their clients and employers directly. This is an intrinsic value. These values are brought to the table because of Blockchain. Without it, no value, with it the improvement to the service brings certainty to the proposition, meaning all concerned can operate with confidence, knowing that risk is significantly reduced.

This can also be seen when tasks are completed, Blockchain can host an interface that vouches for the work, releasing payment or reward, as appropriate. It can all happen seamlessly, independently to other stakeholders. This removes delays in payment, ensures that deadlines are met and rewards efficient management of workloads.

It can track and trace intellectual properties protecting both producers and consumers of products and services. This restores who and what others can see by allowing the owner of the content to decide how that content is used and/or abused.

Through the use of Blockchain platforms users can both use the service and enjoy additional benefits by participating in the management and control of the network. Additional benefits include verification of what you have earned to control as to how it is managed and to whom it is available. While sounding irrelevant, it is crucial to how your data is shared or displayed.

Smart Contracts

‘Legal Tech’ is disrupting the traditional operations and self-understanding of the legal profession. This transition from analogue to digital combines 3D modelling, Common Data Environments (CDE) with digital tools such as BIM 360, DALUX and/ or VICO Office. During the project review, all the agreed work must be registered and written down. The work is coded and priced in the model using blockchain. This means that the model must be so detailed that it constitutes the digital twin in relation to the executing contracts.

The above can be done when a receipt of the delivered materials has been made, a process check of the work performed and a final check of the work and the material and it is registered in the model. Payment can be released when work is completed, and the biggest drawback here is the retention of payment and cash flows. This is overcome by having parties commit to the platform so that blockchain decides when monies are released, not the client. Accepting this bind means the project can stay on time and to budget.

Data is a commodity; therefore, it has value. AEC professionals have traditionally, in the adversarial economy been incentivised to minimise the transfer of information between parties. This is counterproductive. Blockchain has the ability to effect even smart contracts, that is to say that if there is something to be done, when it is complete, it can be appraised in real-time, and payment can be made and verified.

Sustainability

Sustainability embraces three principles in order to be inclusive and encompassing, namely: the economy, society and the environment. United Nations has defined seventeen sustainable development goals describing interlinked global goals. Within construction most notably would be SDG 6: clean water and sanitation; SDG 7: affordable and clean energy; SDG 9: industry, innovation and infrastructure; SDG 11: sustainable cities and communities; SDG 12: responsible consumption and production; and SDG 13: climate action. If cement was a sovereign country, it would be the third worse carbon dioxide polluter (8%), behind China and USA. Finding an alternative is not easy, but a development in North Dakota offers hope. BioMASON is multimillion start-up investment that uses bacteria to produce sustainable concrete masonry. It uses sand, bacteria, and nutrient-rich water to ferment and create calcium carbonate crystals that binds together similar to cement. Innovative initiatives like this give hope to saving the planet.