Blockchains In Construction Workshop DCW 2017

Distributed Ledger Technologies (DLT) or more commonly referred to as Blockchains, are being hailed as the next big industrial revolution. This technology has the potential to have a bigger impact on business and society than the internet has had, even when taking into account the huge technological advances we have seen over the last 20 years.

To evaluate the potential benefits of Blockchains to the built environment and infrastructure sector, an interactive workshop was created to run during Digital Construction Week 2017.

This workshop was designed to challenge how this new technology could support or accelerate the industry changes sought by the introduction of Building Information Modeling (BIM) and other transformative digital technologies aimed at increasing productivity within the construction sector.

The challenge areas for the Blockchain technology workshop covered:

Design teams – Create a network effect for accelerating BIM use; BIM Level 2 design development version control; securing design data and access to common data environments; and integration with COBie to create data standards for Blockchains.

Manufacturing – linking design data to manufacturing processes and to payments through automated smart contracts; tracking and authenticating the origins of all materials; life-time traceability of all materials and equipment; shipping and logistics; and B2B payments for goods and services based on smart contracts linked to programmes.

Construction – Reducing carbon footprint through just-in-time logistic management of materials and plant; improving openness and speed of supply chain payments; real-time audit trail of ownership for off-site materials; real-time validation of safety training and ability for specific people to work on sites; automated timecard processing; automated smart collateral warranties; and witnessed commissioning and handover processes moved to Blockchains.

Client – Cyber security; security of IoT devices; history of design development; controlled shared data feedback from IoT devices; defined BIM produced data access to third-parties such as emergency services; automated smart contracts, including warranties, collateral warranties, insurance contracts, proof of ownership; better integration with lifecycle management and maintenance tools; better oversite of payments throughout supply chains.

The industry experts and software  experts from IBM, SAP, Oracle Gold partner; in addition to professional standards bodies such as The Building Services Engineering Association and The Royal Institution of Chartered Surveyors, worked together to identify and then present processes that they would want Blockchains to disrupt.

The general view of the 40 experts from the construction and infrastructure sector and from several of world’s largest software vendors was that Blockchains do have the potential to accelerate the use of BIM, as well as streamline the unstructured and disparate supply chains within the construction sector.

Three areas in particular were highlighted as starting points for Blockchains within the sector:

  • Circular Economy. Traceability of materials from original digital design, through to manufacturing, installation and eventual recycling.

 

  • Smart Contracts. Breaking down big complex contracts into smaller automated rule based contracts that could attach payments, insurances and multi-party sign-off to actual provable supply chain events in real time.

 

  • Project Accounts. Making payments and cashflows more open to speed up payments to suppliers, sub-contractors and third parties.

Overall, the consensus from the workshop was that Blockchains do have the potential to bring to fruition that holy grail business transformation that the sector has been desperately seeking for the past 50 years.

In order to demonstrate the impact on existing processes and demonstrate the benefits that Blockchains can bring several pilots were deemed necessary.

Thanks to the financial technology sector, the Blockchain technology already exists to start these construction sector focused pilots.

As an action oriented workshop, the first pilot looking at creating a circular economy and logistics handling of steel is already underway.

The use of smart contracts within construction was by far the biggest topic discussed and work will shortly begin to bring together industry experts with contract experience and Blockchain experts to identify the full extent of the smart contract processes that could be adopted.

This is the first follow-up post following the workshop. As we gather and analyse the data from the workshop, we will provide more updates.

The introductory slides can be found here.

 

Notes to Editors:

This event was sponsored by the Process Innovation Forum (PIF), under their Co-Creation Programme.

The Blockchain workshop content and approach was arranged by the Helium Blockchain Alliance, with PIF support using their established Co-Creation Programme format.

The PIF Co-Creation Programme seeks to build a scalable framework where open innovation can take place and shared freely ultimately adding value to the built environment.

 

Blockchain Construction Contracts


Imagine an entire construction contract in the form of a blockchain smart contract where funds for each stage of construction are locked into the agreement in advance and released as work is performed or materials are delivered.

Fundamentally anything that could be included on a standard pen and paper construction contract could also be included in a blockchain constrained smart contract. In fact a handful of US states have passed or are in the process of passing legislation that makes smart contracts legally binding on and off the blockchain.

The benefits of this use of blockchain technology would be game changing.

Take a typical material supplier for example. That supplier will often require a deposit which the subcontractor must finance or request from the general contractor who in turn must also either finance or pass the bill along to the building owner. This deposit and the paperwork it generates can often be thousands of dollars and could cause major delays in construction as it is funded.

From a material supply standpoint specific payment terms can be dictated but the reality is that the supplier is unlikely to be paid until the subcontractor gets paid. Most subcontractors are subject to billing cycles of the general contractor, meaning that the materials may not be paid for until 60 days after completion of the work or more.

To make matters even worse the following phrase is all too common in the construction industry: “I’ll get you paid next week I’m just waiting on funding from another project”. The industry, especially at smaller and less professional scales, is riddled with “robbing Peter to pay Paul” scenarios which create cash flow problems detrimental to every entity involved on the construction project.

Now let’s theorize a similar situation utilizing immutable smart contracts on a blockchain.

At the signing of the “contract” the building owner, or more likely the bank, pre-deposits funds into a cluster of dozens of smaller sub-smart-contracts that are transparent and visible to anyone with the right credentials working on the project.

Due to the transparency inherent to blockchain technology the supplier in this situation will be able to see his or her funds sitting in the contract in advance. The smart contract will specify a list of criteria which must be met in order for the supplier to receive funds before material orders are placed. In this case, for example, the smart contract can specify that once goods arrive to the job site the funds will be released to the supplier through multi-sig style validation from a series of interested parties including the building owner (or representative), the bank, the subcontractor, the owner’s project manager, and the architect. Once everyone achieves consensus that the correct material has arrived at the job site and meets the required specifications the supplier could receive payment immediately. Furthermore, knowing the funds are accessible upon successful completion of the smart contract might compel a supplier to reduce or waive material deposits in the first place reducing delays and friction in the overall supply process.

By using blockchain based smart contracts the construction industry as a whole is transferring trust from the hands of contractors and subcontractors to the blockchain itself which will interpret smart contracts in black and white. Project owners immediately reduce their lien liability on a project since materials and subcontracts are inherently substantially paid on time when the work is done directly from the blockchain smart contract (eliminating intermediaries and greatly reducing the potential for misappropriation of funds). Grey areas that are extant in existing contractual relationships would be resolved in a similar way. For example, a change order could be a separate smart contract to address one specific situation that could not be resolved inside of the original contract.

The use of immutable smart contracts in construction would encourage general and subcontractors to submit more thorough bids from the onset. This extra due diligence prior to signing a construction smart contract could ultimately save the owner of the project a significant amount of money and heartache as there is a great potential to reduce the number of surprises that will be encountered along the way. Consider that even a 5% savings on a large scale construction project is substantial. We feel that migrating the typical pen and paper construction contract onto the blockchain could help building owners not only save money but possible get their project built faster and certainly more transparently than with traditional contractual agreements and distribution of funds.

Guest post

CotB Group Houston, TX

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Blockchains and Supply Chains discussion with SAP

How Blockchains Will Change Every Aspect of the Construction Industry

The internet is approaching its 30th birthday and those who remember life before the internet know how much of an impact it has made in such a short time.

What started out as a new technology mostly used by geeks has pushed up technology firms to the top – Apple, Google, Microsoft, Amazon, Facebook, Alibaba and Tencent are now seven of the top 10 most valuable public companies in the world.

The internet has made such a profound impact that it is hard to imagine life without it.

But blockchain technology is already showing signs that it will have a bigger and more profound impact, with the construction sector set to be one of the biggest beneficiaries.

All the excitement levels and the millions of investors pouring money into internet start-ups in the mid 1990’s are back again.

This time around investors are speculating more heavily and blockchain start-ups are forming at a faster rate than was seen at the height of the last technology boom in the late 1990s and early 2000s.

Teens and twenty somethings are becoming millionaires at the fastest rate ever seen as several start-ups a week are able to raise millions, the majority without a business plan or working prototype.

The rate of start-up growth is recognition that this new technology, invented in 2009, is able to disrupt business models and public sectors in more profound ways than the internet ever could.

In July, a start-up called ‘Tezos’ raised £200m in a matter of days becoming the largest blockchain start-up so far. Many of the investors were seasoned technology focused venture capitalists that have a track record in spotting disruptive technologies.

Tezos is not an exception, just the largest investment to date. The rate at which start-ups are getting investment is clearly showing that Blockchain technology is about to have a big impact on everyone and practically every business model.

The first industry group to see the threats and the many opportunities has been the financial services sector.

When the internet first arrived, banks and insurers were slow to adopt online technology, but once they did they adopt online technology, they discovered huge savings of efficiencies could be made.

Traditional high street banking has mostly shifted online and many banks and insurers only operate in the virtual world.

To ensure common data standards and to share the risks of using new Blockchain technologies, many of the world’s largest banks have joined into various consortia to try to get ahead of the game.

Practically every sector is investigating the use of Blockchain technology, including shipping, retail, travel, utilities, mining and farming.

In the US, birth certificates are being issued via Blockchains. In the UK, the Land Registry is piloting the replacement of deeds with Blockchain secured digital records. In Dubai, you can bypass passport control if you load your details onto their municipal Blockchain ahead of arrival.

And a sign of how big Blockchains could get, many central banks around the world have started looking at issuing Blockchain backed national currencies.

One of the biggest beneficiaries of Blockchain technology could be the construction sector and its inherently fragmented supply chains.

From tracking plant, labour and materials; version tracking of design information; direct international business-to-business payments; securing BIM files; enabling smart cities; communicating with IoT devices; to self-executing smart contracts throughout supply chains.

Almost every aspect of construction processes could be made to operate differently, with greater efficiency and with greater openness on supply chains including supply chain payments.

A beginner’s guide to Blockchains and how they will impact the construction sector are among the topics being discussed at Digital Construction Week, London, 18th-19th October 2017.

The Helium Blockchain Alliance will be working with the Process Innovation Forum to run Blockchains in Construction workshops.


 

Note for Editors:

The Helium Blockchain Alliance is a not-for-profit and open source project aimed at creating global data standards for Blockchains in the construction, infrastructure, mining and utilities sectors. This approach is to enable software vendors to integrate with Blockchains and to facilitate interoperability between Blockchains.

Blockchain Workshop July 2017

Download the presentation slides here

Our second workshop on 11 July 2017 continued to expand on the potential opportunities that Blockchains can bring to the construction sectors.

Key topics and opportunities discussed were:

  • Using blockchains for logistics planning of materials and plant & equipment, and measuring the impact of improved logistics on lowering C02 emissions
  • Storing data about health and safety training courses attended and validity of industry safety certificates
  • Transmitting clocking on/off data to time and record keeping software
  • Securing IoT devices by introducing a security layer for devices to transmit information
  • Creating inter-operable blockchains
  • Creating clarity over payments made to supply chains
  • IBM being helpful with possible piloting of use cases in their R&D Garage