Blockchain applications in the construction industry (Part 49)

Welcome to the 49th part of the 100-part series on Blockchain.

The construction industry is a key driver of economic growth for all nations. This industry has regularly been cited as one of the world’s most fragmented yet high-impact industries. For example, the Burj Khalifa project, which had over 12,000 workers from more than 100 countries on-site at the peak of its construction. To manage such an extended supply chain and to keep track of work in progress, schedule, cost, and payments, enormous efforts, and resources are required.

And on top of these challenges, construction projects experience different forms of mistakes, delays, and accidents at various stages and to varying degrees. The lack of accountability in the construction industry has been an ongoing issue for decades.

Enter Blockchain. Blockchain technology can be implemented in the construction industry to overcome these pain points that the industry is currently facing.

Blockchain in the management of construction projects and settlement of payments

The first application of Blockchain can be in the effective management of construction projects and settlement of payments more transparently.

Every capital construction project involves complex contracts and terms and conditions. Throughout the whole lifecycle of a project, it is always a challenge to ensure collaboration on every level among all the parties involved according to the contract. In addition, late payments and related cash flow issues have been enduring problems of this industry.

Now, let’s understand how Blockchain will solve these issues of the construction industry. Let’s start with the example of payment to laborers through smart contracts. In the proposed system, every laborer who enters the construction site will pass their ID card for security, health, and safety reasons. The workers’ information about the time spent on the construction site will be captured and registered on the Blockchain. This Blockchain-based distributed ledger will be shared between the client, the consultant, and the contractor. Based on the agreed terms on smart contracts with regards to the number of hours worked, the smart contract will be executed, and the respective payment will be initiated to the laborers.

Due to the emergence of very large construction projects, joint ventures are becoming an everyday norm in the construction industry. Basically, a joint venture is a commercial alliance between two or more separate entities that enable them to share risk and reward. These joint ventures enable smaller companies to deliver large projects by combining their expertise and resources. Additionally, these joint ventures help companies gain local knowledge in overseas markets. But along with the benefits, there are some challenges as well for these joint ventures. Collaboration between the different entities participating in a joint venture is the prime among them.

With the implementation of Blockchain, the collaboration within a design joint venture (DJV) can be improved and enhanced. In the proposed Blockchain-based system, milestones of the project will be defined on the shared ledger along with predefined instructions on the smart contracts. As the design process starts, the platform will help to collect and record every necessary interaction within the Design Joint Venture or between project participants.

(i) In the project planning phase, different design packages and deliverables will be defined. In the proposed system, once the design is finished, all of the design packages will be added on the Blockchain platform along with the time taken for the design planning. The necessary parties or clients registered on the Blockchain will then be notified to check the document for their acknowledgment and verification. After getting the required approval from the client, the smart contract will be executed, and payment will be initiated following the predefined conditions and hours worked.

Similarly, all other interactions during the project will need to be registered on the Blockchain platform. And based on these recorded interactions, payments and project performance measure updates will be initiated by smart contracts.

Establishing such a collaborative and transparent system can readily improve the way how a construction project is managed and monitored. It can help to minimize misalignments of contracts and can enable collective corrective actions to make a joint venture a success.

(ii) The same concept will be applied during the construction phase. The team that carries out the construction work will need to be registered on the Blockchain, and the tasks assigned to them will also need to be mentioned on the Blockchain platform. During the actual construction, pre-defined specifications and quality assurance procedures need to be followed, which will then be supervised by the site engineer, quality controller, and the project manager. And once the supervision is done, the results of the quality assurance will also be registered on the Blockchain. And if the results are found to be satisfactory in accordance with the predefined conditions, smart contract will release the payment to the workers and will also update the progress of the project.

(iii) But just the registration of work completion is not always enough, the construction projects are far more complex. There are usually unexpected issues, like major health and safety incidents on the site, which can result in additional claims and disputes. In a Blockchain-enabled construction management system, every health and safety incident and record of unsafe working conditions on the construction site can be registered on the shared ledger, and subsequently, the relevant risk mitigation measures can be initiated. For this stage, the use of IoT sensors along with Blockchain can be very useful as these tools can act as a reliable source of data. The critical information obtained by these sensors can be registered on the Blockchain and can then be processed by a smart contract. If certain thresholds and trigger levels are reached, the smart contract can notify the appropriate person on site to prepare for risk mitigation or to change the construction plan.

Let’s take the example of a crane; its effective operation is crucial in terms of project progress, but also, at the same time, any mistakes in its operations can cause severe health and safety issues. With IoT sensors installed, the operational status of a crane lift can be easily followed and registered on the Blockchain system. If the sensors record that the crane is lifting a higher weight than its permissible limit or if there are extreme winds that can endanger the safety of workers on site; then through a smart contract, a safety alarm will be triggered that will notify the crane operator and the project manager on site to take appropriate actions to prevent any accidents due to overloading or poor weather conditions.

Blockchain in the supply chain of the construction industry

Further, Blockchain can also revolutionize the current supply chain of the construction industry and make it more robust. Designers, contractors, and suppliers nowadays are far more concerned about the materials used in construction projects for reasons such as strict quality assurance, health and safety, material standards, and sustainability. Blockchain provides a perfect solution to trace construction materials, such as prefabricated concrete or steel, along the supply chain. Moreover, as every transaction along the supply chain is registered and visible on the Blockchain, it becomes easier to keep track of the delivery of the material.

Let’s understand it through the example of a steel beam. The life cycle of a steel beam starts from its production and ends when it is used in construction. In this proposed system, every beam registered on the Blockchain system can be tracked through a unique ID. Additionally, all the fabrication and design specifications of a beam will always be available on the Blockchain. Further, as the steel beam moves through the supply chain — every change of its ownership and its transportation details will also be added to the Blockchain. Thus through this Blockchain-enabled solution, the whole construction supply chain can be made transparent and robust.

Blockchain in Building information modeling or BIM

Blockchain can also play an essential role in Building information modeling or BIM. But to fully recognize how blockchain can add value to BIM, it is important to understand the core concept of BIM.

Building Information Modelling or BIM is a process that deals with digital representations of real-life assets. This digital model holds a wide array of information about the asset, such as its 3D geometry, construction management information like time schedules, costs, and operation and maintenance metrics of the asset. BIM is used to design and document building and infrastructure designs. Every detail of a building is modeled in BIM. The model can be used for analysis to explore design options and to create visualizations that can help stakeholders to understand what the building will look like after it’s built.

It is important to note that BIM is much more than just the computer model. It also includes the digital working method, which describes how the model fits into the overall project management system, how the incoming and outgoing information will be handled, and how project participants will build, use and manage the model. The implementation of Blockchain can facilitate the development of BIM and can even help to leverage its full potential.

Engineering projects contain vast amounts and types of data and similarly high volumes of corresponding design and managerial decisions. Once Blockchain is implemented in BIM, it can work as a single source of truth for this data. In a Blockchain-based system, the shared ledger will record an audit trail of design approvals, data verification, and project management decisions. And this information will serve as a single source of truth that will cover all aspects of the project and eliminate any kind of disputes between the cooperating parties.

Once Blockchain is implemented, BIM along with other information from the Blockchain, such as supply chain information, the provenance of materials, payment details, etc., will make BIM an even more comprehensive digital representation of a real-life asset.

Thus through Blockchain, the client can ensure the quality of the deliverables by evaluating the designed criteria set by BIM, which the contractor would have to adhere to. This way, quality checks will be highly transparent, and collaborations will simultaneously be made more effective.

Thus, Blockchain would act as an underlying infrastructure to further strengthen any kind of BIM model.

Blockchain and Digital Twin

Most projects do not stop at the delivery of the asset but continue until the end of the life cycle of the asset, and because of these cases, the Digital twin concept is gaining traction in the industry. The digital twin is a digital representation of a real-life asset. You may wonder how BIM is different from BIM as BIM is also a digital representation. Let’s understand the main difference between them — BIM is just a representation of what the real-world object should be. In contrast, a digital twin is a digital copy of an existing asset.

A digital twin embodies a holistic view where the asset management, operation, and maintenance of an asset is performed throughout its whole lifecycle, from initial concept to maintenance and recycling.

Digital twin and IoT: The digital twin of physical objects realize their full potential with the Internet of Things (IoT) sensors. The real-time data captured by the IoT sensors installed on the physical objects/assets can provide real-time information about the performance of the asset to the digital twin. Thus digital twin gets updated and becomes a live information-rich dashboard and reporting tool for asset management. Simply put, a digital twin, along with the input from IoT sensors on a physical real asset, replicates a real-world system and changes with that system over time. Consider a bridge, for example, fitted with IoT sensors for measuring vehicle load and other traffic conditions. The data from these sensors will provide an always up-to-date information to the digital twin — the digital updates itself according to the data. Through digital twin, the bridge maintenance team can view areas where the bridge is aging or faulty and needs repairs. Thus, preventive maintenance can prevent equipment failure before it occurs and reduces the risk of accidents.

Blockchain and digital twin: The data captured by IoT sensors will be recorded on the Blockchain, thus, preventing the hackers from attacking or manipulating data once the data is added to the Blockchain. Additionally, the data registered will also serve as an input condition for triggering automatic repairs via smart contracts. For instance, if a certain part of the asset has an unexpected failure, through the Digital Twin and Blockchain, it would be easy to identify exactly which elements caused the issue, who was responsible for its assembly, and which manufacturing companies to be contacted for procuring that part.

Thus integration of Blockchain technology can play a crucial role in improving project performance, especially where the productivity of projects is critical, like Highways, Railways, Bridges, Buildings, etc.

Scalability concerns

(i) Blockchain used will be permissioned Blockchain. The stakeholders involved will be assigned specific functions on the smart contracts. Storing the entire data about the supply chain, stakeholders, the project’s progress, design files, BIM, digital twin, data collected by IoT sensors, etc., on Blockchain is very challenging as it is very costly and will significantly slow down the processing on Blockchain. Thus, distributed file storage IPFS can provide low-cost off-chain storage to store data. A unique hash is generated for every uploaded file on the IPFS server, which is then stored on the Blockchain and accessed through the smart contract. Any modification in the uploaded file would change its hash. IPFS has been explained in detail in Part 18.

(ii) To make the Blockchain scalable for its use in the construction industry and increase the speed of transactions, layer 1 (discussed in Part 15) and layer 2 (discussed in Part 16) scaling solutions will be required to be implemented.

If you liked this article and want to know more about Blockchain, NFTs, Metaverse, and their applications, click the below link.

Happy learning!

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