Building Information Modeling (BIM) gives architecture, engineering, and construction (AEC) professionals insight and tools to more efficiently plan, design, construct, and manage buildings and infrastructure. However, payments are a challenge and there is a lot of paperwork involved. BIM software should not be limited to generating 3D models and could serve to compile all project information and documentation, such as change orders, invoices, and payment records.
Blockchain can address issues surrounding secure access to the model and allow for a reliable audit of who made changes, when they were made, and what those changes were. Contractual processes that typically require human intervention and oversight can be partially or fully automated with smart contracts, originating from blockchain technology. In this article, I explore technological advancements that are disrupting the AEC industry and share my takeaways about the convergence of blockchain and the industry so far.
What Is Blockchain?
Blockchain is a decentralized universal ledger that runs off a network of computers that jointly manage a database. It also fosters smart contracts. Whenever an entry is made, it gets added on as a block in an already existing chain of entries after being authenticated by everyone in the blockchain. This chain is also protected by the best cryptography algorithms available, so it’s very difficult to hack. All the blocks are immutably linked to the previous block. So, if a hacker wants to change one block, he/she has to change all the blocks in the chain, which is next to impossible. Also, as this is a chain, we can trace back any event block by block. So, super security comes with this technology.
Let’s say there are 10 people who decide to contribute $1,000 each to a lucky draw. The winner of the draw gets $10,000. For this draw, nobody is in higher authority and there is no bank. If you entered the draw, who do you trust? You have to trust every other participant equally and you are also aware if they want to defraud you, most or all would have to be convinced for an action like that. Therefore, the concept of centralized trust changes to distributed trust. This distributed trust is the heart and soul of blockchain.
How Does Blockchain Relate to Construction?
BIM over the last decade and a half has totally transformed the AEC industry. How the AEC industry works now is totally different from how it worked during the 1990s when one compares some aspects of designing, drawings generation, communication, collaboration, and information exchange.
BIM gives AEC professionals insight and tools to more efficiently plan, design, construct, and manage buildings and infrastructure but payments are a challenge and there is a lot of paperwork involved. BIM software should not be limited to only generating 3D models but could also be served to compile within the software all project information and documentation, such as change orders and invoices and payment information.
Blockchain can address issues surrounding secure access to a BIM model and allow for a reliable audit of who made changes, when they were made, and what those changes were. Contractual processes that typically require human intervention and oversight can be partially or fully automated with smart contracts, originated from blockchain technology.
Smart contracts refer to computer protocols that set out the terms and conditions of a contract. A smart contract helps the contractor to get paid immediately once the work is completed, after being verified by all the parties, automatically without any invoicing process. Regularly all the information regarding status, changes, etc., is sequentially uploaded and compiled into immutable and time-stamped blocks. These blocks are linked together and the linked information is constantly verified on a peer-to-peer basis by other linked block users in the blockchain. This eliminates the need for a third party to verify the accuracy of linked information and serves as a single source of truth.
Effectively, once a block of information is created in this chain it can never be altered without the knowledge of other users in the chain. It is also very simple to verify when a block was created and by whom, and when changes have been made in the blockchain.
What if you never had to submit an invoice again, but still got paid, instantly, the minute you finished your next job? That’s the kind of promise blockchain technology holds for the AEC industry.
For example, if a steel fabricator is ready to ship the steel components to the job site, he would log this information in the BIM software. The smart contract is linked to the BIM model and the project account is funded by the owner. Once the components have been delivered to the job site, the project manager would confirm having received the component within BIM. Automatically funds would get transferred from the project account to the steel fabricator’s account. The exchange of invoices and supplementary documentation in support of a payment claim could also be completed automatically depending on the extent to which such functions are programmed within the smart contract.
Where supply chain management is concerned, if your supply chain is not in sync, then your project is going to suffer. There will likely to be delays, which will lead to a lapse in productivity, cost overruns, and an unhappy client. Blockchain in this context can help trace physical items from origin to final destination. It can help improve transparency, which in turn would help involved parties stay on the same page and avoid potential pitfalls and oversights.
Challenges to Blockchain Implementation
Will blockchain be one of those technologies implemented overnight by construction companies? Most likely, no. In fact, there’s a long way to go, as the digital revolution in construction is just beginning. There’s a long road ahead before blockchain becomes the norm in construction. Here’s a look at why blockchain in construction still has some obstacles to overcome:
- Skepticism—Even the most tech-savvy contractors might be hesitant to adopt blockchain into their day-to-day operations.
- Culture—Blockchain technology is a nontraditional approach to asset transactions. It isn’t easy to adapt, even for the organizations that are now digitized. It takes time, effort, and outstanding knowledge transfer to accomplish it.
- Lack of resources—In order to implement blockchain into everyday operations, a variety of complex systems need to be created. This comes at a cost, for the systems and to hire people required to create and implement them.
- Market readiness—Is the market ready for blockchain in construction? Not right now. It needs time to mature to a point where it’s more of a reality and less of a pipe dream.
- Cost and efficiency—Blockchain technology is quite competent in cost reduction. But it still faces specific challenges while implementing the legacy systems. Setting up the initial blockchain infrastructure is expensive.
The Bottom Line
Though the blockchain future holds significant potential, very little can happen until the challenges mentioned above are dealt with. With an uncertain future ahead, a united front among all the countries and a standard set of regulations will be crucial to implement and realize the potential of these technologies.
What this boils down to is very simple: blockchain has value in construction because it introduces automation, reducing the burden of administrative and financial processes. These are known to slow construction projects down significantly. Blockchain would be the first technology of its kind to revolutionize these processes. And while the industry may not be ready yet for a full-court blockchain press, know that adoption of such technology is closer to a reality than a remote possibility. Looking towards the future, blockchain will be something that we’ll be hearing a lot more about—and it’s only a matter of time before it becomes a necessity in the AEC industry.
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Paras Taneja is passionate about the future of Virtual Design & Construction (VDC), utilizing gaming engines, BIM, and structural computational design. As a junior consultant at Ramboll, he is responsible for several areas which include technology development and applying the appropriate tools for the right job.
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