How blockchain could transform construction and property management

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09th January, 2018

New technology is a disrupter. The construction and engineering sector is well aware of this. Building Information Modelling (BIM) is arguably the most high-profile form of disruption our sector is experiencing and continues to grapple with. In a sector frequently berated for being culturally slow to adapt to change, BIM is embraced by some and regarded as a complex and commercially unviable solution by others. So, enter stage right, blockchain and bitcoin. If this is the future, how will the world of the built environment embrace these latest ‘disrupters’?

Defining blockchain and bitcoin

In ‘The Truth About Blockchain’ published in the Harvard Business Review in January/February 2017, blockchain is described not as a disruptive technology but as a ‘foundational’ technology which has “the potential to create new foundations for our economic and social systems.”

Blockchain was introduced in 2008 as a peer-to-peer network sitting above the internet and was part of a proposal for bitcoin, a virtual currency system. In a blockchain system, a financial and contractual ledger is replicated in a large number of identical databases each hosted and maintained by interested parties. When changes are entered in one copy, all other copies are simultaneously updated. It means that transactions can be settled securely and verifiably within seconds.

As a decentralised currency, bitcoin has no central administrator. The whole concept of blockchain and bitcoin has taken off in the last 12 months with the price of a single bitcoin soaring by 1000% in that time period.

Smart contracts in construction pave the way

Engineering contracts that take the idea of a digital representation of a project into account as a form of contractual agreement between two or more parties, has emerged in the construction sector.

The concept of smart contracts in our sector promotes equal responsibility and an integrated project process (PPC2000 - see previous article on the legality of BIM). The PPC2000 creates a natural realm for BIM to sit in. This concept is also fundamental to the way blockchain works.
So, integrated with the asset management capability of BIM and using blockchain technology as the financial representation of the ‘smart contract’ between all relevant parties, could this new ‘foundational’ technology (blockchain) fully automate and streamline the construction and property maintenance process?

If blockchain adds a transactional ID to every object registered in the BIM model, informed with a relevant responsibility matrix, everyone in the construction and maintenance chain has a consequent responsibility. When an activity is performed, for example part of the build is put in place or a piece of functionality is replaced when worn out, blockchain allows the financial transaction to occur, with funds released to whoever is responsible for dealing with that part of the process.

In practice

Let’s explore this concept from the perspective of the M&E engineering design of a building. The M&E design will require the installation of cabling. So, when the raw material (in the form of a copper core, steel wire armour and a plastic insulating inner and outer PVC sheath) enters the cable manufacturer’s site where the cable reel is created, the blockchain is started and a transaction is made between the parties who own the raw plastic, the copper and steel wire and the party creating the cable. The cable will have a digital ID which means its usage and requirement can be tracked.

The next transaction is between the cabling installer and the manufacturer. Once the cable is created, the ID is scanned and the cable is ready to move to site for installation. A transaction could in theory occur between the sub-contractor or the installer, and the transporter of the cable once the ID is scanned when the cabling arrives on site.

The next transaction occurs when the cabling is installed which then results in the contractor making a transaction to the sub-contractor which then triggers a transaction from the sub-contractor to the installer. The final transaction, upon approval and commissioning, is made when the client makes a transaction to the contractor.

The use of a digital ID allows people to share relevant information that is validated by the authorising body i.e. an information manager. The identities of people and/or vendors can be securely recorded in the blockchain along with a ledger or a trail of the transactions between parties such as a contractor to a subcontractor.

Asset management, post-construction

Post-construction, blockchain has the potential to influence management processes of assets within a building.

As blockchain serves as a digital ledger of activities amongst all parties involved, if these activities are asset based, serving to maintain a building, then each asset at its replacement or service period will trigger a sensor, which in turn releases a transaction to the service provider or party to execute the specific term of the contract from an agreed service agreement. 

For example, when a light fitting reaches its end of life, it triggers the ledger and the transaction is made between the client/end user and the supplier/maintainer to order the replacement light because the system knows the cost of the asset.

Digital and physical worlds converge

Using this approach, a building owner and the building user has more control and transparency of cost, time and scope with blockchain in place through the use of smart contracts. Using a virtual model with its associated objects within a timeframe of construction, payment streams through supply chains could hypothetically be fully automated. As the digital and physical worlds converge into a single source, the practical applications of blockchain will only increase.