Building Blocks: How Blockchain Could Transform Construction

Blockchain technology offers a way for the construction industry to become more transparent, allowing for greater collaboration, information sharing, and conflict resolution between stakeholders in major projects. While there are barriers to widespread adoption, the potential benefits make eventual widespread uptake a virtual inevitability. 

How Does Blockchain Technology Work? 

Blockchain technology is so frequently mentioned alongside cryptocurrency that for some the two have become synonymous. What’s more accurate is to understand blockchain as the technology that enables cryptocurrency to function. The applications don’t stop there. 

Investopedia describes a blockchain as ‘a distributed database that is shared among the nodes of a computer network.’1

“A blockchain is just a list of transactions copied so many times that a human being cannot go in and make a modification to a ledger without causing a lot of alarm bells to go off,” says Bassem Hamdy, CEO of Santa Barbara, Calif.-based Briq, a maker of construction financial forecasting solutions.2 

As such, a blockchain serves as a single immutable source of truth that is secure, decentralized and scalable, traits that will make it extremely useful to forward thinking construction project managers. 

Access to Information

A decentralized blockchain will allow for the collection and permanent storage of ALL information applicable to the construction and maintenance of a given project. This could include everything from regulations, warrantees, and timelines down to the brand of finishing nails used on the third floor. Not only will this be of use as various contractors and subcontractors move through the building stages, but will prove valuable to owners (and future owners) as they attempt to predict maintenance schedules and manage care of the facility. Information requests could theoretically become a thing of the past as the entirety of a building’s history becomes accessible to stakeholders provided access. 

Smart Contracts and Instant Payments

With construction projects being managed via blockchain technology contracts will be fulfilled if, and only if, conditions are met. 

“Blockchain keeps everyone honest,” said David Herd, managing partner in the Los Angeles office of U.K.-based engineering consultancy Buro Happold. “It could improve the smartness of the different transactions that go on between client, design team, contractor, subcontractor and supplier, where we’ve got all these handshakes from top to bottom.”2

Construction Dive provides the theoretical example of a contract that specifies that a cement company is to pour 100 feet of concrete. A device on the truck will confirm when the job is complete, automatically triggering payment, with no invoices or authorizations.2 

“Blockchain provides a platform for clearly cascading work products down the chain and holding everyone accountable for completing key tasks,’ says Marc Minnee, founder of Propulsion Consulting. “Stakeholders have a clear and evenly distributed incentive to register these facts on-chain: Either you won’t get what you ordered or you won’t get paid.”3

In addition, a blockchain will allow for greater tracking of the supply chain, helping companies verify the availability and quality of materials throughout the process. This increased visibility will also place greater pressure on stakeholders throughout the chain to act in an ethical and environmental manner. 

There is also hope that the availability of complete information amongst all involved in a particular project will also lead to an increased level of collaboration, cooperation, and innovation. What’s more, tracking details of projects over the long term will allow project managers to better assess subcontractors on the basis of their history of living up to their promises (or failing to do so). 

Barriers to Widespread Implementation

Although the construction industry is constantly adopting new technology, many are hesitant to adopt such a revolutionary paradigm shift in the management process. Some see it as unnecessary in an industry that is considered to be ‘relationship-based’, while others balk at the price tag (which will likely decrease over time). 

The decentralized nature of blockchain technology is typically a selling point, but can also prove to be an issue of contention. 

“Blockchain is a technology that could facilitate a rapid transfer of money, which removes the issue of trust,” explains Herd, “but it also takes control away from the clients. And clients don’t like losing control.”2

Ultimately the advantages and efficiencies that blockchain technology affords the construction industry will lead to its widespread utilization. What awaits is a world where disputes are more easily settled, administrative tasks are automated, and timelines are better managed.  

Cited Sources
1 Hayes, Adam. “Blockchain Explained.” Investopedia. Investopedia, February 23, 2022. https://www.investopedia.com/terms/b/blockchain.asp
2 Bousquin, Joe. “Tech 101: Blockchain’s Benefits for Construction.” Construction Dive, September 2, 2020. https://www.constructiondive.com/news/tech-101-blockchains-benefits-for-construction/584065/
3 “How Blockchain Will Change Construction.” Harvard Business Review, April 24, 2020. https://hbr.org/2019/07/how-blockchain-will-change-construction
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Alessia Pagliaroli

Alessia takes a consultative approach with all her placements. She feels that, as a recruitment specialist, she is the “eyes and ears of the market” for both the client and candidate. She enjoys bringing value to her clients by being completely transparent, knowing the industry, and providing a competitive point of view.

Senior Recruiter at Goldbeck Recruiting Inc.