Publications / 2019 Proceedings of the 36th ISARC, Banff, Alberta, Canada

Construction Payment Automation through Smart Contract-based Blockchain Framework

Han Luo, Moumita Das, Jun Wang and Jack C.P. Cheng
Pages 1254-1260 (2019 Proceedings of the 36th ISARC, Banff, Alberta, Canada, ISBN 978-952-69524-0-6)

A construction contract facilitates payments through the supply chain by integrating people, activities, and events throughout the project period through obligations, permissions, and prohibitions in its terms and conditions. The management of payments is a manual process and is more difficult in the case of construction projects as different stakeholders at different levels of the project organizational structure are bound by different contracts. Moreover, payments are strongly affected by the lack of clarity in the definitions of the obligations, responsibilities, and liabilities of various stakeholders in construction contracts. This intensifies disputes and causes delays in construction payments leading to additional expenditure, cash flow problems, and lack of trust. Therefore, to address these problems, we propose a methodology to automate construction payments by formalizing them into smart contracts and executing on a decentralized blockchain based framework. We formalize the payment logic that binds the prohibitions and liabilities associated with financial commitments, such as interim payments on completion of tasks in a construction project, and convert it into a computer-executable code. A framework based on blockchain is used to host this smart contract and to automate actions such as the triggering of payments after achieving consensus among the relevant project stakeholders. This framework also address the conditions required for the security of information in construction projects, such as confidentiality and information integrity in a multi-party environment. The proposed framework is demonstrated through a case-based scenario.

Keywords: Blockchain; Smart Contracts; Construction Projects; Interim Payments