Could Blockchain prevent the next Carillion?

 

Could Blockchain prevent the next Carillion?

 

The construction industry has gone through a lot of changes in the ten years I have been recruiting across it, yet in many ways, it has also has stayed the same. A lot of the technical innovations that have been implemented within the industry are using software to speed up processes that were done by hand (or mind) previously. For example, CAD has added a number of iterations, rather than just alter the way that we work. Also one of the recent challenges in BIM implementation is that clients are often thought not to realise the full benefits of it other than it being mandatory. With the recent Winfield Rock report[1] highlighting the issues legal professions have in understanding BIM Level 2 and “what that actually means in terms of parties’ obligations, rights and deliverables”.

Could the industry use digital engineering to truly change the nature of collaboration between clients, consultants, main contractors and sub-contractors with a technology such as Blockchain being used to independently control the flow of information across a project? For those of you who are not familiar with Blockchain it's summarised by Wikipedia rather well;

"A blockchain is a continuously growing list of records, called blocks, which are linked and secured using cryptography. Each block typically contains a cryptographic hash of the previous block, a timestamp and transaction data.By design, a blockchain is inherently resistant to modification of the data. It is "an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way".For use as a distributed ledger, a blockchain is typically managed by a peer-to-peer network collectively adhering to a protocol for validating new blocks. Once recorded, the data in any given block cannot be altered retroactively without the alteration of all subsequent blocks, which requires collusion of the network majority."

Whilst I am not suggesting that cryptocurrencies be used as a viable way of arranging project finance, by using the underlying technology systems could be put in place to authorise transactions once work is completed and avoid multiple intermediaries on a project. It would also provide a transparency on costs and progress to a client throughout the programme.

Some of the fallout from the collapse of Carillion, particularly from non-industry commentators such as MPs, were questions around the payment terms to contractors and the high level of risk on projects, something which often isn’t in the interest of the end client. A system where funds are held centrally and released on verification of work could prevent both main contractors being withheld funds from clients and main contractors withholding funds from sub-contractors etc. The use of peer-to-peer networks could also help real-time decision making and help increase liability between parties in the event of adverse weather, commodity price changes or other unexpected events due to the open and trustworthy information available across the system. For consultants, it can also help reduce the disconnect between design and construction throughout a project.

I would be interested in any thoughts on whether the recent events could create an impetus to create real change in the industry, would Clients embrace a new methodology and reward it at the bid stage now that we are starting to have the tools to do so?


[1] http://www.bimplus.co.uk/people/lawyers-need-better-understanding-bim-level-2/

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