Intelligent contracts: Get smart

Anecdotally, we hear that clients are deterred by BIM because it requires a massive amount of information and upfront decision-making. Anyone building their own house must prepare themselves for the onslaught of choice and ensuing consequences raised during the project. Do they want to answer all these points upfront? Not a chance. They want to get going, see what happens and hope for the best. We have all watched Grand Designs and know how this usually ends.

Another “problem” with BIM is that it is very much the here and now in terms of people needing to make it work and this becoming their day job. The industry is going through the hard yards of BIM familiarisation and is labouring up a difficult learning curve. We much prefer to contemplate developments over the horizon where we can indulge in some crystal ball gazing. This article is very much written in this spirit and describes what may be the next big thing to follow BIM - intelligent (or “smart”) contracts.
There is a basic difference between the human mind and computers. The human mind is skilled at prioritising multiple sources and large volumes of information. A computer processor is good at gathering large volumes of data from multiple sources but does not necessarily recognise what to prioritise. This limitation can be addressed with clever programming but nevertheless represents one of the biggest obstacles to realising the ideas set out below any time soon.

The point is that we prefer easier-to-use technology than BIM. We are used to limited choices and instant results. These can be apps on our smart phones which make life easier for us, from getting from A to B whether by train or by cab, or booking holidays through person-to-person networks. We only need to spend a moment to have complex transactions made and paid for.

One of the benefits of intelligent contracts is the built-in simplicity. The standardisation and automation of the process removes those difficult decisions and not properly thought-out consequences. The process is stripped back to the basic pay/build function of a contract and we do not need to concern ourselves with the workings. Enquire further and this will reveal a network of data sensors, automated ledgers and potentially even crypto-currencies.

The temptation to set off in a different direction to BIM ought to be resisted as far as possible

The process can be described thus: the operative (whether human or robotic) inserts the brick in the wall. The presence of the brick is recorded by the sensor. The quality of the installation is checked against the desired criteria. The presence of the warranty information is verified and payment is released to the installer/supplier.

The transactions can be recorded on a distributed ledger using “blockchain” technology. The blockchain has been heralded as a major breakthrough and is really just a huge string of data to which individual transactions can be recorded in minute detail - literally brick by brick if required - think of an “inchstone” approach to building rather than the traditional milestone.

The quality-checking function can be automated using technologies currently being developed. As alluded to, the prioritising of the data requires attention and continuing human involvement.

Intelligent contracts probably require a BIM-type model on which to base its assumptions as to the fulfilment of the planned versus actual performance. Another potential route for development is to be independent of BIM and take an app-type approach to intelligent contracts. This is a semi-automated position where the certifier takes images of the work and materials for checking. The checking is performed automatically together with the cursory manual inspection of the priority areas.

Other contractual safeguards needed for the implementation of intelligent processes include lodging/checking of the warranty information. The blockchain could provide the means by which this is achieved as well as the record of the financial transactions.

Intelligent contracts could lead to huge savings in the time and resources employed in projects. Arbitrary deductions for retention and defects would be replaced with valuations based on the quality checks with a high degree of granularity. Issues would be flagged up and addressed at the time of construction/installation and payment made conditional on their resolution. The whole defect liability period with the usual reluctance of the subcontractors to re-attend site would be removed.

The landscape in which intelligent contracts might operate in construction is unexplored territory and requires research and development in order to make sense of it. The temptation to set off in a different direction to BIM ought to be resisted as far as possible. Intelligent contracts should be complementary to the developments of the last 20 years and to build on them. That said, no-one should overlook the basic approach we should all take to technology – keep it simple stupid.

Jim Mason is programme leader of the masters in international construction law at University of West of England (UWE) Bristol. UWE Bristol is hosting a launch event for intelligent contract research at a conference on 13 September 2017. Booking available #smartuwe