Intelligent Contracts in the Built Environment

April 12, 2018

A recent survey[1]
showed that the take up of technology in the Architecture, Engineering and Construction
(AEC) sector languishes behind other industries. The AEC sector is currently
making heavy work of adopting Building Information Modelling (BIM) which is the
gateway to digital design and construction. The learning curve is quite steep
and requires investment to achieve BIM familiarisation. Intelligent contracts
present a complimentary technology with the bonus of being easier to grasp and
utilise for the AEC sector stakeholders. UWE Bristol is undertaking research
projects in the area of intelligent contracts and welcomes the opportunity to
collaborate with the Society of Computers and Law. This article sets out some
initial thoughts on the likely trajectory of intelligent contract research and
the aims of the participants.

The benefit of intelligent
contracts is the built-in simplicity. The standardisation and automation of the
process removes difficult decisions and not properly thought-out consequences.  The process is stripped back to the basic
pay/build function of a contract. Further enquiry reveals a network of data
sensors, automated ledgers and potentially even crypto-currencies.

The intelligent contract 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. This can involve a brick by brick certification of
completion if required – an ‘inchstone’ approach to building rather than the
traditional milestone.

The quality-checking function can
be augmented through using technologies currently being developed. In the short
to medium term this is likely to require 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 sub-contractors to re-attend site would be removed.
Research in this area therefore has at its core the desire to increase
administrative efficiency, decrease the incidence of disputes and to arrive at
greater security of payment for the supply chain.

The temptation to set off in a
different direction to BIM ought to be resisted as far as possible. Intelligent
contracts should be complimentary to the developments of the last 20 years and
to build on them. The focus needs therefore to be on the incremental steps
which facilitate adoption whilst addressing real and perceived barriers to
implementation – foremost amongst which are the legal barriers.

Jim Mason is Programme Leader of
the Masters in International Construction Law at UWE Bristol.