Rethinking construction contracts – blockchain, video?

Could new digital technologies such as blockchain or even video contracts take some of the administrative complexity and friction out of construction project delivery?

Construction has long been a highly contractual and often adversarial and litigious industry. Its resistance to change (along with its learned friends in the legal profession) has perpetuated the reliance upon numerous detailed agreements and related risk-management products such as insurances.

However, there has been some progress – at least in the UK (and in other markets that apply UK-type approaches). More collaborative forms of contract (PPC2000, the NEC suite, the JCT/CE Collaborative Contract) have been developed to foster more amicable working relationships. Progressive models of procurement (for example, the Cabinet Office has urged trials of two-stage open book, cost-led procurement, and integrated project insurance), gain/pain-sharing arrangements, and single project bank accounts address commonly experienced pain-points. And these may be supported by information and workflow-sharing platforms (extranets or common data environments, CDEs – contract change management was something of a battleground among the extranet vendors a decade ago) that seek to improve process visibility and transparency. More contract-focused solutions such as think project!’s CEMAR, Sypro or MPS’s CCM might also be used to manage contract changes.

The future may yet require more radical approaches to how businesses interface with each other. Currently, a myriad of one-to-one contracts create numerous interfaces, adding complexity and friction to flows of information and remuneration.

Blockchain?

Multi-party alliance-type contracts may help reduce these issues, while also fostering a more inclusive approach to delivering clients’ projects (advocating ‘integrators’ rather than ‘contractors’, the ICE-led Project 13 is a key initiative here), while emerging technologies such as blockchain are being proposed as a basis for ‘smart contracts’.

IBM Blockchain slideMuch-hyped, blockchain was elegantly de-mystified by IBM’s Tim Rook at the recent second Salesforce construction conference (24 January 2019; view Salesforce white paper here).* Rook talked about the potential to authenticate industry transactions from end to end (while admitting construction was still maybe 5-10 years from achieving any kind of token value exchange between parties to those transactions). IBM has helped launch numerous blockchain systems – all enshrining the core principles of consensus, provenance, immutability, finality and shared view. Given construction’s continuing poor levels of productivity, he suggested digital technologies such as blockchain could save time, remove cost (by reducing overheads, disputes and waste), reduce risk, and increase trust – a rare commodity in an often-adversarial industry.

Video-based contracts?

Perhaps less new technologies that we use daily might also resolve potential disputes – particularly for small-scale modernisation, refurbishment or repair works? A Finnish start-up is advocating something novel….

SessioTomas Westerholm, CEO and founder of Helsinki, Finland-based Sessio Software has developed an alternative approach to formulating and monitoring agreements to deliver construction works using video. He believes video-contracts might According to this Finnish news report, Westerholm believes video contracts can help resolve the misunderstandings and missed deadlines that are often an unavoidable part of renovation works.

Sessio video contract imageIt is a simple idea. Using the Sessio app, users record a local video or a video call where they describe the specifics of the works. The captured audio and video can then be augmented by still photographs upon which the user can draw – and the material is then quickly merged into a ‘video contract’. The process takes little time (certainly far less than drafting a traditional contract and associated schedules) and also enables parties to a contract to discuss and agree the renovation works without having to physically be where the works will take place. “And as the works progress, there are always additional details that need to be agreed on,” says Westerholm.

Usually such details are discussed verbally, since writing everything down would take too long. But things often don’t work out exactly as discussed or the works end up taking longer than expected. Westerholm believes a video contract, created with Sessio’s app, changes this as it works as a record of the agreement. Westerholm hopes that this will help bring about a transformation of behavioural patterns, as a recording will encourage renovation companies to be precise with what they promise and deliver.

Sessio is at the early stages of its journey, having a few part-time employees, and an early stage app updated in November 2019. But Westerholm – an architect by training – believes that once construction site supervisors have a chance to try the app, they will quickly see its benefits and start using it at their sites. The report highlights the immediate time and cost savings to construction businesses from eliminating the need to drive to the location to discuss the works.

“We all carry portable devices that are always connected and have highly sophisticated tech. This allows for entirely new kinds of services, and I’m sure there’s still massive untapped potential for new ideas.”

If blockchain sounds too complex and video doesn’t appeal, why not just adopt a simpler approach to contracts? For example, UK contract evangelist Sarah Fox advocates 500-word contracts to build trust and avoid disputes….

(* Read about Salesforce’s first construction council conference here; Salesforce is a client of pwcom.co.uk Ltd.)

Permanent link to this article: http://extranetevolution.com/2019/02/rethinking-construction-contracts-blockchain-video/

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