Abstract
The construction industry has dynamic supply chains with multiple suppliers usually engaged in short-term relationships. Government legislation, novel types of payment agreements, conventional information technology solutions, and supply chain management best practices have endeavoured to solve payment-related financial issues in the construction industry, which are mainly caused by the complexities of the construction supply chain. Nevertheless, payment-related issues persist as one of the key challenges in the industry. Applications of blockchain technology–a trusted, distributed data storing mechanism–along with smart contracts are gaining focus as solutions for complex interorganisational processes. A smart contract is a self-executing script that codifies a set of rules or agreements between multiple parties and runs across the blockchain network. This paper identifies the suitability of blockchain and smart contract technologies in solving payment issues in the construction industry. An expert forum of construction industry stakeholders served as the primary data collection method through a structured questionnaire. The key finding of the paper is that blockchain and smart contract powered solutions can significantly mitigate the payment and related financial issues in the construction industry, including partial payments, nonpayments, cost of finance, long payment cycle, retention, and security of payments.
Highlights
The construction industry produces some of the most complex and largest objects, such as buildings, bridges, dams, and tunnels
The areas were (a) severity of the payment and related financial issues in the construction industry (11 statements); (b) the main reasons contributing to these issues (34 statements); (c) capability of current Information and Communication Technologies (ICTs) applications to solve payment issues (11 statements); and d) potential of blockchain and smart contracts to solve payment issues (11 statements)
The overall expert opinion shows significantly higher potential for blockchain and smart contract solutions to overcome payment-related issues in construction compared to current ICT solutions
Summary
The construction industry produces some of the most complex and largest objects, such as buildings, bridges, dams, and tunnels Such complex construction requires integrating many specialists and suppliers of products, components, and sub-elements through multiple supply chains [1]. This paper identifies the most significant payment and related financial issues in construction supply chains and explores the underlying reasons for these issues. The nature of construction production gives rise to dynamic, long supply chains These complex supply chains cause significant uncertainties and issues in the construction industry, especially related to finance and payments [3]. Construction projects have quality and compliance issues, and a significant number of cases are directly related to materials and components or supply chain-related issues. The current methods of construction supply chain management have been unable to resolve these compliance issues [11]
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