Smart Contracts and Construction Technology

New construction technology is popping up all the time. This push towards new technology makes it hard for general contractors and subs to tell a product with real merit from a flashy gimmick. After all, the industry has long been targeted by snake-oil salesmen, promising their new tool or technique will forever change the industry. The long and short of it is this: The construction companies that understand how to use smart contracts and other technology will likely be positioned to win more bids, finish projects faster, and dramatically speed up payment.

Smart contracts and blockchain technology are relatively new developments in the construction space. So far, IBM and others that develop these solutions have yet to deliver a commercially viable option. But jobsite and office staff alike would be doing their company a disservice by dismissing the new age. There are apps and software available that make jobsite organization a snap. Payment document tracking software helps to keep everyone on track as well. Perhaps most importantly, the fast transfer of data through a cloud system and the ability to take electronic payment can also drastically reduce the amount of time it takes to get paid. Technology really is here to help construction companies and employees.

Implementing this technology may seem like a risk, but denying its momentum can be even riskier. We’re used to information being available at our fingertips. Customers will come to expect that on jobsites as well. They’ll want to be able to track the progress of a job in real-time while also staying up to date with issues and delays.

Smart technology implementation doesn’t mean adopting it blindly and trusting a system to handle all of your worries. You should understand why the industry isn’t jumping in with both feet and how this technology works. Also, you need to recognize what you should be doing to protect your payment, regardless of the technology being used.

Why construction is slow to get smarter

Technology has improved the lives of professionals in industries across the world. Implementing new systems, software, and machines means faster progress and more replicable results. It also means that companies can start scaling their results, growing exponentially by relying on this tech while humans focus on creativity.

Construction has experienced the benefits of technology more so than any other industry. A look in any contractor’s toolbox will show a slew of power tools that have replaced hand tools. They’re faster and easier to achieve consistent results with.

So, if the construction industry has reaped some technological benefits, why are automated jobsite practices, e-payments, and apps receiving a mixed welcome? Levelset’s 2020 Construction Payment Report  shows that, while contractors are building increasingly technologically advanced structures, the majority are still using 20th century technology to manage project and payment processes.

The construction industry has dragged its heels on new ideas and tech. In fact, unions tend to look negatively on anything that changes their policies and procedures, or might impact employment. This mindset affects union and non-union work.

Maybe most predominantly, office managers and clerical staff are the most concerned about payment software and waiver tracking apps. They’re worried that if the technology is good enough, that they’ll be replaced by these systems. The reality is this: The people who understand how to use construction technology are the ones in the best positions. They’ll be the best equipped to survive these changes in the long run.

Preservation is rarely the key to success. Adaptation is more likely the answer. Customers want to be able to track their investment’s progress. Technology allows that in as close to real-time as possible. That same tech also makes payment easier to verify, easier to render, and faster for everyone involved. Adapting to these changes will help ensure your company’s success.

Jobsite apps and software increase communication and awareness

Tracking the progress on a jobsite requires direct communication with subcontractors and pinpoint supervision. Subs communicate their progress with payment applications, progress reports, and weekly check-ins with GCs and the owner’s representatives. Factor in that the construction industry is renowned for poor scheduling, and this can be a very slow way to track progress.

The use of tracking apps and software like Accu-Build, ProjectPro, or Buildertrend allow a foreman or supervisor to keep track of the site’s progress. Apps that track manpower and payroll automatically update an easy-to-access cloud system. Material deliveries (and accompanying signatures) can also be captured in the cloud. A GC, customer, or office manager can simply log into the system and see near-live progress on the site with a few keystrokes.

According to Scarlet Jonathon of ProjectPro, when it comes to jobsite tracking, their software “enables its user to have complete access and updates on the resource consumption, job progress status, planned schedule, and anything that concerns the contractors on site.”

These apps and software programs can increase communication, collaboration, and coordination. And that’s good for everyone.

Smart construction contracts & blockchain technology

Complementing this system with a blockchain smart contract can increase productivity and payment speed tremendously. Blockchain smart contracts collect information taken from the job site through apps, cameras, and sensors. The technology can detect changes that trigger other actions automatically, like a material delivery or even payment.

For example, when a supplier drops off materials, a camera monitoring the supply area can trigger the overseeing system to make a payment to that supplier. Sensors and scales can also be used to trigger an automatic reordering of materials. Once they hit a specified level, the system makes the call to the supplier.

A similar system can be used to trigger payments to subcontractors from a contractually-maintained escrow account. Once certain stages of a job are reached (the previously-mentioned reorder, for example), the system can make progress payments automatically.

All of the data and progress collected by the smart contract will be available through a third-party app, allowing both contracts and customers to evaluate the progress. This is a far more efficient process.

This should really appeal to subcontractors. A smart contract can do away with pay-when-pay clauses by cutting out the middle-man in the progress payment chain. This technology can make the entire payment process more transparent. And transparency is a key factor in getting paid on time.

Smart construction technology needs smart people

These apps, programs, and contracts increase efficiency and productivity, but they require a human touch. The act of drawing up a fair and mutually beneficial contract is more detailed under this new technology. Human oversight is necessary to guarantee proper execution of the contracted terms, regardless of how automated the system claims to be.

Levelset is a good case in point here. Construction companies that use their payment software to track lien deadlines, exchange lien waivers and notices, etc. are often able to dramatically cut their time to payment. Their research team verifies project and property information, ensuring that payment documents are accurate. But even while it automates some time-consuming processes, it still requires people at the company to oversee it.

Understand that most of these advanced systems are not entirely automated. Construction companies still need an office manager or credit specialist to prepare and submit payment applications, exchange the proper lien waivers, and to take note of where progress isn’t being made. Often, construction software solutions don’t replace human workers, they make the workers able to get more done in less time.

Technology is rarely perfect, and errors can occur. For this reason, human oversight is absolutely required as a safety-check. General contractors, foreman, and supervisors should still be checking on their manpower to ensure efficiency. Humans still need to be involved in the delivery process, securing signatures, and ensuring the correct materials or documents were delivered.

The jobsite’s direction and progress still require proper verification, although it can be at larger intervals. In short, hands still need to be the wheel to ensure a successful end result.

Payment protection processes on a tech-savvy jobsite

Protecting your company’s bottom line should still be the priority, regardless of how advanced a jobsite is. As mentioned earlier, mistakes happen, and even smart contracts won’t always guarantee your right to payment.

It’s important to be sending preliminary notices on all projects, especially in states where notices are required to protect lien rights. Being named in a smart contract and inputting data into a tracking app doesn’t take the place of a preliminary notice. Let the paying parties on the job know you’re there, ready to work, and prepared to protect your rights.

Automated apps and contracts will indeed speed up the progress on the site. Still, it’s essential to use your own methods for documenting as well. Using your own job site-tracking app can be a quick and efficient way to do this, with images, timestamps, and other important information necessary to protect payment during a dispute.

When you consider how many checking account numbers will be entered into a smart contract, logic would say it’s easy for one of those accounts to be a digit off. If your account number was improperly entered, you could be looking at a late payment before you realize there’s an issue. If the customer or GC misses a payment, be sure to send a payment reminder to draw attention to it.

Smart contracts are hopefully self-executing, so you should receive payment faster than paper checks in snail-mail. If you don’t receive your payment after sending a reminder, there’s something going on. At this point, you should send a notice of intent to lien and prepare to file a mechanics lien against the property.

Once you file a mechanics lien and send a copy to everyone required, the ball should start rolling. The good news is that since you protected yourself with proven methods and documents, you won’t have to wait long before the wheels of payment are set in motion.