Luận văn thạc sĩ Quản lý xây dựng: Blockchain application in construction sector : An empirical smart blockchain - based framework in contract and stakeholder management

PHAM NGOC LIEN

BLOCKCHAIN APPLICATION IN CONSTRUCTION SECTOR: AN EMPIRICAL SMART BLOCKCHAIN-BASED

FRAMEWORK IN CONTRACT AND STAKEHOLDER MANAGEMENT

Major: Construction Management Major code: 8580302

MASTER’S THESIS

HO CHI MINH CITY, August 2022

Instructor: Assoc Prof Dr Pham Vu Hong Son Examiner 1: Assoc Prof Dr Tran Duc Hoc Examiner 2: Dr Nguyen Thanh Viet

Master’s thesis is defended at HCMC University of Technology, VNU- HCM at room 409A4 – Building A4 – HCMUT Campus on 22nd August 2022

The board of the Master’s Thesis Defense Council includes:

3 Assoc Prof Dr Tran Duc Hoc - Reviewer 1

Verification of the Chairman of the Master’s Thesis Defense Council and the Dean of faculty of Civil Engineering after the thesis being corrected (If any)

CHAIRMAN OF THE COUNCIL HEAD OF FACULTY OF CIVIL ENGINEERING

VIETNAM NATIONAL UNIVERSITY HO CHI MINH CITY

HO CHI MINH CITY UNIVERSITY OF TECHNOLOGY

SOCIALIST REPUBLIC OF VIETNAM Independence – Freedom - Happiness

THE TASK SHEET OF MASTER’S THESIS

II TASKS AND CONTENTS

- Identify existing problems in current construction cost and stakeholder management practice

- Identify Blockchain potential applications in said fields and limits of extant literature of Blockchain in the industry

- Propose an empirical framework to manage contract and stakeholder

relationships using Blockchain architecture and state-of-the-art

III TASKS STARTING DATE : 01.03.2022

ACKNOWLEDGEMENT

I would like to acknowledge and give my warmest thanks to the lecturers, admins and classmates of International Master Program – Ho Chi Minh City University of Technology, who have made this program a huge success and continuously supported me during the course

The completion of this research could not have been possible without kind support and guidance of PhD/ Associate Prof Pham Vu Hong Son, my admirable thesis instructor Your brilliant comments, suggestions and connections have been extremely helpful for me, not only on this journey of undertaking my master’s thesis research, but also in my future career and life

I would like to send my special thanks to the interview participants who have facilitated their precious time and efforts to review the research outcomes and shared with me their best advice

Last but not least, I am forever grateful to my family members and friends, in Ho Chi Minh city, in my hometown and overseas, who have always been understanding and given me enormous emotional support during difficult times

ABSTRACT

Construction projects, with their complex nature, large scale and various uncertainty, usually involve many parties with complicated collaboration It is crucial that a network system to improve mutual trust, collaborative transparency and efficiency with win-win motive to ensure overpower of one single party is minimized and common goals are achieved while individual interests, including healthy cash flow and financial merits are satisfied, to exist Conventional centralized governance fashions where client and/or general contractor play the key roles and have overpowering force over others have been proven not effective in settling current loopholes Blockchain, a distributed ledger technology with high transparency, immutability and security, is believed the solution as it has been applied successfully in many other industries with similar aims This dissertation seeks to present a comprehensive empirical Blockchain-based contract management framework applicable in construction sector to reduce the risk of payment, cash flow and conflict resolution failure and strengthen overall project management procedure Demonstration of two prototypes: Automatic interim payment with presence of a general contractor and one nominated subcontractor; and Determination of delay responsibility between a client and a general contractor and implementation of subsequent contractual events, are also discussed The research outcomes were reviewed by a committee in which members are either experts in construction sector or Blockchain field via a written structured interview questionnaire Merits, shortcomings and barriers of the proposed methodology were studied and recorded as foundation of future research

Keywords: Blockchain, Construction, Contract Management, Smart Contract,

Procurement, Delay Resolution

TÓM TẮT LUẬN VĂN THẠC SỸ

Các dự án xây dựng, với tính chất phức tạp, quy mô lớn và nhiều yếu tố không chắc chắn, thường có nhiều bên với sự hợp tác phức tạp Rất cần thiết phải tồn tại một hệ thống mạng lưới để cải thiện sự tin cậy lẫn nhau, hợp tác minh bạch và hiệu quả với động cơ đôi bên cùng có lợi để đảm bảo giảm thiểu quyền lực của một bên duy nhất và đạt được các mục tiêu chung trong khi các lợi ích cá nhân, bao gồm dòng tiền lành mạnh và giá trị tài chính được thỏa mãn Các mô hình quản trị tập trung thông thường trong đó chủ đầu tư và/ hoặc tổng thầu đóng vai trò chủ chốt và có sức mạnh chế ngự những người khác đã được chứng minh là không hiệu quả trong việc giải quyết các lỗ hổng hiện tại Blockchain, một công nghệ sổ cái phân tán với tính minh bạch, bất biến và bảo mật cao, được cho là giải pháp vì nó đã được áp dụng thành công trong nhiều ngành công nghiệp khác với mục đích tương tự Luận án này mong muốn trình bày một khuôn khổ quản lý hợp đồng dựa trên Blockchain, được áp dụng toàn diên trong lĩnh vực xây dựng để giảm rủi ro thanh toán, dòng tiền và thất bại trong giải quyết xung đột và củng cố quy trình quản lý dự án tổng thể Hai mô hình được mô phòng: Thanh toán tạm thời tự động với sự hiện diện của một tổng thầu và một nhà thầu phụ được chỉ định; và Xác định trách nhiệm chậm trễ giữa chủ đầu tư và tổng thầu và việc thực hiện các sự kiện hợp đồng tiếp theo cũng được thảo luận Các kết quả nghiên cứu đã được xem xét bởi một ủy ban, trong đó các thành viên là các chuyên gia trong lĩnh vực xây dựng hoặc lĩnh vực Blockchain thông qua một bảng câu hỏi phỏng vấn có cấu trúc bằng văn bản Những ưu điểm, khuyết điểm và rào cản của phương pháp được đề xuất đã được nghiên cứu và ghi nhận để làm nền tảng cho các nghiên cứu trong tương lai

Từ khóa: Blockchain, Xây dựng, Quản lý hợp đồng, Hợp đồng thông minh, Mua

sắm, Giải quyết chậm trễ

THE COMMITMENT OF AUTHOR

I, Pham Ngoc Lien, author of master’s thesis entitled “Blockchain Application In

Construction Sector: An Empirical Smart Blockchain-Based Framework In Contract And Stakeholder Management” hereby declare that the thesis was done

by the author under the supervision of the instructor All works, ideas and materials gained from other references have been cited in the correct way

Author

Phạm Ngọc Liên

TABLE OF CONTENTS

THE TASK SHEET OF MASTER’S THESIS i

ACKNOWLEDGEMENT iii

ABSTRACT iv

THE COMMITMENT OF AUTHOR vi

TABLE OF CONTENTS vii

2.2.1 Overview of contract and stakeholder relationship management

researches 15

2.2.2 Blockchain technology 18

3 FRAMEWORK STRUCTURING 25

3.1 Architecture of proposed framework 25

3.2 State-of-the-art of proposed framework 27

3.2.1 Consensus mechanism 27

3.2.2 Consortium Blockchain on Ethereum 30

3.2.3 Data access using OTP 31

5 CONCLUSION AND FUTURE RESEARCH 55

5.1 Research Outcome and Limitation 55

5.2 Future Research 56

REFERENCES 57

APPENDIX 62

Appendix No.1 – Specimen of Research Interview Questionnaire 62

Appendix No.2 – Responses of Research Interviewees 73

LIST OF FIGURES

Figure 1.1 Construction Project Stakeholder Relationship Map 2

Figure 1.2 Blockchain-based Framework's Expected Key Functions and Characteristics 3

Figure 1.3 Research Stakeholder Relationship Model 4

Figure 1.4 Research Methodology 5

Figure 2.1 Basic Tasks and Common Difficulties in Contract Management 9

Figure 2.2 Mechanism of Blockchain operation 12

Figure 2.3 Blockchain Network Architecture 13

Figure 2.4 Mechanism of Smart Contract operation 14

Figure 3.1 Blockchain-based Contract and Stakeholder Management Framework in Construction Sector 25

Figure 3.2 Byzantine Generals' Problem 29

Figure 3.3 PBFT Algorithms Explained 30

Figure 4.1 Project Smart Contract Deployment Model 32

Figure 4.2 General Payment Process in Construction Projects 33

Figure 4.3 Consensus Achievement for General Contractor’s Payment Application 34

Figure 4.4 Example of Automatic Payment Contract Execution 35

Figure 4.5 Blockchain-Based Construction Delay Resolution Methodology 39

Figure 4.6 Blockchain-based Delay Resolution Flowchart 41

Figure 4.7 Blockchain-based Project Delay Resolution Flowchart for Stand-alone Delays 41

Figure 4.8 Blockchain-based Project Delay Resolution Flowchart for Concurrent Delays 43

Figure 4.9 Arrow diagram of the case-study project 44

Figure 4.10 As-Planned Schedule of case-study project 44

Figure 4.11 As-Built Schedule of case-study project 44

Figure 4.12 Case-study description 49

Figure 4.13 Available voting options for case-study dispute resolution 49 Figure 4.14 Optional Jury Member Setting 49 Figure 4.15 Pseudocode for Notice of Extension of Time and Compensation of LAD and Contractor's Claim Processes 50

LIST OF TABLES

Table 2-1 Most influencing factors in project stakeholder collaboration during

construction stage 17

Table 2-2 Summary of Common Consensus Protocols 20

Table 4-1 Delay Typology and Proposed Solutions 38

Table 4-2 Case-study project delay information 45

Table 4-3 Case-study project delay analysis 46

Table 4-4 Research Structured Interview Question Content 51

Table 4-5 Information of Research Interviewees 51

Table 4-6 Interview Finding Summary: Advantages of Research Proposed Framework 53

Table 4-7 Interview Finding Summary: Disadvantages of Research Proposed Framework 53

Table 4-8 Interview Finding Summary: Barriers of Research Proposed Framework Development and Application 54

LIST OF ABBREVIATION

1 INTRODUCTION 1.1 Problem Statement

Financial wellbeing plays an essential role in driving the success of any industry and the fate of its organizations Construction projects, with their various types, scales, requirements and locations [1], usually involve multiple parties with complicated collaboration, in which, poor financial management may result in construction companies’ bankruptcy [2] According to a report in USA, construction companies have 14% higher failure rate than most companies [2] It is crucial to manage the relationships among project stakeholders to ensure project common goals are achieved while individual interests, including healthy cash flow and financial status, are satisfied

However, the construction industry is now facing various challenges in collaborative operations [3] Firstly, as construction projects involve a dynamic group of several enterprises (clients, architects and engineers of multiple professionalisms, general contractors, subcontractors, and suppliers, etc.) who possibly have never worked together before must invest handful of resources to execute the project key indicators (See Figure 1.1), and are dismantled at the end of the project [4], trust issue becomes a problem Secondly, due to the discontinuity and fragmentation in the processes of funding, designing, bidding, manufacturing off-site and constructing on-site [3] [5], a trustworthy and resourceful information reservoir across the supply chain does not exist [3] Thirdly, during contract execution, a stakeholders’ individual, for example, site manager, designer or quantity surveyor, occasionally must, at his discreet, act on behalf of his organization The freedom in his choice and the ‘uncertainty’ level of the circumstances may result in various outcomes, including negativity like difficulties and costs arising [6] Lastly, provisions of progressive payments in construction projects are prone to unfairness [7] Due to the bargaining power of upstream parties (client and/or general contractors) and complicacy of work acceptance, payment verification, approval and transaction processes, arguments regarding late payment and/or non-payment usually arise Late payment and non-payment have negative impacts on downstream parties’ finance (i.e subcontractors

and suppliers) as mentioned, along with upstream parties’ reputation and result in other project failure risks

Figure 1.1 Construction Project Stakeholder Relationship Map

In summary, construction project stakeholders nowadays must face a lots of operative issues, either subjective and objective, leading to project goal failure and individual financial and productivity loss A trustworthy, transparent and traceable platform to manage relevant contractual relationships and issues including payment and conflict is necessary for a project success Conventional centralized management fashions where client and/or general contractor play the key roles and have overpowering force over others have been proven not effective in solving aforementioned problems or sometimes even worsen the process It is required that a peer-to-peer network, or a technology eliminating information asymmetry and facilitating automatic execution with limited human interference to improve mutual trust, collaborative transparency and efficiency with win-win motive to exist

1.2 Research Objectives

Blockchain technology is believed the solution as it has been applied successfully in many other industries with similar existing problems This research aims to introduce a smart blockchain-based contract, payment and stakeholder relationship management framework to address above issues in the construction

sector Key functions and characteristics of the framework are illustrated in Figure 1.2.

Figure 1.2 Blockchain-based Framework's Expected Key Functions and Characteristics

The proposed framework is expected to facilitate the process in 03 dimensions: contract management, payment management and stakeholder relationship management, simultaneously Regarding contract management purposes, the framework is expected to be a transparent yet secure information platform for project parties with agreed level of ownership The record of all valid transaction/data in the shared ledger with credible timestamps enables auditors to trace the sequence and logic of all contract events On the other hand, the model is expected to facilitate the acceptance of work for payment verification, as well as to make sure the procedure applied aligns with agreed payment terms and conditions written in the contract Payment automation either in cryptocurrency or fiat money can contribute in avoiding both innocent and intended late transfer while transaction charge is reduced as bank presence is not mandatory As in stakeholder relationship management dimension, it is expected that the overpowering of a single node, typically client or general contractor is prevented The blockchain-based framework also acts as a platform to

obtain multi-lateral consensus should a request for mutual acceptance/rejection arises (i.e: conflict solving regarding delay damages, responsibility for work failure, etc)

1.3 Scope of Study

A typical construction project’s life cycle consists of 06 stages: Appraisal; Definition, Design; Construction; Commissioning and Operation [8] The research sets a demarcation focusing on contract management in construction stage

The contract stakeholder from Figure 1.1 is further simplified for the ease of study (See Figure 1.3) Two most important parties are Client and General Contractor enter a master contract for construction service of a project They both have other contractual relationships and non-contractual relationships with other stakeholders like subcontractor, quantity surveyor, architect, engineer and supervisor to implement project activities while having bond providers like bank or insurance company as financial back-up for the risk of contract bleach and/or failure Further studies in the future may expand the number of stakeholders to explore better scalability

Figure 1.3 Research Stakeholder Relationship Model

1.4 Research Methodology

Research methodology is summarized in Figure 1.4

Figure 1.4 Research Methodology

Literature review of recent researches on contract management and blockchain in construction sector shall consist of 2 main topics:

- Contract management in construction sector: To gain insights on recent contract and stakeholder management practice in construction sector; identify advantages and disadvantages of utilized administration tools to pinpoint potential of blockchain application as a more effective alternative;

- Current knowledge and application of blockchain in construction sector: Acknowledge how blockchain presents in construction sector nowadays; discover potential integration of current blockchain application with other tools and techniques to create a highly functional system in contract and stakeholder management

Summary of literature review findings and studied papers are presented in Chapter 2 of this dissertation

In Chapter 3, a framework is proposed by formalizing construction contracts into smart contract format in a multiple-domain systematic structure with comprehensive description of who-does-what The contract is executed on a blockchain based framework which consolidates both network nodes’ consensus and data collected from an authentic third-party source for resolutions based on agreed terms and conditions of the smart contract whenever stimulus requiring certain stakeholders’ actions are identified Suggested instruments to obtain network consensus and assure system security are also presented in this chapter

In Chapter 4, two prototypes of proposed framework are developed, including (i) interim payment to a general contractor and a subcontractor and (ii) project delay

resolution In addition, structured interviews to gather experts’ opinions regarding the feasibility of proposed framework are conducted and discussed in this chapter.

1.5 Contribution to Academic and Practical Fields

The proposed smart Blockchain-based framework is expected to contribute to existing construction contract and finance management body of knowledge and be accepted as a comprehensive guideline for project stakeholders in various project characteristics, to reduce the risk of payment and cash flow failure and strengthen overall project management procedure

1.5.1 Academically

To expand body of knowledge on Blockchain in general and Blockchain in construction sector in particular Since its establishment in 2008, the technology has gained its significance in many other aspects and industries like Data management and storage, Operation of smart cities, Payments and Banking solutions [9] Although the potential of Blockchain in construction sector has been studied in several researches, recent researches on its exploitation is, in fact, rather limited

In addition to linking existing applications of Blockchain in a systematic architecture throughout focused project life cycle stage (construction stage), state-of-the-art of the proposed framework is discussed, allowing future reference on technology endorsement

- Be applicable to manage both off-site material fabrication and delivery works and on-site construction works

- Be applicable for both short-duration and long-duration construction projects of different executive natures, i.e Design-Bid-Build, Design-Build and Engineering-Procurement-Construction

- Be able to execute contract payments automatically with high sense of trustworthiness, timeliness and dignity, in accordance to agreed payment terms and completed work or parts of work certified by engineers and inspectors where bank involvement is not mandatory

- Be able to assist project managers to address certain conflicts among

contractors/subcontractors in term of coordination of work and verification of work completed in cross-discipline projects

On the other hand, the research introduced two prototypes regarding automatic construction interim payment process and conflict solution related to delay responsibility with clearly described mechanism and example, giving stakeholders comprehensive reference of possible future trials prior to commercial mass application

2 LITERATURE REVIEW

In this section, key salient findings of review of literature are showcased Review directions include major concepts and definitions, current contract management practice and body of knowledge of Blockchain technology in information, contract and conflict management within construction sector Blockchain has been studied and applied in several aspects of the industry, but not yet to its full potential due to lack of systematic linkage

2.1 Concepts and Definitions 2.1.1 Contract Management

Contract refers to a mutual agreement of representation between an offer and an acceptance by at least two parties, including mutually binding terms and conditions to obligate the contractor to provide the specified products, services, or results and to obligate the client (or buyer) to provide monetary or other valuable consideration [10] Contract management involves multiple logical tasks and techniques to safeguard agreed conditions of contract are followed, contractual risks are mitigated and necessary actions are taken in the event there is breach of contract by any party, to reduce actual project damage and keep the performing party harmless in term of time and payment, etc

Process workflow of contract management is spread out on the whole project life cycle Basic tasks and common difficulties of contract management are illustrated in Figure 2.1

Figure 2.1 Basic Tasks and Common Difficulties in Contract Management

2.1.2 Stakeholder Management and Dispute Resolution

According to Engineering Advancement Association of Japan, stakeholders are people concerned with business activities and specific people concerned with a specific project are called project stakeholders [11] There are two hierarchies of project stakeholder (or otherwise called project participants): Primary stakeholder and Secondary stakeholder Primary stakeholders are those who have contractual or legal obligation and authority to manage and commit resources to fulfill project schedule, cost and technical performance objectives Such persons usually participate

in the design, engineering, development and construction, and logistic support of the project Secondary stakeholders are those who have no formal contractual relationship to the project but have righteous interests in the project status, like local community or professional researchers, etc

Construction projects involve many stakeholders with different interests and requirements Project stakeholder management is a systematic approach, associated with appropriate skills of project managers to accommodate stakeholder interests while best project outcomes are achieved [12]

A major matter in any industry, especially one with complicated stakeholder relationships like construction industry, is dispute resolution

Generally, there are three dispute resolution models including: state court litigation, professional private arbitration and crowdsource arbitration (including Blockchain dispute resolution) [13] State courts’ main advantage is that the jury’s judgement is backed up with the force of state authority, resulting in strong lawful action However, state court procedures are usually lengthy and costly, hence not favorable among medium and small sized businesses [13] Professional arbitration services can also be provided by private dispute adjudication boards, for instance, Vietnam International Arbitration Centre (VIAC) in local office, which is normally faster and judgement quality is guaranteed thanks to the knowledge and reputation of the board committees In recent years, in order to adapt with increasing needs for fast, fair and cost-effective resolution process, private arbitration can be organized on online platforms, for example, the European Online Dispute Resolution which solves over 36,000 cases in the year 2018 [13]

Unlike the above, crowdsourced arbitration involves untrained juror members instead of competent and professional attorneys It is a common solution for smaller groups who wish to manage resolution themselves by establishing common ground rules to facilitate community adjudication in a timelier and affordable manner Crowdsourced dispute resolution can be both offline and online With the advent of Blockchain technology, online Blockchain dispute resolution become an effective tool for solving conflicts with lower risk of manipulation, less cost and better time-

efficiency Thus, Blockchain-powered crowdsourced arbitration shall be presented in

Section 2.2.2.4 of this research as a recommended methodology to resolve conflicts

in construction project delay matters

Figure 2.2 Mechanism of Blockchain operation

Below are some of blockchain’s most significant characteristics [17], [18]: - Decentralization: Blockchain operates on distributed ledger on decentralized peer-to-peer network There is no intermediary or centralized server so the risk of single-point of failure is eliminated All nodes may have equal rights and obligations (depends on the network purpose)

- Immutability: Once recorded to the blockchain, transactions cannot be updated or deleted

- Transparency: In a public blockchain network, all nodes are informed whenever a transaction occurs

- Security: Blockchain’s decentralization characteristics is an effective protocol to prevent itself from attacks In order to get a blockchain under control, attackers must at the same time hack multiple devices over the network, which makes it very expensive and nearly impossible Blockchain uses hashing algorithms (the process of transforming any given data string into another value using a hash function and the new string cannot be decoded back to its original value as recalculating these hashes would cost “enormous and improbable” computing power [19]) and protective asymmetric-key cryptography algorithms (only authorized persons who have a

correct pair of private-and-public keys can permit transactions) to ensure data security The state-of-the-art of Blockchain security is shown in Figure 2.3 [20] - Auditability: Whenever transaction is made, it is recorded in the ledger with a timestamp, enabling auditors to trace back the series of events when necessary - Trust: The majority of network nodes must express consensus to add data to the blockchain That eliminates the risk of overpowering force of a single node in the network

Figure 2.3 Blockchain Network Architecture

With aforementioned features, Blockchain technology is now effectively applied in various aspects and industries A blockchain-based contract management framework can enable information publicity among project stakeholders, as well as a platform to perform all multiple-party transactions, including information record of work acceptance, conflict settlement and payment process The framework is inspired by smart contracts, one of the most common applications of blockchain

2.1.4 Smart Contract

A smart contract is executable code that runs on the blockchain to facilitate, execute and enforce the terms of a contract agreement between untrusted parties [21] Smart contract operation mechanism [22] is illustrated in Figure 2.4

Figure 2.4 Mechanism of Smart Contract operation

Once contract terms and conditions are discussed and agreed, they are encoded into public Blockchain platforms like Ethereum or permissioned Blockchains written on modular foundations like HyperLedger with limited access The contract defines respective parties’ rights and obligations Record of any fulfillment or breach of contractual obligation, partially or entirely, is bounded with reasonable subsequence, either payment, penalty or contract termination All records of contract implementation are saved in the ledger, enabling relevant stakeholders to monitor and audit the process In the era of Industry 4.0, thanks to Internet of Thing (IoT), record of contract fulfillment or violation can be not only manually verified by authorized persons in the Blockchain, but can also be automatic input of trusted third-party information sources (called “oracle”) [23] [24], Automatic execution is the key to smart contract operation as it enables smart contracts to execute themselves following the occurrence of some defined event without requiring human intervention [25]

Today, smart contracts are mainly applied in construction material supply chain and logistics as it executes the payment among stakeholders once agreed contract agreement terms (for example: on-time material delivery with required inspection proofs) are satisfied Smart contracts are also applied in construction work-done interim payments to eliminate payment and cash-flow issues as they may settle payment to general contractor automatically using an embedded fund upon the

validation of payment request of relevant stakeholders (quantity surveyor, supervisors, etc.) [11] [12] Moreover, smart contracts can be linked to create a “web of payment” [26] , once payment is transferred to a general contractor’s wallet, linked relevant conditions of smart contracts between general contractor and their agencies, subcontractor or supplier for instance, triggers automated payments to these downstream parties Generally, existing smart contracts only consist of rather simple and straightforward contract conditions with the intention of reducing paperwork hassle whilst many other construction project real-world conflicts and complicated situations are not being considered On the other hand, awareness of Blockchain potential in the industry among construction companies are rather limited According to Construction in a Digital World, a survey conducted in 2020 by KPMG Canada and Canadian Construction Association, only 5% of the companies have implemented Blockchain technology in their production practice, while 57% have got no plan to exploit the technology in near future [27]

Increasing demand of higher professionalism and executive coordination of modern construction projects wherein information in general and contractual information to be specific among project stakeholders must be delivered in a timely and accurate manner is urging the industry to shift its contract management fashion from paper-based to digitalization Electronic contract was introduced to automates

and simplified the contract creation and management throughout four stages of a contract or any legally binding agreement’s life cycle: Contract Creation, Contract Execution, Change Management and Contract Closure [28] Digital payment management enables project stakeholders to complete the payment process online instead of using paper, resulting in the reduction of payment processing effort by 84% [24]

However, it can be observed that among the world’s past and present digital revolution, the application of modern technology in construction industry is fairly humble compared with many other manufacturing industries, for instance automotive, pharmaceutical and biotechnological production

Not until the advent of Building Information Modeling (BIM) that great opportunities to increase the quality of building information and construction management were revealed since the model serves as a ‘single version of the truth’ [17] Relevant parties including designers of different professions, clients, contractors, inspectors and operators can view the building information through 3D visualization and furthermore exploit its various information dimensions such us scheduling (4D), cost (5D), sustainability (6D), etc Even though real-life BIM maturity is not up to its full potential, related researches on BIM in building information management have grown abundantly However, there are several outstanding issues hindering BIM from becoming an effective tool in contract management such as dispersed legal significance [15], information redundancy [4] and data storage capacity Service provider Oracle integrates BIM with cloud computing technology to build a cloud-based platform for project information storage and contract governance (called Aconex) [29] However, centralized cloud-based platforms like Aconex are operated on a pay-as-you-go third-party administrator’s server, making it prone to security and operation issues including loss of data, data privacy, denial of data access and trust issues [30] [31]

As the relationship between project stakeholder is complex and transforms from project to project [1], it is required to analyze the factors influencing it

According to [5], 20 factors are identified to have impacts on the collaboration among construction project stakeholders during construction phase Among which, 5 most influencing factors are summarized in Table 2-1

Table 2-1 Most influencing factors in project stakeholder collaboration during construction stage

1 Honesty between project stakeholders Whether the stakeholders are willing to take his responsibility when failures occur or try to conceal their faults and blame

others

collaborate on win-win profit sharing mindset or work for their own interest only 3 Discontinuity and fragmentation of the

construction industry supply chain

Design-Build, Build or Turnkey Project as contract type affects resource and risk apportionment among stakeholders

Design-Bid-2.2.2 Blockchain technology

Blockchain has been a hot research topic in recent years By July 2019, there had been over 1,000 Blockchain-related journal articles worldwide, many of them are products of inter-national cooperation [32] Most discussed topics are cybersecurity, smart contract, Bitcoin technology and Internet of Thing (IoT) Research in Asia focuses on the technology in two main areas: Blockchain application layer (e.g., privacy protection, smart contracts, IoT) and underlying technology (e.g., architecture, edge computing, algorithm, frameworks) Research in non-Asian countries focuses on application of Blockchain in solving economic and social issues, in addition to technology [32]

Half a decade after the invention of Bitcoin, the backbone of Blockchain 1.0 era, in 2013, Blockchain 2.0 or Ethereum platform functionality was established by Vitalik Buterin The establishment of Ethereum and its cryptocurrency Ether enabled Blockchain technology to benefit from other applications besides monetary transaction with the introduction of decentralized applications (DApps) and smart contracts in many aspects of life, from asset possession, to healthcare, education and voting, etc Once introduced, the potential of Blockchain technology in construction management was quickly recognized However, researches during this period mainly focused on conceptual potential of the technology, rather than its full extent of applicability

2.2.2.1 Public, Consortium and Private Blockchain

In term of openness and access level, there are three general types of blockchain system [33]

Public (or Permissionless) Blockchain is accessible to everybody with internet access, to create data, create smart contracts and run as network nodes [34] Everyone in the network is rewarded to act for the best outcomes of the network, hence, verification of a transaction can be done without the need of a trusted party [3] However, such transparency results in information privacy risk as everyone can

access and initiate changes to the data In addition, it takes more time to verify and add blocks into the chain due to large number of nodes in the network

In contrary, in Private (or Permissioned) Blockchains, only individuals, who are known and chosen, with permission from the network administrator can join the network This is useful for organizations with preference to have control over their data and internal policy, especially financial and auditing systems [34] In private blockchains, shorter time is required to obtain the consensus in the network and more transactions can be processed within a period of time [3]

In Consortium Blockchain, the third type of blockchain systems with medium level of openness and access, several nodes belonging to multiple organizations participate in the network management It is recommended for transaction among businesses

Data across different Blockchains can be linked via cross-chain bridge chain bridges exchange smart contract information, cryptocurrency or non-fungible tokens (NFTs) from one Blockchain network to another [35] Even though most cross-chain applications at the moments focus on cryptocurrency trading, potential of the technology can be expanded to link sizable data for information storage improvement purpose

Cross-2.2.2.2 Consensus Mechanism

In every Blockchain network, consensus algorithm plays a vital role in maintaining system’s safety and efficiency Regardless of blockchain accessibility level, consensus is required to solve these two problems: double spending and Byzantine General Problems [36]

Double spending is using the same token for two transactions at the same time which can be prevented by the verification of many distributed nodes all over the network, to check the legitimacy of data before consenting Every time a transaction is made, the whole system is updated with newly added data block, and new changes are apparent to all network members [37]

Byzantine Generals Problem abstract was first introduced in 1982 [38] as a failure of exhibiting behavior in a computer system where conflicting information is sent out by dishonest nodes called “traitor” Generally, in a network with three or less nodes, it is impossible to ensure information consistency among the nodes But in a network with n ≥ 4 nodes, the system can tolerate up to n/3 traitors (Byzantine Fault Tolerance BFT) Solving Byzantine General Problem is necessary to ensure successful operation of all networks but the problem is even more difficult when it comes to a distributed network In 1992, Practical Byzantine Fault Tolerance (PBFT) was presented, the algorithm working in asynchronous environment is believed to be able to improve response time while tolerating faulty nodes’ malicious attacks and software errors [39]

There are numerous variants of consensus algorithms available in both public and permissioned Blockchain Description of some of the most prominent ones is summarized in Table 1 [36] [40] [41]

Table 2-2 Summary of Common Consensus Protocols STT Consensus

Protocol

Public/Private Blockchain

Work (PoW)

complicated puzzle to solve block hash value

High scalability; Difficulty of attack

Power consuming; Long response time

Stake (PoS)

ownership or the

they own

Energy saving; High scalability;

monopoly

3 Practical Byzantine Fault

Private A primary node is

Energy saving; Short

Low scalability

Tolerance (PBFT)

transaction Others to vote only if they have received votes from over 2/3 of all nodes

response time

2.2.2.3 Blockchain in construction industry

Not until further attempts to overcome previous limits of Blockchain 1.0 and 2.0 related to speed, scalability and privacy issues, resulting in the development of Blockchain 3.0, an advanced Blockchain ecosystem with robust application of smart contracts, transaction systems, and DApps, the technology presence in construction-related research had increased

Nature of Blockchain and its various possible application areas in construction management are discussed in many researches According to Yun Wang (2017), three types of Blockchain-enabled applications are proposed to improve the current processes of contract management, supply chain management, and equipment leasing [26] In 2021, Perera, S., et al discussed four prominent application areas of Blockchain technology in construction procurement including e-Procurement, Payment management, Supply chain, Project and product certification [18] Boonpheng at el provided a more conceptual paradigm on how Blockchain may improve the construction engineering management in term of cost, time, quality, transparency and information security [42] First, the usage of Blockchain results in reduction of transaction, inspection and audit costs Second, time required for document validation is cut down as project stakeholders have access to project data on the shared ledger Third, Blockchain enables transparency of construction material origin and changes the way BIM stores project data, thus, increases the efficiency of project quality management Fourth, clearly Blockchain tightens poor mutual trust between project stakeholders as they only have to trust the system, not the people in it Blockchain is also an open book so that relevant stakeholders may trace back past events to deliberate their judgement in case of dispute Fifth, Blockchain limits access, it reduces the risk of counterfeit information and improve data confidentiality

Another common research approach is the integration of Blockchain to improve current project information management practices According to Žiga Turk et al (2017), BIM, a centralized information environment, faces several obstacles to identify the BIM contributors’ information ownership, liability and responsibility for errors when cases of legal dispute arise [15] The authors argued that Blockchain technology application in various scenarios of different centralization and chain levels could play a useful part in addressing these problems in BIM practice In 2020, Fan Xue et al proposed an innovative semantic differential transaction approach to minimizing information redundancy for BIM and Blockchain integration The proposed model aimed to reduce BIM file size by capturing only changes instead of the entire file to save data storage resources across the network, and to ensure interoperability across different commercial BIM platforms [4] Zhong et al proposed a Blockchain-based framework for construction quality information management on Hyperledger Fabric platform which consists of three modules: Blockchain module; BIM module and IoT module to tighten information interaction on-site and off-site, especially on quality compliance control [33] The integration of Blockchain, IoT and BIM, as commented by Wu et al, is still in its “infancy” [43] In their research, a three-level system architecture for integrated blockchain-based IoT-BIM was designed, developed and evaluated to manage off-site production in modular construction [44] proposed an integrative Blockchain-BIM framework to expedite building permitting process for post-disaster redevelopment by encouraging prompt data exchange to assess structure damages

Other authors focus on how smart contracts can facilitate interim payments automatically Han Lou et al (2019) proposed a framework which consists of two consensus modes – automatic checking and verification of predefined conditions by smart contract and manual approval/refusal by relevant project stakeholders in which the process ends when a payment request with supporting data is either approved or disapproved by all parties [45] In 2020, the authors improved the proposed framework by including proof of manual payment (bank to bank transfer) at the end of the framework The chain ends when payment made satisfies payment terms and

conditions prescribed in the contract Security matters and trade-off of security level with transaction cost and speed were also discussed [7] In can be seen that if applied successfully, blockchain-enabled smart contracts may address two major shortcomings of current payment practice in construction industry including reliance on centralized control mechanisms and lack of guaranteed execution [46] Both papers on automatic interim payment have contributed significantly in reducing risks of late and non-payment from client to general contractor mentioned in earlier problem statement section However, further analysis can be conducted to magnify their applicability in other problem solving such as determination of penalty, preventing late or non-payment from general contractors to subcontractors, or resolving conflicts in payment claim details among various subcontractors

In summary, extant literature has discussed concept of Blockchain and its potential in construction sector as a management tool in various stages and aspects of the supply chain, for instance, procurement, material provenance verification, payment, and information management, instead of viewing it as a multi-dimensional total solution This lack of linkage can be addressed by introducing Blockchain from early project establishment (i.e: design and other project information are stored on Blockchain-linked BIM), to later decentralized procurement, smart contract registration, project schedule and quality smart monitor, payment management, conflict-solving and long-lasting information storage upon construction completion for future operation and maintenance

To conclude this section, the author would like to cite O.Nawari et al [44] who emphasized the slow adaptation of digital transformation in the construction industry The concerns of construction enterprises on investment capital, investment return, lack of trained personnel and government restrictions are among the factors still hindering absorption of advanced technologies, including Blockchain, in the industry

2.2.2.4 Blockchain in dispute resolution

The philosophy of Blockchain-powered crowdsourced arbitration is to put disputes in a public vote [25] by either a randomly-selected anonymous board of

jurors or assigned well-known legal experts Platforms like Rhubard Fund [47] allows users to post a dispute topic on its portal, along with proposed resolution options so that jurors, who must deposit an amount of fixed token in a pool, can vote for the one they consider the most righteous The solution with most votes is considered the final judgement and jurors who voted for this verdict are rewarded with the mentioned token on pro-rata basis On the other hand, jury members with less favorable solutions forfeit their tokens to redistribute to winning jurors This game-theory based principle is called Schelling Point [25], it prevents voters from making random choice and encourages them to put reasonable efforts in the process of problem solving Other networks like Aragon [48] add another layer of game-theory in the principle of eliminating juror bribery and favoring honest jurors over malicious ones by requiring jury members to enter an agreement to delate the bribing party and vote for the opposite side in the event either party attempts to bribe the jury If the parties still fail to resolve the dispute upon public judgement, it is possible that a special panel of jurors with higher professionalism and reputation to be set up to further review the evidence, consider arguments before providing their final decision [49] Apparently, online Blockchain jurisdiction is significantly less costly and more time-effective compared to a physical courtroom arbitration thanks to its less strict facility requirement, incentive mechanism and the power of Internet population while risk of manipulation is controlled

3 FRAMEWORK STRUCTURING 3.1 Architecture of proposed framework

In order to facilitate the process of contract management in construction sector, a conceptual framework based on Blockchain infrastructure (Figure 3.1) is proposed in this study

Figure 3.1 Blockchain-based Contract and Stakeholder Management Framework in Construction Sector

The proposed framework consists of 5 domains (E-Procurement, Ledger,

Nodes, Off-chain Database and Outcomes) and 6 schemes (Formalization, Request, Verification, Consensus, Trigger and Record)

Procurement of construction works (selection of general contractor) is done

on an electronic procurement (E-Procurement) platform, preferably on Blockchain

also via a decentralized application (dApp) wherein all agreed terms and conditions can be easily extracted and compiled into a systematic structure with comprehensive description of who-does-what and transferred in smart contracts coding format

(Formalization) The beauty of establishing a link between E-Procurement data and

smart contract data is that efforts for Formalization is reduced significantly as contract managers and IT developers don’t need to “translate” the contract language into code An organization breakdown structure must be obtained to set out appropriate level of authorization in the network for certain project stakeholders, not only client and general contractor but others whose rights and obligations related to the project can be legally spelled out It is proposed that smart contracts are used in conjunction with embedded fund of cryptocurrencies, so that payment can be implemented automatically and rapidly, thus, contractors, suppliers and subcontractors would be protected against careless acts of upstream parties [37] It is noteworthy that payment is viable via fiat money too In Vietnam, various commercial banks have established Letter of Credit services via third-party Blockchain channels to facilitate cross-border payments for foreign trading [50]

At the beginning of the smart contract execution process, a project stakeholder, for example, a contractor submits a request for payment, an architect requests for a variation order to modify the design to adapt to site constraints or a site engineer

requests that the contractor must pay a penalty for a HSE violation (Request) When

the transaction of such request reaches the client, a process of consensus achievement

begins (Consensus) Detailed of consensus mechanism is presented in article 3.2 of

this study The consensus is achieved when all project stakeholder either approve or disapprove the named request Besides network nodes’ consensus, the predefined conditions of the contract, like unit price, quantity can be checked against using other off-chain or cross-chain data [35] collected from on-site sensor devices, real-time BIM point-cloud updates [24] or changes of market price indices on the internet can be also integrated via application programming interface (API) enabling cross-chain

interoperation to support project stakeholder’s assessment (Verification) IoT

application tasked delegated to Cloud computing, a concept named Cloud of Things