Role of Blockchain-Enabled Smart Contracts in Automating Construction Progress Payments

Abstract

The construction industry has long been plagued with late and nonpayments. Despite the desired benefits of payment automation and today’s increased access to digitized progress data, too often payment applications still rely on inefficient workflows and documents that are time-consuming to prepare, review, approve, and execute. This paper argues that current payment applications, even if computerized, cannot support reliable automation of progress payments due to their reliance on centralized control mechanisms and lack of guaranteed execution. The paper examines why blockchain-based and decentralized smart contracts can address these limitations. It explores the conceptual underpinning for the design of an automated payment system and investigates the role of smart contracts in enabling reliable and autonomous conditioning of cash flow on product flow status. To illustrate these points, a use case is presented for smart contract-based progress payments in the context of unmanned aerial vehicle-based progress monitoring. The paper concludes with a discussion of challenges facing blockchain-based payment automation and the broader implications for dispute resolution and construction law informatics, namely zero-trust computing and the creation of an auditable single source of truth for projects.