Intelligent Construction Contract (iContract) Sandbox

Leaders: Alan McNamara, Samad Sepasgozar

Overview

Construction is amongst the least digitised of all industry sectors due to the return-on-investment driven culture and the wafer-thin profit margins seen throughout the sector. In the Australian construction industry, the value of avoidable costs that end up in dispute is approximately 5.9% of the overall contract price. Across all the sectors the value of the Australian construction industry in 2016 was approximately $225 billion which would correlate to $13.3 billion spent on dispute.

The top 4 causes of dispute consistently reported in the annual 'Arcadis global dispute report' are all centred around the legal construction contract. The archaic manual nature in the formulation and administration of these contract documents continue to be the root cause of the adversarial attitude that plagues the sector. On top of the dispute driven nature of current construction contracts, contract practices are known to be inefficient at all stages of the contractual process with a cost saving of 6-7% being highlighted as achievable through the optimisation of the contractual process.

In order to exploit the new wave of technologies that are beginning to impact the construction industry (Blockchain, IoT, Big Data, Cloud Computing), the development of a digitally automated contract that would be central to all other data sets on any given construction project is required. The traditional contract is the last bastion of an archaic era and true disruption can be achieved by evolving this process in order to lead the construction industry into the digital age.

Impact Statement

This sandbox aims to develop a prototype intelligent contract (iContract) platform. This will be a digital version of the traditional construction contract that will offer a central platform to draw data, required to administer the contract clauses, from any other data sets available from software being used on a project (i.e Scheduling software/BIM/Communication software/IoT sensors).

The iContract can then initiate contract clause execution in a semi-autonomous manner based on the flow of data input into the system.

iContracts have the potential to shape a new culture of transparent contract practices for the good of all parties and ultimately de-risking the engagement and investment profile of the whole sector.

The iContract would optimise the contractual process through the digital nature of the system with peripheral impacts in other aspects of construction practice such as on-site execution and supply chain management.

Through this digital approach to construction contracts, several impacts would be anticipated both in the formulation, administration and outcomes of the iContract process:

  1. Increased speed and accuracy of contract formulation between parties
  2. A significant increase in the contract administration process through an increasingly automated iContract system
  3. Greater security of payment for any stakeholder engaged through an iContract due to the optimised contractual payment process
  4. Decrease in general dispute as a result of the more efficient, accurate and optimised contractual process