Smart contracts can help subcontractors working on construction projects

Analysis

How BIM can help solve payment issues

3 July 2019 | By Usha B Trivedi

BIM Implementation with smart construction contracts can help those in the supply chain, says Usha B Trivedi.

Construction projects today come with heaps of documents which help in avoiding challenges when it comes to making payments. General contractors verify and handle the payments, for all the subcontractors on board, as and when the project progresses.

These documents help in verifying the actual work done by the subcontractors against what has been scheduled. As a result of which the construction company and the general contractors need to spend a lot of time scrutinising the documents prepared and the records on the ledger.

Payment influx and efflux

Payment requests made by a construction company itself are based on the quantity of work items and pricing of the units, or the part of work completed. However, for payment requests raised by a subcontractor, the construction firm has to evaluate the actual progress of the work and work items assigned versus work finished.

The latter is usually based on the type of work subcontracted, which includes labour, material or lump-sum activities. So the difference in payment requests and verification are undeniably different in both the scenarios. To obtain the work orders and items such as working hours, time taken to finish a certain task etc, engineers have to analyse the measurements and actual work done considering the realistic and unavoidable challenges.

The spectre of litigation

Such tasks and payment related issues can often lead to litigation. In early 2018, Vanson Enterprises faced a lawsuit from five of its subcontractors alleging the general contracting company did not pay for work they carried out on the Walt Disney World Resort in Orlando, Florida.

Such incidents not only undermine the reputation of a company, but also put the trustworthiness of the business at stake. Such issues can become even more challenging when there are no documents to verify the details for making the payment against the work items assigned and completed. Despite the existence of BIM quantity take-offs, such issues are seen more than often across the construction industry. At this juncture, building construction professionals will question the existing practices of the AEC industry and BIM capabilities – which seems justified.

Is the construction industry lacking a concrete base setup?

One of the reasons that construction firms encounter such lawsuits is because they fail to have appropriate construction documentation at the right time to make informed decisions. Firm believers of traditional construction documentation will emphasise its benefits, in spite of the challenges faced in managing dozens of construction documents. But in an era where most of the companies are headed towards digitization, this seems too good to be true.

BIM models developed with AIA standards of LOD 500, and embedded with secure technology database, open up the avenues to data exchange and storage. This paves path for smart construction with digitised documentation helping the decision makers to take informed decisions at the right time.

Source code of federated BIM models with contracts

Smart construction not only means construction with the technology, but embedding the BIM models of building designs and construction planning with a reliable source code. With this source code, smart contracts can help construction companies chart out payment plans and contracts with the contractors and subcontractors by setting up contractual automated provisions.

Intelligently developed source code completely eliminates human intervention to verify the work progress at the time of release of payment. Since payment issues are undeniably daunting, these source codes with special provisions in BIM models of LOD 500 can initiate the payment requests from the project work-end itself.

It is unlikely that such automated payment requests go wrong and remain unattended to end up in a court of law. In fact, project managers on site, the general contractor and subcontractors as well as the supplier, can all conform to a suitable standard and work in tandem.

A source code that addresses all the aspects of quantity take-off, construction scheduling and payment budgets together helps in resolving the issues of payment. In future when the construction industry is booming, lawyers too will be under increased pressure to help their employer get through any litigation charges. The lawsuit paper world may be longstanding, but it will fall apart when projects are complex.

What will rescue construction companies is an appropriately structured federated BIM model and a source code with contractual provisions.

Usha B. Trivedi is an engineer with Hi-Tech CADD Services

Smart contracts can help subcontractors working on construction projects. Image: Baloncici/Dreamstime.com