Should you trust your contractor? Wether you’ve dealt with one before or not you probably already have some general knowledge of how contractors operate. Some want you to seal the deal so they can collect lumps sums and drag out your deadline to enrich themselves. Others genuinly wish you pay more and few do the work with no problems. The elephant in the room is most projects will end badly. To think you can avoid cost overruns, opportunity cost, and timeline delays by using an official company think again. When going through a company the benefits are few: traceability and accountability on materials, that’s it. Most large contracts pits contractor against clients over poor job estimates and multiple missed deadlines.
Occasionally projects are completed quickly, but a majority falls behind schedule, costing you not only potential revenue but up to 30% more than the initial contract. Undoubtedly this breeds distrust and confrontation. 91% of projects go beyond their schedule, even so only 9% of clients ever meet a deadline. A recent survey of 107 construction companies in the UK revealed that the sector is accustomed to a 10% – 20% delay on projects, coupled with up to 20% cost overruns. In extreme cases the cost runs over by 50%!
Current construction supply chains suffer numerous challenges in terms of deadlines and budgeting. According to a survey conducted by IHS Markit, “Construction projects experience a 10-30% delay in meeting deadlines and up to 20% cost overrun, and in some rare cases up to 50%.”
Below is an excerpt from AECROS’ WP:
“Previous studies have shown that mutual trust helps to smooth the construction process, allows flexibility for facing uncertainty, increases efficiency and sustains long- term relationships. In practice, formal contractual rules are always developed to legitimise behaviours and strategies at odds (Kadefors, 2004). However, current contractual relationships are mainly based on confrontational situations that reflect the level of trust (or mistrust) in the contract documents, which can be the driver to increase the total cost of a specific project (Zaghloul and Hartman, 2003).
Today’s methods of contracting and use of construction technology are inadequate. Data exchange is slow and needs a new shared space to meet market needs. Modern construction technology simply creates too much error, wasted material, time, money and unearned potential revenue.
One automated construction technology startup is catching up to market needs. AECROS fills the gap by a tokenized construction supply chain. Construction 2.0 now becomes fully automated with advanced technology. We have a mix of BIM, blockchain, AI, digital twins, 5G, LoRa beacon, IoT for auto inventory tracking, AR/VR, RFID, fintech and more. Automated construction will rebuild contractual trust, save economic and environmental costs by reducing building time by more than 60%.
Blockchain enabled contract management
Security is blockchain’s main strength by allowing digital information to be distributed without risk of being hacked or stolen. Smart contracts are blockchain based agreements similar to real life contracts but in digital form. The main feature is established trust between parties through automatically executed payment for proof-of-work submitted.
A smart contract protects clients, contractors, subcontractors and suppliers against insolvency of late payments. They can even be interlined with each other to create automatic top-down flow of payments for completed milestones, for example, a verified building completion triggers an automatic payment to the general contractor that triggers a subcontractor and suppliers’ auto payment. This sets the precedent for trustworthy contracts while removing the need for middlemen and payment and cash flow problems.
In conclusion, trust needs to be restored in construction. Blockchain has soared in the use of smart contracts with over 7000 communities using it to foster open communication and trust.
If there is to be full trust-based accountability, reliability, and KPIs, superior technology and methods have to be implemented. Full trust can be achieved using blockchain technology to overcome contracting issues while saving time, money, and relationships.
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