An Implementation of Smart Contracts

by Integrating BIM and Blockchain

Alireza Shojaei1(&), Ian Flood2, Hashem Izadi Moud2,

Mohsen Hatami2, and Xun Zhang2
1
Building Construction Science, College of Architecture, Art and Design,
Mississippi State University, Starkville, MS 39762, USA
shojaei@caad.msstate.edu
2
M. E. Rinker, Sr. School of Construction Management, University of Florida,
P.O. Box 115703, Gainesville, FL 32611, USA
{flood,izadimoud,mohsen.hatami,xzz0032}@ufl.edu

Abstract. This paper presents an implementation of smart contracts by inte-

grating BIM and blockchain. After briefly reviewing the literature regarding
blockchain technology, smart contracts, and integration of the BIM and
blockchain, a blockchain network using Hyperledger fabric is proposed and
tested to govern a sample construction project. The proposed framework does
not utilize the cryptocurrency aspect of the blockchain as the payment form.
Instead, it discusses the integration of the current banking system and the use of
fiat currencies in transactions. The results show that blockchain is a viable
system for governing construction project contracts by automating the conse-
quences of each transaction and maintaining a tamper proof record of project
progress, which would be valuable in any kind of dispute resolution. The
blockchain network developed in this study implements the smart contract as its
network operation logic. As a result, the notion of having to translate all the
traditional contract clauses to the computer program is shown to be unnecessary
and to some extent not suitable for construction, due to the complexity, fluidity,
and high uncertainties involved in each project.

Keywords: Building Information Modeling
Blockchain
Smart contract

BIM
Cyber-physical space

1 Introduction

The construction industry is filled with legal disputes. Disputes can result from a wide
range of issues such as ambiguity in the terms of the contract, late payments, late or
underperforming delivery of work, to name but a few. One of the proposed solutions to
improve the current working environment is smart contracts. A smart contract can be
defined as a computer program with if/then structure which administers the contract
clauses. Once a party executes its tasks, it asks for inspection, and upon verification, a
payment would automatically be issued. The advantage of such a system is its clarity
and enforceability which may result in smoother contract execution and a significant
reduction in disputes. Building Information Modeling (BIM) due to its data-intensive

© Springer Nature Switzerland AG 2020

K. Arai et al. (Eds.): FTC 2019, AISC 1070, pp. 519–527, 2020.
https://doi.org/10.1007/978-3-030-32523-7_36
520 A. Shojaei et al.

nature and the level of details presented in an appropriate model is an excellent way to
tie different sections of the work to a smart contract. However, a secure and proper link
between the BIM model, the physical work, and the smart contract is needed to make
such a system viable. Blockchain has been successfully implemented in supply chain
management in different industries to connect stakeholders and facilitate storage and
sharing of information. This study aims to test the feasibility of blockchain technology
as the link between the BIM model and the physical world with the implementation of
smart contracts as the business logic of the blockchain network.
The rest of this paper is organized as follows. First, an overview of the blockchain
technology, smart contracts, and the current state of knowledge regarding the inte-
gration of BIM and blockchain is presented. Then, a blockchain network for connecting
the BIM model to the physical world based on the Hyperledger Fabric platform is
discussed with a presentation of a sample implementation of smart contracts that
integrates BIM and blockchain. At last, the paper concludes with discussing the results,
research limitations, and future direction for research.

2 Blockchain Technology

Enforcement of trust throughout the construction industry is always challenging. One

way to ensure trust among all parties is by using blockchain technology in construction
contracts. Blockchain is a database technology that provides smart and coded schemes
to verify and store transactions throughout chains of communications. Blockchain is a
Distributed Ledger Technology (DLT), which is simply a database of transactions.
Blockchain transactions are stored on different nodes of the network, which makes it a
fully decentralized system. Transactions are regularly synchronized, keeping the sys-
tem up to date at all times. A blockchain network is secure as it uses cryptography to
store and transfer all the transactions throughout its decentralized network and the data
is tamper proof due to the consensus system and chain-like data sequence [1, 2]. In
order for a transaction to be executed, all the nodes in the network need to process that
transaction. The fact that DLTs are not owned by specific parties, are fully decen-
tralized and coded, makes them a suitable platform for contracts. Trust in contracts is
instilled in people, organizations, and authorities who are prone to error, corruption,
and misuse. However, trust in DLTs are based on coded transactions that are not owned
by anyone and executed through a chain of distributed nodes [1, 2]. Blockchain
technology is widely used in cryptocurrencies, most notably bitcoin. While the first
version of blockchain started with cryptocurrencies, blockchain technology has pro-
foundly evolved throughout the years. Blockchain 1.0 was the basis of the Bitcoin,
blockchain 2.0 introduced the idea of smart contracts through blockchain with Ether-
eum (a blockchain-based distributed computing platform). Blockchain 3.0 goes beyond
smart contracts and tries to apply blockchain to areas such as healthcare, culture, and
government.
Enforcement of trust, distribution of power among different parties (nodes) and its
cryptographic nature have made blockchain technology a promising platform for smart
contracts within the Architecture, Engineering, and Construction (AEC) domain. Also,
the full digitalization of transactions provides a door to the future of transactions which
 An Implementation of Smart Contracts by Integrating BIM 521

the AEC industry needs to move towards it [1, 3, 4]. The characteristics of blockchain
along with its evolution through introducing different versions that can easily
accommodate different needs helped spread the application of blockchain across
multiple disciplines. Currently, blockchain is being used for record keeping, supply
chain transparency, smart grid distribution, money tracking, voting, and insurance
industries [5]. While numerous advantages have been mentioned for blockchain
technology, there are some downsides that might slow down its adoption in the AEC
industry. For example, depending on the consensus algorithm in use, confirming a
transaction might take a long time. Also, applying blockchain technology in the AEC
industry, which is fairly technology-resistant, might inhibit the adoption of this new
approach.

3 Smart Contracts

Smart contracts are computer protocols that verify, simplify, and enforce the perfor-
mance or negotiation of a contract or eliminate the unforeseen clauses in the contract
[6]. Smart contracts comprise several transactions taking place between verified parties;
they usually vary widely in scale and complexity and are executed by computer codes
[1]. According to Sklaroff [7], a transition from human-language contracts to
technology-based system contracts creates new disorganizations. These issues arise
from the following features of smart contracts: (1) automation, which requires all
agreements be formed by fully-defined terms; (2) decentralization, which requires the
verification of job performance by third parties; and (3) anonymity, which reduces the
dependency of the contract on the commercial context it is being used. As a result, a
semi-automated system is the likely outcome in the short and medium term [8]. In order
to encode the parameters of a contract by a programmer, smart contracts commonly
omit the necessity of administrative staff and expenses. By automating the execution of
the contract, it can be interpreted that smart contracts are legal self-help agreements
outside the obligation of the law. Subsequently, computer codes are used to write them,
which are not legal languages of contract law.
The ultimate mission of smart contracts is to replace traditional contracts with a
new method of technological contract. Through this process, smart contracts enable
companies to operate with significantly fewer disputes and need for law enforcement or
court intervention. They can even negotiate with other parties autonomously (or other
parties’ smart contracts) [7]. The AEC industry needs to adapt to the digital age
effectively in order to improve its productivity. One of the most beneficial aspects of
using smart contracts is that understanding the contract and its implications would be
much easier than reading the common contractual language. Furthermore, it is not
necessary to know how the smart contract works in order to use and trust it. The users
of smart contracts are not supposed to know the coding structure and complicated
algorithms needed for it to work. An excellent example of this advancement in daily
life is a car which can be used without knowing the details of how its internal parts
work [9].
According to Lynch [10], the construction industry has several issues regarding its
reputation, such as a lack of trust, being unfair to subcontractors, and a slow rate of
522 A. Shojaei et al.

change in comparison with other industries. Due to the lack of flexibility in smart
contracts, a significant challenge will remain in the technology’s scalability [7]. Also,
because of the nature of construction projects regarding existing numerous uncer-
tainties in each project, smart contracts in their current state are not perceived as
suitable for complex contracts [11]. Smart contracts for construction purposes have
been considered concerning various components including the automation of contract,
the execution, programming, payment, and certification [12, 13]. According to Fox
[12], by using smart contracts, the scope, type, and size of a contracts’ dispute will be
significantly reduced. By using smart contracts, the dependency on intermediaries such
as lawyers and cost estimators would be decreased, which will result in both time and
cost savings.

4 BIM and Blockchain

As a digital model that integrates many sources, Building Information Modeling

(BIM) provides an exchange platform of information that allows different disciplines to
collaborate and solve design and construction issues. To protect the digital intellectual
properties of different stakeholders, legal information management is critical in case of
disputes and litigation among the numerous and fine-grained contributors involved in
the collaboration process [14]. It is widely accepted that the legal uncertainties and
model ownership management are the main barriers to BIM adoption [15]. The
implementation of BIM needs more trust among different stakeholders in the design
and construction industry [16].
According to Barnett [17], the main areas of research on the use of blockchain in
construction include: designing a common data environment, automated dispute res-
olution, and automated regulation and compliance. The strength of blockchain is to
solve the issues of trust, which has the potential to bridge the barriers in BIM adoption
[2]. Ramage [18] points out that the centralized ledger of standard forms of a contract
results in an expensive and time-consuming process. Mason [9] proposes to build
intelligent contracts between different participants and to develop a trust-based model
to enhance the legal reliability of BIM. The author believes that as a distributed ledger
technology, blockchain can be used as the basic infrastructure that helps smart contracts
be executed without the common payment systems such as banks [9].
Previous studies cite several pieces of evidence in both academia and industry that
support blockchain integration with BIM [3, 19]. Mathews [16] believes that since
blockchain is an efficient way to solve the problem of trust, its combination with BIM
allows innovation to evolve and challenge the boundaries, and hierarchies of the
industry. Turk and Klinc [2] point out that blockchain has the potential to address some
of the issues that discourage the design and construction industry from using BIM,
including confidentiality, provenance tracking, disintermediation, non-repudiation,
multiparty aggregation, traceable inter-organizational recordkeeping, change tracing,
data ownership, etc. Blockchain integration with BIM and other rapidly advancing
technologies will push the industry towards leaner procurement systems with improved
collaboration. As a result, there will be more control and transparency regarding the
cost and duration of the projects by eliminating intermediate parties, which also reduces
 An Implementation of Smart Contracts by Integrating BIM 523

the overall cost of projects. Mathews et al. [20] hold the view that BIM and now
blockchain offer real solutions in pushing forward the oncoming digital transformation.
The authors also express that the implementation of blockchain will impact the building
and construction industries just as it did the finance, insurance, health, and education
sectors [20].

5 Smart Contract Implementation Model

Public blockchain networks that require every node to execute every transaction and
maintain the ledger while controlling the consensus have their own limitations. For
instance, they cannot scale properly, and they cannot support private and confidential
transactions and contracts. Due to the nature of projects in construction and the
importance of transaction confidentiality, it is more reasonable to look for private rather
than public permission based blockchain solution in the AEC industry. In this study, a
private, permission based blockchain, using Hyperledger fabric [21] is deployed, which
is modular, scalable, and secure. In contrast to the common blockchain networks such
as Bitcoin, where the network members are secret, and transactions are public, in the
framework proposed and tested in this research the network members are known, but
the transactions are secret (unless you have permission to view it). In other words, the
network is private, and the membership is controlled. As a result, the business partners
know who they are dealing with, but the detail of each transaction is known only to the
parties involved in that transaction.
The literature reviewed in the smart contract section shows that the perception of
smart contracts is a hard coded computer program that executes the contract clauses. In
the implementation used in this study, the smart contract is basically the logic gov-
erning the network that is encoded within itself; it also relies on peers for verification.
In other words, the method used here is to some extent can be considered as a semi-
automated contract where the execution and verification of obligations are done by
peers inside the network, but the blockchain network controls the consequence of their
actions upon verification. The advantage of such a system is that in addition to being
flexible and versatile enough to scale to any construction project, it has consequence-
based autonomy and tamper proof record keeping which are a significant improvement
to the current state of practice in the AEC industry. It is also worth mentioning that in
adopting smart contract and blockchain in industrial applications, there is no need to
use the cryptocurrency aspect of the blockchain, and monetary compensations can be
executed through traditional channels such as electronic deposits. Figure 1 shows the
network structure proposed and tested in this study where seven participant types are
defined, namely, client, architect/engineer, General Contractor (GC), regulators,
inspectors, suppliers, and sub-contractors. More than one peer is assigned the role of
sub-contractor, regulator, supplier, and inspector. The types of transaction requests and
endorsement ability (verification of other transactions) that each peer has is different
based on their role in the network. For instance, the GC can request a transaction for the
work executed, but only the inspectors can endorse and approve that transaction.
Figure 2 shows the sample BIM model used in this study and highlights a column
on the third floor of the building under consideration. By assigning a unique ID to each
524 A. Shojaei et al.

Fig. 1. Network structure.

Fig. 2. BIM structure and the corresponding blockchain of the column A-121

element as their identifiers, the BIM model is tied to the physical world by the
blockchain. The highlighted column is IDed as A-121. The linked list of blocks are also
presented in Fig. 2, where each block describes a transaction that is already endorsed
by the appropriate parties and now is part of the blockchain. The workflow process
starts with the client requesting the notice to proceed transaction for the project and
upon endorsement by the GC, and appropriate regulatory peers, the first block is
 An Implementation of Smart Contracts by Integrating BIM 525

created. The blockchain continues to grow as the project progresses. To better

understand the process, the blocks related to the column A-121 will be discussed in
more detail. The process starts with the Subcontractor/GC requesting a transaction for
purchasing the column. Upon endorsement by the supplier, that block is created. The
next transaction would be requested by the supplier when the column is shipped and
endorsed by its peers. Then, upon delivery of the material to the job site, the supplier
requests another transaction that relates to the delivery of the column and request for
the payment. Upon the endorsement of this transaction by the GC, the fund would be
transferred to the supplier, and also the appropriate funds would be transferred from the
client to the GC for the material on site. The GC requests the last transaction in this
case upon the erection of the column, which then needs to be endorsed by the inspector.
The use of smart contracts in the construction industry and especially implementing
it by blockchain is a novel approach. In a recent study, Lou et al. [22] discussed
automating construction payments through a smart contract based blockchain frame-
work. While both this study and Lou et al. [22] uses permission-based blockchain to
facilitate smart contract enforcement and automate the payment process, this study
departs in integrating BIM model into the contract and create a cyber-physical space for
administrating the project through the blockchain network.

6 Conclusion

The smart contract implementation model discussed in this paper is generic and ver-
satile in a manner that can be applied to any construction project with minimal
adjustments, such as updating the payment amounts. The framework can be easily
matched to the structure of any project by adjusting the parties involved, type of
transactions and endorsements, and the value of each transaction. However, the
structure of the blockchain network designed in this research reflects a design-bid-build
delivery system at the construction stage. Further research is needed to adopt block-
chain technology to other procurement methods and also possibly to extend its
application to the design and operation stages of the building lifecycle. Also, the smart
contract implementation and consensus system used in this study are by no means
optimal, and it is only adopted as a starting point to show the feasibility of the
approach. Further work is needed to identify the optimal network structure and con-
figuration that matches the characteristics of the AEC industry. This paper proposed a
conceptual framework with a limited empirical test to test its viability. More extensive
empirical tests and refinement is needed to polish the framework and make it opera-
tional. The structure of the network in this study is designed from the perspective that
the project is an organization and all the parties involved play their part as a node in
that organization. The Hyperledger fabric allows multiple organizations to operate in a
network or multiple networks to interact with each other. As a result, one direction for
future research would be modeling the construction process where each party is defined
as an organization with its own network and the project workflow is modeled through
the interaction between the different blockchain networks. Overall, it is shown how
blockchain can be used in a semi-automated to implement smart contracts in a con-
struction process. In a way, it can be used to link the physical and digital world (BIM
526 A. Shojaei et al.

Model) to maintain and control the cyber-physical space. Also, more automation can be
achieved by integrating IoT, RFID, and other sensory technologies where departure,
arrival, and inspection of the material, and workmanship can be streamlined.

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