Smart contract applications for mitigating disputes in the construction industry

Abstract

Disputes frequently arise in construction projects due to the complexity of the processes and challenging environment, resulting in cost overruns, delays, wastage, and low productivity. Thus, the Construction Industry (CI) is enthusiastic about innovative dispute mitigation measures by incorporating digital technologies. Consequently, Smart Contracts (SCs) have emerged as a pioneering approach to digitise construction contracts and thereby mitigate construction disputes. Accordingly, this research aims to investigate the applications of SCs to mitigate disputes in the Sri Lankan CI. The research aim was approached through an explanatory mixed method. Initially, a questionnaire survey was carried out to collect quantitative data which was followed by qualitative expert interviews. Quantitative data were statistically analysed through Mean Weighted Average (MWA) and Relative Importance Index (RII) whereas qualitative data were analysed through content analysis. The study identified the root causes of construction disputes in the Sri Lankan context as poorly written contracts, poor preparation and approval of drawings, lack of communication and coordination, poor supervision and site management, and contain of contradictory and inaccurate information in the contract documents. The findings highlighted that SCs can significantly reduce construction disputes by replacing ambiguous processes with clear, automated processes. By linking payments to milestones, storing project data transparently, and potentially triggering actions based on safety or quality data, SCs streamline communication, ensure everyone plays by the agreed-upon rules, and thereby minimise disputes. Future researchers are suggested to explore the practical challenges and strategies for implementing SCs in the Sri Lankan CI.