VIETNAM NATIONAL UNIVERSITY HO CHI MINH CITY HO CHI MINH CITY UNIVERSITY OF TECHNOLOGY PHAM NGOC LIEN BLOCKCHAIN APPLICATION IN CONSTRUCTION SECTOR: AN EMPIRICAL SMART BLOCKCHAIN-BASED FRAMEWORK IN CONTRACT AND STAKEHOLDER MANAGEMENT Major: Construction Management Major code: 8580302 MASTER’S THESIS HO CHI MINH CITY, August 2022 THIS RESEARCH IS COMPLETED AT UNIVERSITY OF TECHNOLOGY – VNU – HCM CITY Instructor: Assoc. Pham Vu Hong Son Examiner 1: Assoc. Tran Duc Hoc Examiner 2: Dr. Nguyen Thanh Viet Master’s thesis is defended at HCMC University of Technology, VNU- HCM at room 409A4 – Building A4 – HCMUT Campus on 22nd August 2022.
The board of the Master’s Thesis Defense Council includes: 1. Do Tien Sy - Chairman 2. Nguyen Anh Thu - Member, Secretary: 3. Tran Duc Hoc - Reviewer 1 4.
Nguyen Thanh Viet - Reviewer 2 5. Nguyen Hoai Nghia - Member Verification of the Chairman of the Master’s Thesis Defense Council and the Dean of faculty of Civil Engineering after the thesis being corrected (If any). CHAIRMAN OF THE COUNCIL HEAD OF FACULTY OF CIVIL ENGINEERING Dr. Do Tien Sy Assoc.
Le Anh Tuan i VIETNAM NATIONAL UNIVERSITY SOCIALIST REPUBLIC OF VIETNAM HO CHI MINH CITY Independence – Freedom - Happiness HO CHI MINH CITY UNIVERSITY OF TECHNOLOGY THE TASK SHEET OF MASTER’S THESIS Full name: PHẠM NGỌC LIÊN Student code: 2070687 Date of birth: 10.1995 Place of birth: Hanoi Major: Construction Management Major code: 8580302 I. THESIS TOPIC Blockchain Application in Construction sector: An Empirical Smart Blockchain- based Framework in Contract and Stakeholder Management TÊN ĐỀ TÀI: Ứng Dụng Công Nghệ Blockchain Trong Lĩnh Vực Xây Dựng: Đề Xuất Khung Làm Việc Trên Nền Tảng Blockchain Để Quản Lý Hợp Đồng Và Các Bên Tham Gia Dự Án II. TASKS AND CONTENTS - Identify existing problems in current construction cost and stakeholder management practice. - Identify Blockchain potential applications in said fields and limits of extant literature of Blockchain in the industry.
- Propose an empirical framework to manage contract and stakeholder relationships using Blockchain architecture and state-of-the-art. TASKS STARTING DATE : 01. TASKS ENDING DATE: 30. Pham Vu Hong Son HCM City, 29th August 2022 INSTRUCTOR Assoc.
Pham Vu Hong Son HEAD OF ACADEMIC DEAN OF FACULTY OF CIVIL DEPARTMENT ENGINEERING Dr. Le Hoai Long Assoc. Le Anh Tuan iii ACKNOWLEDGEMENT I would like to acknowledge and give my warmest thanks to the lecturers, admins and classmates of International Master Program – Ho Chi Minh City University of Technology, who have made this program a huge success and continuously supported me during the course. The completion of this research could not have been possible without kind support and guidance of PhD/ Associate Prof.
Pham Vu Hong Son, my admirable thesis instructor. Your brilliant comments, suggestions and connections have been extremely helpful for me, not only on this journey of undertaking my master’s thesis research, but also in my future career and life. I would like to send my special thanks to the interview participants who have facilitated their precious time and efforts to review the research outcomes and shared with me their best advice. Last but not least, I am forever grateful to my family members and friends, in Ho Chi Minh city, in my hometown and overseas, who have always been understanding and given me enormous emotional support during difficult times.
iv ABSTRACT Construction projects, with their complex nature, large scale and various uncertainty, usually involve many parties with complicated collaboration. It is crucial that a network system to improve mutual trust, collaborative transparency and efficiency with win-win motive to ensure overpower of one single party is minimized and common goals are achieved while individual interests, including healthy cash flow and financial merits are satisfied, to exist. Conventional centralized governance fashions where client and/or general contractor play the key roles and have overpowering force over others have been proven not effective in settling current loopholes. Blockchain, a distributed ledger technology with high transparency, immutability and security, is believed the solution as it has been applied successfully in many other industries with similar aims.
This dissertation seeks to present a comprehensive empirical Blockchain-based contract management framework applicable in construction sector to reduce the risk of payment, cash flow and conflict resolution failure and strengthen overall project management procedure. Demonstration of two prototypes: Automatic interim payment with presence of a general contractor and one nominated subcontractor; and Determination of delay responsibility between a client and a general contractor and implementation of subsequent contractual events, are also discussed. The research outcomes were reviewed by a committee in which members are either experts in construction sector or Blockchain field via a written structured interview questionnaire. Merits, shortcomings and barriers of the proposed methodology were studied and recorded as foundation of future research.
Keywords: Blockchain, Construction, Contract Management, Smart Contract, Procurement, Delay Resolution v TÓM TẮT LUẬN VĂN THẠC SỸ Các dự án xây dựng, với tính chất phức tạp, quy mô lớn và nhiều yếu tố không chắc chắn, thường có nhiều bên với sự hợp tác phức tạp. Rất cần thiết phải tồn tại một hệ thống mạng lưới để cải thiện sự tin cậy lẫn nhau, hợp tác minh bạch và hiệu quả với động cơ đôi bên cùng có lợi để đảm bảo giảm thiểu quyền lực của một bên duy nhất và đạt được các mục tiêu chung trong khi các lợi ích cá nhân, bao gồm dòng tiền lành mạnh và giá trị tài chính được thỏa mãn. Các mô hình quản trị tập trung thông thường trong đó chủ đầu tư và/ hoặc tổng thầu đóng vai trò chủ chốt và có sức mạnh chế ngự những người khác đã được chứng minh là không hiệu quả trong việc giải quyết các lỗ hổng hiện tại. Blockchain, một công nghệ sổ cái phân tán với tính minh bạch, bất biến và bảo mật cao, được cho là giải pháp vì nó đã được áp dụng thành công trong nhiều ngành công nghiệp khác với mục đích tương tự.
Luận án này mong muốn trình bày một khuôn khổ quản lý hợp đồng dựa trên Blockchain, được áp dụng toàn diên trong lĩnh vực xây dựng để giảm rủi ro thanh toán, dòng tiền và thất bại trong giải quyết xung đột và củng cố quy trình quản lý dự án tổng thể. Hai mô hình được mô phòng: Thanh toán tạm thời tự động với sự hiện diện của một tổng thầu và một nhà thầu phụ được chỉ định; và Xác định trách nhiệm chậm trễ giữa chủ đầu tư và tổng thầu và việc thực hiện các sự kiện hợp đồng tiếp theo cũng được thảo luận. Các kết quả nghiên cứu đã được xem xét bởi một ủy ban, trong đó các thành viên là các chuyên gia trong lĩnh vực xây dựng hoặc lĩnh vực Blockchain thông qua một bảng câu hỏi phỏng vấn có cấu trúc bằng văn bản. Những ưu điểm, khuyết điểm và rào cản của phương pháp được đề xuất đã được nghiên cứu và ghi nhận để làm nền tảng cho các nghiên cứu trong tương lai.
Từ khóa: Blockchain, Xây dựng, Quản lý hợp đồng, Hợp đồng thông minh, Mua sắm, Giải quyết chậm trễ vi THE COMMITMENT OF AUTHOR I, Pham Ngoc Lien, author of master’s thesis entitled “Blockchain Application In Construction Sector: An Empirical Smart Blockchain-Based Framework In Contract And Stakeholder Management” hereby declare that the thesis was done by the author under the supervision of the instructor. All works, ideas and materials gained from other references have been cited in the correct way. Author Phạm Ngọc Liên vii TABLE OF CONTENTS THE TASK SHEET OF MASTER’S THESIS. iv THE COMMITMENT OF AUTHOR.
vi TABLE OF CONTENTS. vii LIST OF FIGURES. ix LIST OF TABLES. xi LIST OF ABBREVIATION.
Scope of Study. Contribution to Academic and Practical Fields. Concepts and Definitions. Stakeholder Management and Dispute Resolution.
Overview of contract and stakeholder relationship management researches. Architecture of proposed framework. State-of-the-art of proposed framework. Consortium Blockchain on Ethereum.
Data access using OTP. Automatic interim payment. CONCLUSION AND FUTURE RESEARCH. Research Outcome and Limitation .1 – Specimen of Research Interview Questionnaire .2 – Responses of Research Interviewees.
73 ix LIST OF FIGURES Figure 1.1 Construction Project Stakeholder Relationship Map .2 Blockchain-based Framework's Expected Key Functions and Characteristics .3 Research Stakeholder Relationship Model .1 Basic Tasks and Common Difficulties in Contract Management .2 Mechanism of Blockchain operation .3 Blockchain Network Architecture .4 Mechanism of Smart Contract operation .1 Blockchain-based Contract and Stakeholder Management Framework in Construction Sector .2 Byzantine Generals' Problem.3 PBFT Algorithms Explained .1 Project Smart Contract Deployment Model .2 General Payment Process in Construction Projects .3 Consensus Achievement for General Contractor’s Payment Application .4 Example of Automatic Payment Contract Execution .5 Blockchain-Based Construction Delay Resolution Methodology .6 Blockchain-based Delay Resolution Flowchart .7 Blockchain-based Project Delay Resolution Flowchart for Stand-alone Delays .8 Blockchain-based Project Delay Resolution Flowchart for Concurrent Delays .9 Arrow diagram of the case-study project .10 As-Planned Schedule of case-study project.11 As-Built Schedule of case-study project .12 Case-study description .13 Available voting options for case-study dispute resolution .14 Optional Jury Member Setting .15 Pseudocode for Notice of Extension of Time and Compensation of LAD and Contractor's Claim Processes. 50 xi LIST OF TABLES Table 2-1 Most influencing factors in project stakeholder collaboration during construction stage .17 Table 2-2 Summary of Common Consensus Protocols .20 Table 4-1 Delay Typology and Proposed Solutions .38 Table 4-2 Case-study project delay information .45 Table 4-3 Case-study project delay analysis .46 Table 4-4 Research Structured Interview Question Content .51 Table 4-5 Information of Research Interviewees .51 Table 4-6 Interview Finding Summary: Advantages of Research Proposed Framework .53 Table 4-7 Interview Finding Summary: Disadvantages of Research Proposed Framework .53 Table 4-8 Interview Finding Summary: Barriers of Research Proposed Framework Development and Application.54 xii LIST OF ABBREVIATION IoT Internet of Things BIM Building Information Modelling DApps Decentralized Applications BFT Byzantine Fault Tolerance PoW Proof of Work PoS Proof of Stake PBFT Practical Byzantine Fault Tolerance HSE Health, Safety and Environment API Application Programming Interface BCoT Blockchain- Cloud of Things OTP One-Time Password EoT Extension of Time LAD Liquidated Ascertained Damage 1 1. Problem Statement Financial wellbeing plays an essential role in driving the success of any industry and the fate of its organizations. Construction projects, with their various types, scales, requirements and locations [1], usually involve multiple parties with complicated collaboration, in which, poor financial management may result in construction companies’ bankruptcy [2].
According to a report in USA, construction companies have 14% higher failure rate than most companies [2]. It is crucial to manage the relationships among project stakeholders to ensure project common goals are achieved while individual interests, including healthy cash flow and financial status, are satisfied. However, the construction industry is now facing various challenges in collaborative operations [3]. Firstly, as construction projects involve a dynamic group of several enterprises (clients, architects and engineers of multiple professionalisms, general contractors, subcontractors, and suppliers, etc.) who possibly have never worked together before must invest handful of resources to execute the project key indicators (See Figure 1.1), and are dismantled at the end of the project [4], trust issue becomes a problem.
Secondly, due to the discontinuity and fragmentation in the processes of funding, designing, bidding, manufacturing off-site and constructing on- site [3] [5], a trustworthy and resourceful information reservoir across the supply chain does not exist [3]. Thirdly, during contract execution, a stakeholders’ individual, for example, site manager, designer or quantity surveyor, occasionally must, at his discreet, act on behalf of his organization. The freedom in his choice and the ‘uncertainty’ level of the circumstances may result in various outcomes, including negativity like difficulties and costs arising [6]. Lastly, provisions of progressive payments in construction projects are prone to unfairness [7].