As we noted in our first article on artificial intelligence in
construction, artificial intelligence (AI) is a broad term that
generally refers to technology that uses algorithms to process data
and simulate human intelligence. In our first two articles, we
discussed machine learning and then image recognition and sensors-on-site. In this
article, we discuss two more AI-related topics: (1) building
information modeling; and (2) smart contracts.
Building Information Modeling
Building information models (BIMs) are three-dimensional,
digital, construction blueprints. BIMs allow numerous project
participants to view and modify the same model. They are generally
highly detailed, allowing users to access information on each
BIMs offer several benefits over prior practice. They provide
participants with the capacity to visualize and comprehend a design
much more easily. They also allow for better communication between
participants by constantly updating the design as changes are made.
BIMs can also lead to improved design quality, detail, and
precision because of their digital form. Finally, because BIMs are
constantly updated, they allow owners to monitor a project closely
for deviation from the original plan. These benefits may also
reduce the risk of liability in some cases.
However, BIMs also create several new risks of liability, two of
which we note here. First, the roles and responsibilities of
participants can become irreversibly intertwined in a BIM. In other
words, it may become impossible to ascribe responsibility, and
therefore fault, to the correct actor when numerous actors are
given broad decision-making authority. Given all the hands touching
the design documents, it is very important, in particular, to
define the design responsibilities carefully.
Second, BIMs create intellectual property right concerns. The
traditional rule is that the party that creates the model owns it.
But since BIMs are often compiled from information contributed by
numerous sources and parties, the situation becomes more
complicated. The solution to this issue is to address it in the
contract. If parties fail to do so, they will be left to follow a
convoluted web of information to locate the “true owner”
of the model.
“Smart Contracts” and Blockchain Technology
“Smart contracts” is a phrase used to describe
computer code that automatically executes all or parts of an
agreement automatically and is stored on a blockchain-based
platform. A blockchain refers to a decentralized, online ledger,
which holds a time-stamped series of immutable records of data
managed by a cluster of computers.
There are two types of blockchains: public and private. Public
blockchains are decentralized and allow anyone to join the network
and participate in the blockchain. Once transactions are validated,
the data is secured and cannot be modified or altered. Private
blockchains, on the other hand, limit who can access and
participate in the network and are typically controlled by one or
more entities. Accordingly, only parties participating in a
transaction can access private blockchains. Similar to public
blockchains, once transactions are validated in a private
blockchain, the data cannot be modified or altered. Large networks
of computers are used to verify blockchain transactions and store
blockchain data. The use of blockchain technology can eliminate
transaction fees and the need for third-party verification
typically required in certain transactions.
Smart contracts, like traditional contracts, define the rules
and liabilities of the parties. The difference, however, is that
smart contracts automatically enforce their obligations and
liabilities. Once operational, smart contracts generally require no
human intervention to execute and enforce their terms. Smart
contracts are currently suited for simple transactions. An example
is automatically transferring funds from one party to another when
specific criteria are met and imposing damages if certain
conditions are not met. Hybrid-contracts, however, consist of a
traditional written contract alongside a smart contract to cover an
automated function, such as payment.
Implementing fully autonomous smart contracts in the
construction industry presents many issues. One is the need for
unique code to accompany every smart contract. While common
transactions can recycle the code from other smart contracts, every
construction contract contains significant elements that are unique
that would require unique code. Another issue arises from the need
for funds to be pre-loaded into a digital wallet so that the smart
contract can automatically execute its payment obligations.
Construction projects can be expensive. Requiring a party to
advance funds into a virtual wallet until completion is likely not
a viable option. Additionally, fully autonomous smart contracts
would likely require some reliance on outside information that
cannot be anticipated in the contract code. Data from image
recognition and sensors-on-site, for example, will need to be
continuously updated in a fully automated smart contract. Outside
data reliance for smart contracts poses what many refer to as the
“oracle” problem. Outside data can only be provided to
smart contracts through manual input. Thus, it would require a
party to hire someone who specializes in providing data for smart
contract codes. Utilizing an oracle will create additional fees and
less autonomy as the smart contract would fail if the oracle fails
to relay the outside information. Further, parties using an oracle
must trust that the oracle will adequately perform its duties as
mistakes could render a smart contract useless.
Smart contracts also pose some important legal issues. Because
data shared on blockchain technology cannot be altered or modified,
it is virtually impossible to change the terms of the contract.
Where modification is necessary, new smart contracts must be
created. Additionally, courts will likely struggle to adjudicate
smart contracts and blockchain technology due to a lack of
familiarity with the new technology. One way some parties have
nonetheless sought to take advantage of the benefits of smart
contracts, while addressing their limitations, is to use
hybrid-contracts that contain elements of both traditional and
smart contracts. This allows some automation and provides security
for parties by having a written contract that can be easily read
and interpreted by a court. For this reason, hybrid-contracts
appear to hold the most promise for industry-wide application.
Originally published 11/13/2020
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