Joshua Lorenz, left, and Brandon Rothey, right, of Meyer Unkovic & Scott.

Technology continues to change the way we work and live in surprising ways. It was hardly five years ago when the likes of ride-share apps like Uber and Lyft ushered in the onset of the gig economy that is making lives easier for people around the globe. Technology also has changed the way some have thought about currency, which thrust cryptocurrency, such as Bitcoin, into the spotlight.

But it's Bitcoin's behind-the-scene technology—blockchain—that is enabling and evolving these developments and making an equally impactful role in transforming traditional industries. Blockchain, essentially a digital and distributed record of data, already is innovating the supply chain and financial sectors. Now, in what might not at first seem like a natural fit, it has the largely unrealized potential to make a big mark on the construction industry.

An international construction firm, in fact, recently signed a significant supply chain management deal with a U.S. blockchain company to track assets and streamline facility management. Deals like that are currently the exception rather than the rule, but the implications of how blockchain can affect contracts in the future are too large to ignore, and already we're seeing it used in certain design processes.

Laws are not necessarily keeping pace with these rapidly changing developments, making it critical to consider the impacts of the use of technology on a project. Let's break it down.

How Blockchain Works

Eliminating reams of paper and bringing transparency to networks, blockchain creates a database consisting of “blocks” of information that can be created and altered by those with access to a given network. These blocks are connected by “chains” showing the work between the original block and the new or amended information. A popular analogy for blockchain is to think of it as a bank ledger, only everyone in the network has a copy.

With the information distributed among those with access to the network—in construction, these might be project owners, contractors, subcontractors, architects, etc.—they can monitor and approve changes. This transparency ideally provides a layer of security because there is no central location for a hacker to capture encrypted data.

How Smart Contracts Might Help Builders

Depending on the industry, blockchain has multiple uses. The smart contract built with blockchain technology has future potential in the construction industry and can allow for easy verification and administration of contracts and has the potential to streamline payment and claim procedures. Being written in code, these types of contracts can be partially or fully self-executing and self-enforcing.

In construction, the unique aspects of each project often render using a cookie-cutter, one-size-fits-all approach to contracting difficult. Even standardized contract documents are modified significantly because each project is different. Changes to the contract documents (including change orders), the project schedule and the like can become unwieldy on bigger jobs, and with more dollars at stake, smart contract technology is likely to find its place in the construction industry, beginning with larger projects.

From a technology standpoint, however, the construction industry historically has been slower to embrace change than some other industries. However, when the tangible benefits of adopting new technology become real, change will follow, and smart contracts likely will become more frequently used in the not-too-distant future.

How Blockchain Can Help BIM

One area in construction where an innovative technology already is being used is known as building information modeling (BIM). BIM is a process in which an intelligent, three-dimensional model-based design of a project is built digitally to ensure accuracy in construction and limit errors.

It's an especially exciting technology for architects because it catches interference among various shop drawings which otherwise may not be obvious until construction. For example, think of a series of blueprints overlaying each other. It's hard to visualize those plans until the project is in 3-D—and then there might be a pipe going through a doorway no one noticed until it actually was built. BIM can help minimize those mistakes.

Blockchain technology allows for easier tracking and coordination among the different trades using BIM for a project to the extent they are given access to the model. Alterations can be seen as they happen, and any errors should be caught in the digital space before they get to the worksite.

The Potential to Make Projects Vulnerable

While technology can add convenience and efficiency, the more people with access to technological information, the more opportunities there are for a cyber threat. The more project participants having access to the BIM, for example, the more opportunities there are for scamming and cyber deception. Every time someone opens the model, there exists the potential to impact the model. In smart contracts, too, a simple bug or typo in the code can create risks. As long as humans and technology interface, the potential for human error will exist.

Sophisticated hackers always are adapting to changes in cybersecurity, and there is an ongoing need for IT experts in not only construction, but in most industries in the United States. Even with the proper staffing, if a seasoned cybercriminal is intent on stealing someone's data, it can be very difficult to prevent.

What happens if important data, intellectual property or trade secrets are stolen or exposed? If there are losses, who is liable?

How to Protect Yourself

If a party is dealing with data in any appreciable way, in addition to implementing appropriate IT protections and protocols, they should consult not only with an attorney to review and draft contract language to protect the party from liability for cyber risk, but they also should look into getting appropriate cybersecurity insurance to cover any losses.

New technology, as always, will revolutionize the construction industry. However, construction professionals will need to be well-prepared in order to seize the benefits and opportunities that technology brings while avoiding the potential pitfalls.

Brandon B. Rothey is a trial lawyer at Pittsburgh-based law firm Meyer, Unkovic & Scott. He protects businesses, professionals and their business interests. Contact him at [email protected].

Joshua Lorenz is an attorney at the firm. He focuses his practice on construction and real estate law and litigation. Contact him at [email protected].