A smart contract system for security of payment of construction contracts

Timely payment of project participants is crucial for successful completion of construction projects, however the construction industry worldwide suffers from poor payment practices. The existing research studied the reasons and the consequences of the payment problem, but very few studies proposed methods for eliminating the problem. In this paper a novel smart contract payment security system named SMTSEC is presented for eliminating or reducing payment issues in the construction sector. The SMTSEC ensures security of payment of construction contracts through an automated computerized protocol that runs on a decentralized blockchain. The potential contributions and limitations of the proposed SMTSEC are studied through a real construction project. The main contribution of the SMTSEC is that it provides a new method for timely and transparent payment of construction projects by guaranteeing security of payment for works under construction without requiring administrative costs and burdens of trusted intermediaries such as lawyers or banks.