To what extent can smart contracts replace traditional contracts in construction project?

PurposeThe smart contract provides an opportunity to improve existing contract management practices in the construction projects by replacing traditional contracts. However, translating the contracts into computer languages is considered a major challenge which has not been investigated. Thus, it is necessary to: (1) identify the obstructing clauses in real-world contracts; and (2) analyze the replacement's technical and economic feasibility. This paper aims to discuss the aforementioned objectives.Design/methodology/approachThis study identified the flexibility clauses of traditional contracts and their corresponding functions through inductive content analysis with representative standard contracts as materials. Through a speculative analysis in accordance to design science paradigm and new institutional economics, the economic and technical feasibility of existing approaches, including enumeration method, fuzzy algorithm, rough sets theory, machine learning and artificial intelligence, to transform respective clauses (functions) into executable codes are analyzed.FindingsThe clauses of semantic flexibility and structural flexibility are identified from the contracts. The transformation of semantic flexibility is economically and/or technically infeasible with existing methods and materials. But with more data as materials and methods of rough sets or machine learning, the transformation can be feasible. The transformation of structural flexibility is technically possible however economically unacceptable.Practical implicationsGiven smart contracts' inability to provide the required flexibility for construction projects, smart contracts will be more effective in less relational contracts. For construction contracts, the combination of smart contracts and traditional contracts is recommended. In the long run, with the sharing or trading of data in the industry level and the integration of machine learning or artificial intelligence reducing relevant costs, the automation of contract management can be achieved.Originality/valueThis study contributes to the understanding of the smart contract's limitations in industry scenarios and its role in construction project management.

Automated summary

This study aims to discuss the obstructing clauses in real-world contracts and analyze the technical and economic feasibility of transforming contract clauses into executable codes. Through inductive content analysis and speculative analysis, the study identifies the flexibility clauses in traditional contracts and explores different methods to transform these clauses into computer languages.