Administrative risks challenging the adoption of smart contracts in construction projects

Abstract

Purpose

As a remedy to usually voluminous, complicated and not easily readable construction contracts, smart contracts can be considered as an effective and alternative solution. However, the construction industry is merely known as a frontrunner for fast adoption of recent technological advancements. Numerous administrative risks challenge construction companies to implement smart contracts. To highlight this issue, this study aims to assess the administrative risks of smart contract adoption in construction projects.

Design/methodology/approach

A literature survey is conducted to specify administrative risks of smart contracts followed by a pilot study to ensure that the framework is suitable to the research question. The criteria weights are calculated through the fuzzy analytical hierarchy process method, followed by a sensitivity analysis based on degree of fuzziness, which supports the robustness of the developed hierarchy and stability of the results. Then, a focus group discussion (FGD) is performed to discuss the mitigation strategies for the top-level risks in each risk category.

Findings

The final framework consists of 27 sub-criteria, which are categorized under five main criteria, namely, contractual, cultural, managerial, planning and relational. The findings show that (1) regulation change, (2) lack of a driving force, (3) works not accounted in planning, (4) shortcomings of current legal arrangements and (5) lack of dispute resolution mechanism are the top five risks challenging the adoption of smart contracts in construction projects. Risk mitigation strategies based on FGD show that improvements for the semi-automated smart contract drafting are considered more practicable compared to full automation.

Originality/value

The literature is limited in terms of the adoption of smart contracts, while the topic is receiving more attention recently. To support easy prevalence of smart contracts, this study attempts the most challenging aspects of smart contract adoption.

Citation

Gurgun, A.P. and Koc, K. (2022), "Administrative risks challenging the adoption of smart contracts in construction projects", Engineering, Construction and Architectural Management, Vol. 29 No. 2, pp. 989-1015. https://doi.org/10.1108/ECAM-09-2020-0678