Conceptual Model Utilizing Blockchain to Automate Project Bank Account (PBA) Payments in the Construction Industry

The UK (United Kingdom) government published a guidance document in 2012 stipulating the use of project bank accounts (PBA) to promote fair and prompt payment practices in the construction industry. This article provides a high-level conceptual model utilising blockchain to automate project bank account payments. In PBA, project funds are partitioned in a separate bank account, like an escrow. Traditionally, before PBA, the main contractor would use the client’s project payments to reinvest in new work, or strategically withhold supply chain payments to sustain positive cash flow. PBA revokes the main contractor as the sole recipient of the project budget and provides the client with transparency over project expenditures. The proposed conceptual model allows project participants to approve and execute automated payments through user dashboards. Part of the security of smart contracts is their unchangeable properties once deployed; however, this is problematic, as construction projects regularly undergo change orders and programme alterations. Furthermore, Ethereum-based smart contracts in the current environment are limited due to the costs associated with auditing and on-chain hosting fees. To mitigate this, transactions in the PBA blockchain model are instantiated through an off-chain application, which stores pre-executed transactions in the form of signed messages. These messages are pushed to the blockchain and converted to transactions once they are approved by validating authorities. The result is a strategy to achieve payment automation at a more economical cost. The proposed model illustrates a high-level amalgamation of PBA, blockchain, off-chain, and asset tokenization. A limitation of this article is that it does not include any programming and the ideas are presented in the form of a flowchart. Future work includes programming the solution.