What is AI?
Artificial Intelligence (AI) leverages computer systems to carry out tasks that are usually performed by humans. Fundamentally, it stems from "machine learning" (ML), a subset of AI where computer systems employ statistical techniques to "learn" from the data they receive. In theory, the more data these systems have, the faster and more effectively they can learn.
Why AI in construction projects?
AI is rapidly gaining traction across various industries and the construction industry is no exception.
Construction projects are notoriously challenging, from managing voluminous contract formation and extensive project communications to project management aimed at minimising delays and costs, along with ensuring safety and quality throughout.
One of the most promising applications of AI in construction is the use of Smart Contracts. AI-driven Smart Contracts can perform tasks that would traditionally require manual intervention. For instance, they can automatically initiate payments or adjustments based on specific weather conditions, ensuring that contractors and project owners receive fair and timely compensation for weather-related delays, thereby minimising financial risks and disputes.
Many construction projects use project management systems to store documents and respond to correspondence, and although effective, this is only the tip of the iceberg in terms of what AI technology is capable of doing.
"Smart Construction Law" envisages a scenario in which the role of a certifier in a project becomes automated and paves the way for compiling reliable records of certifications and instructions issued by the contract administrator.
The Smart Contract is stored on a blockchain and programmed in such a way that all parties can see the progress of the project and be sure that each party is held accountable for their respective tasks.
The benefits of Smart Contracts for employers and contractors are significant:
Smart Contracts can automate routine tasks, streamlining contract administration and freeing up time for strategic activities while minimising errors. By encoding contract terms into code and storing them on a blockchain, Smart Contracts automatically execute when predefined conditions are met, speeding up processes. The fixed nature of blockchain ensures that all parties have access to the same information simultaneously, helping to prevent misunderstandings and disputes. Additionally, Smart Contracts can automate payment processes, ensuring that payments are made promptly when milestones are achieved, which helps avoid issues like late payments and improves cash flow management.
But as with any innovation, AI comes with its challenges:
For smaller construction companies, a major drawback is the high cost of implementing AI, which requires investment in technology, infrastructure, and training. Statutory challenges must also be addressed to ensure Smart Contracts meet legal requirements for signatures and written agreements, and built-in dispute resolution mechanisms are needed to manage coding errors. A skills gap further complicates adoption, as limited knowledge about AI may deter colleagues from using it. Lastly, high-quality data is essential; incomplete data can significantly affect AI performance.
How to prepare for AI adoption:
Embracing AI in contract administration offers a clear path toward improved efficiency, transparency, and cost savings. Although initial investments in technology, training, and data quality are needed, AI-driven Smart Contracts and technologies are practical tools that can reshape how contractors manage contracts, streamline projects, reduce risks, and boost profitability.
Contractors can prepare for AI adoption by assessing current workflows to identify where AI can add the most value, such as automating payments or compliance tracking. Contractors should also plan for technology and infrastructure upgrades, as well as training to bridge any skills gaps in AI understanding. Ensuring legal compliance for Smart Contracts, including mechanisms for dispute resolution, and budgeting for potential integration costs with existing systems will further support a smooth transition into AI-driven operations. Making these preparations will position contractors competitively in a smart construction future.
