ITcon Vol. 29, pg. 935-975, http://www.itcon.org/2024/41

Investigating hosting project bank accounts (PBAs) on the blockchain and its potential value contribution to the UK construction industry

DOI:10.36680/j.itcon.2024.041
submitted:December 2023
revised:November 2024
published:December 2024
editor(s):Amor R
authors:Denis Scott, PhD (corresponding author)
University College London (UCL)
ORCID: https://orcid.org/0000-0002-9673-3537
Denis.Scott.19@ucl.ac.uk

Tim Broyd, Professor
University College London (UCL)
ORCID: https://orcid.org/0000-0003-0657-0779
Tim.Broyd@ucl.ac.uk
summary:The UK Government mandated using project bank accounts (PBAs) in public-sector construction projects to reduce the risk of damages caused by contractor insolvencies and cash farming. Cash farming is a strategy contractors exploit to maintain high levels of capital for maximising investments into future work at the detriment of the supply chain enduring withheld payments. This article explores the cash flow problem from the technology perspective, particularly whether the programmability of smart contracts and the general-purpose protocol layer of the blockchain can be leveraged to reduce systems fragmentation and increase cash flow automation. This research proposes a PBA blockchain application and tests its hypothesis through proof of concept. Data is collected from construction consultants with working experience of PBAs to validate the proposal from the enterprise perspective. The findings suggest four key practical implications: (1) The proposed application reduces the PBA management workload of contractors due to process flow automation, (2) blockchain and smart contracts include the potential to democratise PBAs across a broader percentage of the supply chain, (3) a blockchain-based PBA can be set-up within a day (vs weeks with banks) and stores transactions permanently (vs a one year cap with banks), and finally, (4) blockchain can improve the granularity and traceability of cash flow data in payment performance reports.
keywords:Project bank account, blockchain, payments, smart contract, cash flow, process integration
full text: (PDF file, 2.385 MB)
citation:Scott D, Broyd T (2024). Investigating hosting project bank accounts (PBAs) on the blockchain and its potential value contribution to the UK construction industry, ITcon Vol. 29, pg. 935-975, https://doi.org/10.36680/j.itcon.2024.041
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