Áine McGuinness is a senior associate at legal services firm DWF
AI is rapidly gaining traction across various industries, and the construction industry is no exception. One of the most promising applications is the use of AI-driven smart contracts, which 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.
“Embracing AI in contract administration offers a clear path toward improved efficiency, transparency and cost savings”
Many construction projects use project-management systems to store documents and respond to correspondence, and this is only the tip of the iceberg in terms of what AI technology is capable of taking care of. ‘Smart construction law’ envisages a scenario in which the role of a certifier in a project becomes automated, paving the way for reliable records of certifications and instructions to be 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 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 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 pay is prompt when milestones are achieved, which helps avoid late payment and cashflow issues.
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
Construction projects are notoriously challenging, from managing voluminous contracts and extensive project communications to minimising delays and costs, not to mention the need to ensure safety and quality requirements are met.
Embracing AI in contract administration offers a clear path towards 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 could add the most value, such as automating payments or compliance tracking. They should also plan for technology and infrastructure upgrades, as well as training to bridge any skill gaps in AI understanding in their organisations.
Ensuring legal compliance for smart contracts, including mechanisms for dispute resolution, and budgeting for potential integration costs with existing systems would further support a smoother transition to AI. Making these preparations will help contractors position themselves for a future of smarter construction.
Additional contributions from DWF associate Stephen McGuigan and trainee solicitor Olivia Cumming
