If construction is going to improve we must first create a fairer more stable construction industry. Once this has been achived we will finally see productivity improvement.
The only way to create lasting change is to offer better outcomes than those offered currently. In an industry like construction with such deeply entrenched ideas, we must show a clear a path to achieve this. We must answer ‘what’s in it for me’ for key members of the supply chain.
At Malablock we belive that the first step in chaning the industry is getting cash to flow more quickly along the supply chain. This can be done using software to create a shared transparent record of; evidence of work carried out, the requests for approval and who granted approval.
The software will record the consensus of all required approvals and facilitate payments. The process is transparent for relevant parties in each transaction. Work is carried out by the subcontractor and request for payment is made, approval by the main contractor, payment request from the main contractor, subsequent approval of the contract administrators then the payment recommendation to the client and final payment.
By tracking the approvals for a piece of work into a distributed shared ledger where contractual consensus is recorded. This can then trigger the payments simultaneously to subcontractor and main contractor.
This will have the following effects on the project and supply chain;
Clients will have confidence that money is being spent correctly and is going to the subcontractors responsible for the work and materials on site. It will result in lower costs, Subcontractors will give better rates for projects where they know they will be paid quickly.
Contract Administrators and/or monitoring surveyors will have the confidence that they are recommending the correct payment for work completed and that subcontractor payments are up to date. Also, confidence that the main contractor can not use project payments to manage their cash flow elsewhere.
The Main Contractor can be alleviated of the responsibility of managing cash flow and making subcontractor payments letting them focus on delivery. This is a leaner approach and means they need much less internal accounting support.
The Subcontractors get paid sooner. This allows them to manage their cash flow for payroll and materials.
This has the added benifit of strengthening the financial stability of the supply chain.
Payments are only the first stage. By recording the performance against contractual KPIs industry-wide it can give subcontractors a robust way to prove value and be able to justify higher rates because they will reduce risk on projects. This digital reputation will have a massive impact on the existing procurement process.
The other area to explore will be to make incentives easy to build into subcontracts. There are lots of great case studies showing that alliancing (or integrated project delivery) works. Today it’s not so easy to implement at scale. This platform will allow that.