The future of engineering project contract development

and administration using blockchain technology



By Dr Lalamani Budeli

South Africa




In recent years, engineering project complexity which is measured by the degree of novelty, its interdependencies, and the technology applied has increased leading to greater than before the need for contracting work to technical expects, mostly involving original equipment manufacturer (OEMs). Contracts are required by law when two or more companies wish to conduct business with each other to specific activities to be performed by both organizations and the terms through which they will fulfil their parts of the agreement. The most forms of contracts in the New Engineering Contracts (NEC), Federation Internationale Des Ingénieurs-Conseils (FIDIC), and building construction contracts (BCC).

The blockchain smart contract offers an opportunity for engineering firms to revitalize how contract management can be improved to meet the pace, complexity, and technology needs present in the 21st century. This article proposes that the use of smart contracts in engineering projects will reduce the contracting lead times, financial losses, allow automatic execution eliminating payment delays while improving contract administration.

Keywords: Engineering project contract, blockchain technology, smart contracts


According to Cohn, West and Parker (2017-274), contract management is the process of managing contract creation, execution, and analysis to maximize operational and financial performance at an organization, all while reducing financial risk.  Cong and He (2019-1756) understood that hiring contractors in engineering projects expressly increases the project execution risks if the project management team does not take essential measures. Blockchain smart contract, which is a digital contract that executes when set conditions are met potentially enlarges the contracting space mostly due to its ability to automate the contractual processes and paperwork underpinning these complex projects, which will save money, free up valuable resources, and speed up project delivery, whispered Bartoletti and Pompianu (2017- 498). Blockchain is a secured trusted network where every stakeholder is involved to assure the validity of the shared information at all times. Smart contracts remove several meetings need and the involvement of trusted third parties to facilitate agreements over the initial requirements.  Destefanis, Marchesi, Ortu, Tonelli, Bracciali and Hierons (2018-21) alleged that the distributed ledger technology (DLT) has capabilities to register every modification from the initial specification, and telling what to do when it happens from the beginning of the project and allows blockchain members to approve.

Background Concepts on Blockchain Technology

Cohn, West and Parker (2017- 273) held that Blockchain is a distributed ledger technology that is managed by different peers on a peer-to-peer network. This technology operates without any central administrator or centralized data storage management. Data is widely spread across several nodes and the quality of data is maintained by replication and encryption. The main idea was to develop a trustless system that solves the double-spending problem using a peer-to-peer distributed ledger technology through a computational proof of the chronological order of transactions

Cong and He (2019-1764) indicated that the blockchain network is, therefore, a decentralized information system that contains information about all past transactions and operates on a pre-selected protocol which defines the direction of performing and validating the transactions, as well as the functioning of the entire network and its members.

Bartoletti and Pompianu (2017- 498) believed that a transaction group in blockchain networks is combined into blocks of transactions connected in the chain using the hash of the previous block’s record. Therefore, as a property of immutability, the basic security feature of blockchain networks is enforced. According to Goranović, Meisel, Fotiadis, Wilker, Treytl and Sauter (2017:6157), the further the block is along the chain (the older it is), the more the data included in it is protected from changes.


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How to cite this paper: Budeli, L. (2020). The future of engineering project contract development and administration using blockchain technology, PM World Journal, Vol. IX, Issue VIII, August.  Available online at https://pmworldlibrary.net/wp-content/uploads/2020/07/pmwj96-Aug2020-Budeli-future-of-project-contract-development-and-administration.pdf



About the Author

Dr Lalamani Budeli

South Africa



Dr Lalamani Budeli obtained his degree as an Engineer in Electrical Engineering at the Vaal University (VUT), BSc honors in Engineering Technology Management at University of Pretoria (UP), Master in engineering development and Management at North West University (NWU), Master of business administration at Regent Business School (RBS) and a Doctor of Philosophy in Engineering Development and Management at North West University (NWU), Potchefstroom, South Africa. Currently, he is a managing director of BLIT, an engineering, research, and project management company based in South Africa.

His research interests include project portfolio management, agile project management, plant life cycle management, advanced systems analytics, project early warning system, and the use of artificial intelligence in project management. Currently, he is spending most of the time on research that is looking at the development of system and application that uses the latest technology like block chain, internet of things (IoT) , Big data, and artificial intelligence. Lalamani Budeli can be contacted at budelil@blit.co.za.