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Ph.D. Proposal Defense
School of Building Construction
Georgia Institute of Technology
Ph.D. Student: Jong Han Yoon
Date: Thursday, December 16th 2021
Time: 11:00am – 12:00pm
Committee Members:
Dr. Pardis Pishdad-Bozorgi, Advisor and Chair
School of Building Construction
College of Design
Georgia Institute of Technology
Dr. Javier Irizarry
School of Building Construction
College of Design
Georgia Institute of Technology
Dr. Daniel Castro-Lacouture
School of Building Construction
College of Design
Georgia Institute of Technology
Dr. Basak Kalkanci
Scheller College of Business
Georgia Institute of Technology
Dr. Thibault Schrepel
Stanford University CodeX Center
The Stanford Center for Legal Informatics
Law at Vrije University Amsterdam
Dissertation Title: A smart-contract-enabled system for trustless environment enforcing honest behaviors in construction procurement processes
Abstract:
Construction projects can be executed more efficiently and successfully when construction supply chain (CSC) stakeholders engage in trust-based collaboration and information sharing. However, the CSC stakeholders find it challenging to build trust given that every project is unique and involves different team players. In this short-term setting, the stakeholders may put their individual interest ahead of project interest and pursue dishonest behaviors for economic gain. These issues are exacerbated in the subcontractor procurement process in construction projects. Distrust and dishonest behaviors, including bid shopping by opportunistic General Contractors (GCs) and unethical change orders pursued by Subcontractors (Subs) following the bid award, create an unhealthy business environment that counteracts the benefits of the bidding system, and leads to lower quality standards, increased claims and disputes, delayed project completion, cost overrun, and even decreased safety. The goal of this Ph.D. dissertation is to create an innovative smart-contract-enabled system that enforces honest behaviors and trust among GCs and Subs in the procurement process. The author reviews the literature on trust-building and honest behaviors in construction projects and identifies limitations of the traditional procurement approach, such as bid shopping conducted by GCs and unethical change orders pursued by subs after bid awards. The author hypothesizes that smart contracts on Blockchain can address these identified limitations by providing a trustless environment in which stakeholders do not need to trust each other because the smart-contract-enabled system enforces the stakeholders to execute the trust-needed actions or honest behaviors in a project. The author examines this hypothesis by proposing and developing a smart-contract-enabled procurement system that facilitates an automatic, transparent, and fair bidding process to eliminate bid shopping and, thus, reduce unethical change orders with the aim of enforcing honest behaviors and trust among GCs and Subs. The author then verifies the effectiveness of the system by demonstrating it in front of the construction industry professionals and seeking their input. To further examine the effects of the trustless environment provided by the smart-contract-enabled system, the author will employ game-theoretic reasoning on two hypothetical procurement scenarios: one representing a traditional procurement process involving bid shopping and another one representing a smart-contract-enabled trustless process. The analysis demonstrates the effects of the trustless environment provided by the smart-contract-enabled procurement system from the perspective of game theory including Pareto optimality and Nash equilibrium. Lastly, the author conducts a role-playing simulation game based on the two scenarios with undergraduate and graduate students at the Georgia Institute of Technology. The simulation serves as a triangulation approach for further validating the result of the game theory model. This dissertation contributes to the body of knowledge of the construction industry by 1) developing a smart-contract-enabled procurement system that can enforce honest behaviors and trust among GCs and Subs in the subcontractor procurement process, 2) promoting the construction industry’s understanding of the trustless environment provided by smart contracts, and 3) examining its practical effects on construction projects through game-theoretic reasoning.
