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Abstract
In 2012, the UK Government created a goal to use project bank accounts (PBAs) to deliver £4 billion worth of public-sector projects by 2015. The ambition of this goal was to restrict main contractors from exercising cash farming and to mitigate the risk of government money being lost when main contractors become insolvent (i.e., when a PBA is used, a project’s cash is partitioned from the main contractor’s business account; therefore, if the main contractor files for bankruptcy, the project’s cash is protected). Cash farming is a strategy contractors use to increase their working capital to invest in large-scale projects, which involves withholding supply chain liabilities. However, this withholding of cash comes at the cost of subcontractors enduring unethical working practices, such as prolonged overdue payments that lead to high levels of insolvencies. This thesis 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 (BC) can be used to increase systems integration cash flow automation. This research proposes a PBA BC application and tests its hypothesis through proof of concept. Data is collected from two groups of study participants: (1) construction practitioners with working experience of PBAs and (2) blockchain engineers with technical expertise in BC to validate the proposal from the organisational and technical perspective. The author’s PhD studentship was sponsored by a UK main contractor that uses PBAs in most of the construction projects they deliver. Furthermore, this contractor was interested in exploring blockchain as a potential solution to improve their business performance. Therefore, the researcher leveraged the opportunity of extracting construction company insight by engaging in a knowledge-transfer study, by pulling information from industry and presenting it in this thesis. The findings of this thesis suggest: (1) blockchain (BC) and smart contract (SCs) can reduce the management workload of processing PBAs in the current climate; (2) BC and SCs include the potential to democratise PBAs across a broader percentage of supply chain tiers, (3) a BC-based PBA can be set-up within a day (as opposed to weeks using normal banking procedures), and finally, (4) BC provides a trusted data layer for improving the granularity and traceability of cash flow in payment performance reports.
