The term SMART contract means a protocol for negotiating and signing contracts. It is often limited to contracts which can be sent electronically once agreed and then signed electronically. Although this is a major improvement on paper trails, it misses significant parts of the contracting process.
The Contract Process
The three ages of contracting are:
- contract inception: from verification to tendering
- contract creation: from contract choice to award/completion
- contract operation: from contract to dispute management
SMART contracts deal only with the small task of completing the contract, before the process passes into operation. A coherent and mature contracting process would allow the inception, creation and operation ages to be managed digitally. This would bring together current systems for creating digital contracts, digitally signing them and managing contracts once signed, as well as adding further depth to the process.
I have spent the last 20 years reading, writing and advising on construction contracts and those contracts (in the sense of the terms and conditions) are often a very small part of the documentation that needs to be signed and agreed.
As well as the conditions of contract, a construction contract can include:
- articles of agreement ie the contract overview
- contract particulars or data ie the project overview
- specifications, drawings and data ie the details for the works, goods and services (and bills of quantities where used)
- pricing information including rates, analyses and so on
- information and BIM protocols to help the supply chain work seamlessly together
- works programme(s) and schedules
- health & safety information eg the construction phase plan where CDM 2015 applies
- miscellaneous document like bonds, guarantees, procedures, related contracts.
While being able to negotiate, complete and sign the contract electronically is a huge improvement, until all documents relating to the contract, and those thousands created during the construction project can be created, stored, indexed and recovered in an on-line system, the role of paper will continue to blight the industry.
Intelligent or Smart
However, intelligent contract systems could do much more, such as:
- track the negotiation of clauses (as one document and individual clauses, although with simpler contracts single changes are more visible)
- log telephone calls, tasks, appointments, emails and correspondence relating to contract negotiations
- automatically send contracts and contract documents to the relevant person to authorise (according to pre-set delegations and permissions)
- allow contracts and relevant records to be signed digitally (by staff with relevant authority)
- store and record all relevant works documents (and their approved updates) with version control and a full log of when documents are accessed
- send, store and record changes to the project, works or tasks
- track time and money expenditure on specific items of works
- track programme changes and their causes
- create audit trails for claims
- log minutes of meetings
- log permissions, instructions, orders, directions of the contract administrator(s)
The future of contracting is to use technology to simplify the contract process and the administration of a project, to build trust, avoid disputes and start a project quicker.
Those are also the aims of simple contracts too!