Framework for Automated Billing

in the Construction Industry Using BIM

and Smart Contracts

Xuling Ye(&) and Markus König

Ruhr-University Bochum, Universitätsstraße 150, 44801 Bochum, Germany

xuling.ye@rub.de

Abstract. Building Information Modeling (BIM) represents the application of

digital building models to improve project-wide collaboration. With the help of
building information models, elements with tendering information, construction
work to be carried out, quantities to be processed, planned times and subcon-
tractors commissioned can be described in an integrated way. However, digital
models are currently still little used for the automated billing of construction
work. In this paper, an approach is presented to make contract management and
payment within construction projects simpler, more transparent and more
automated. The implementation takes place with the help of Smart Contracts,
which are linked to digital building information models. For this purpose, a
billing model and processes for checking the contract are defined on the basis of
the building elements, determined quantities and defined construction works. If
the contracted construction has been checked and accepted, the payment pro-
cedure is started automatically. The Smart Contract, as well as the individual
transactions, are managed using Blockchain technology. Detailed contract data
and execution information is stored in a common data environment (CDE) and
linked to the Smart Contract. The concept for the realization of “BIM contracts”
as well as aspects of the implementation are presented in this paper. Finally, we
discuss several aspects for improvement and further development in the future.

Keywords: Building Information Modeling
Blockchain
Smart Contract

Common data environment
Information container for data drop

1 Introduction

An increasing need for digitization in the coming decades is expected in the building
industry for various reasons. Among the most important reasons are the increasing
complexity of construction projects, low productivity, and the growing need for real-
time information sharing [1].
Building Information Modeling (BIM) has become a widely accepted solution for
making the whole lifecycle of construction project digital. Agarwal et al. [1] shows that
low margins and relatively low productivity are the issues of the construction industry
for decades. The main reason for this lies in the low digitization degree in the con-
struction sector despite the increasing scale and complexity of construction projects.
Relying mainly on drawings or paper-based documentation does no longer satisfy the

© The Editor(s) (if applicable) and The Author(s), under exclusive license
to Springer Nature Switzerland AG 2021
E. Toledo Santos and S. Scheer (Eds.): ICCCBE 2020, LNCE 98, pp. 824–838, 2021.
https://doi.org/10.1007/978-3-030-51295-8_57
 Framework for Automated Billing in the Construction Industry 825

increasing needs of construction projects. Digitization can meet these needs by facil-
itating information sharing, data capturing and analysis. In this way, it also enables
time-efficiency for construction projects. With the benefits of digitization, Agarwal
et al. believe that 5D BIM, which integrates time and cost into a 3D BIM model, is a
coming up trend in the construction industry.
By integrating “cost” to the BIM model, a 5D BIM model can instantly generate a
cost budget and the corresponding financial representations over time. Advances are
reducing the time of quantity take-off (QTO) and generating bill of quantities
(BoQ) from weeks to minutes, improving the accuracy of estimation, minimizing
disputes caused by ambiguity in CAD data, and allowing cost consultants to spend
more time in improving value [2]. QTO specifies the quantity of different materials,
while BoQ structures and lists the costs of the quantities.
In this paper it is assumed, that a contract is concluded between the client and the
contractor for the construction assignment of the works. The individual construction
work items, accounting units and payments are included in the contract. The required
information can be taken from the 5D BIM models. The contract specifies additional
regulations for the release of deliverables or procedures and retentions in case of
defects. The performance report, inspection of the construction work as well as the
invoicing can also be partially supported by 5D BIM models. However, the commu-
nication and invoicing is usually still conventional without a direct link to the con-
struction contract.
Using current practice has limitations: (1) The construction accounting is currently
a manual process and therefore very time-consuming and error-prone. (2) The time
from invoicing to receipt of payment is disproportionately long. This fact leads to many
bankruptcies in the building industry. (3) The contract structures are very complex and
non-transparent. (4) Payment claims are difficult to verify, since detailed documenta-
tion of the as-is construction process and the complex interactions of the individual
contracting parties are missing (5) Because of the complexity, single construction tasks
are combined into large payment blocks.
Due to the limitations of current practice, a new approach for combining BIM with
Smart Contracts using Blockchain technology is proposed in this paper. Smart Con-
tracts are self-executing contracts, where the terms of the agreement between the client
and contractor are written directly in lines of computer code. The code and the
agreements are stored via a distributed, decentralized Blockchain network. Smart
Contracts enable trusted transactions and agreements to be carried out between different
anonymous parties without the need for a central authority, legal system or external
enforcement mechanism. Thanks to the Blockchain technology, Smart Contracts make
all transactions traceable, transparent and irreversible.
Smart Contracts contain certain details that are normally described in a textual form
in conventional contracts. The contract information, however, is defined by program-
ming code. The principle is: Code is law. For example, a Smart Contract can define that
a contractor receives a certain amount of money if he has delivered a certain service.
Consequently, Smart Contracts contain if-then rules. If a condition specified in the
contract is fulfilled, this automatically results in a consequence. This means that defined
activities to implement the intent expression of the contract are automatically carried
826 X. Ye and M. König

out when a required event occurs. At the same time, all contractual partners are
informed of any status changes in real time.
Smart Contracts based on a Blockchain have some advantages over conventional
contract forms: 1) Reliability: If a Smart Contract has been programmed correctly,
difficulties in interpreting the terms of the contract are almost impossible. The loss of
documents is also excluded. 2) Security: If Smart Contracts are programmed based on a
Blockchain, they are protected from hackers by cryptographic encryption procedures.
Nobody can change the negotiated contractual conditions afterwards. 3) Efficiency:
Programming a Smart Contract takes less time than corresponding bureaucratic pro-
cessing. This saves contract partners time and money. 4) Independence: Smart Con-
tracts reduce the need for third parties, such as lawyers, notaries and bankers. The
unchangeable Blockchain is used to verify a contract. For this reason, the principle
“code is law” applies. The program code of a Smart Contract decides whether the
contract conditions have been fulfilled correctly or not.

2 Related Work

2.1 5D BIM Model

Agarwal et al. [1] define a 5D BIM model as “a five-dimensional representation of the
physical and functional characteristics of any project. It considers a project’s time
schedule and cost in addition to the standard spatial design parameters in 3-D.”
However, this definition is not detailed enough and leaves room for interpretation. The
paper assumes a 5D BIM model to be a combination of different information. The basis
is a digital building information model which contains geometric and semantic infor-
mation about the building. The Industry Foundation Classes (IFC) are used for data
exchange, especially in building construction. The bill of quantities (BoQ) are created
for the tendering and awarding of construction works [21]. An international standard
for the description of BoQ information does not yet exist. Nevertheless, there is a
standardized format for data exchange in Germany called GAEB (in German:
Gemeinsamer Ausschuss Elektronik im Bauwesen) [20] provided by the Joint Com-
mittee for Electronics in the Construction Industry. The GAEB XML format is sup-
posed to serve the agreement of a uniform standard for the exchange of building
information and thus to support all requirements to electronic processes concerning
public notice, contracting and accounting in the execution of construction works [20],
and is linkable with other information models [24, 25]. The building model can be used
to determine quantities that are assigned to the individual BoQ elements. For an in-situ
concrete wall, for example, these are formwork area, reinforcement in kilograms or the
concrete quantity in cubic meters. The calculation of the individual quantities based on
the components of the BIM model is called quantity take-off (QTO). For the data
exchange of the calculated quantities simple lists or the mentioned GAEB XML format
can be used [20].
Subsequently, based on the individual construction works and calculated quantities,
a schedule and time planning can be made, taking into account the design and the
building site. For this purpose, individual activities are defined, connected and saved as
 Framework for Automated Billing in the Construction Industry 827

a network plan [22]. The durations can be determined, for example, considering the
selected construction methods and calculated quantities. The components of the BIM
model are then linked to the individual activities using the calculated quantities. In the
current approach, the schedule is not taken into account, as it can be stored and
exchanged separately. The combination of building model, BoQ and QTO is referred to
in the paper as 5D BIM model. In practice, these three data sources or files are linked
together [23].

2.2 Blockchain and Smart Contracts

Blockchain is a distributed ledger technology [3–5], where “distributed” is managed by
a decentralized peer-to-peer (P2P) network [3] and “ledger” is realized as an electronic
database [5] comprising a chain of blocks [4]. In this network, the transactions are
verified, validated and combined into blocks. The blocks are then chained together.
Thus, the procedure is based on a chained block structure that grows linearly. The data
is stored multiple times in this network to be able to cope with a failure of one or more
nodes. The data in the Blockchain is unchangeable and cannot be manipulated or
deleted. Using a P2P network in the Blockchain was first proposed in 2008 as a Bitcoin
cash system to solve the double-spending problem [6], which is a problem since digital
currency in the internet could be used more than once since it can easily be copied and
broadcasted by hackers. This problem was solved 1983 [7] by using a client/server
(C/S) network, where a C/S network provides a central server as a trusted third party
between two nodes. However, compared to the C/S mode, the P2P network can provide
users with a higher degree of autonomy and direct-interaction capability, can further
distribute data and control, load-balance requests across the network and eliminate the
risk of a single point of failure [8].
The Blockchain concept was developed from the Bitcoin technology firstly pro-
posed by the pseudonymous Nakamoto in 2008 [6]. Brito and Castillo first mention the
term “block chain” based on the Bitcoin policy in 2013 [9]. Since then, the term
Blockchain has been widely accepted and used. However, the Bitcoin (i.e. the origin of
Blockchain) was a non-programmable system suitable only for cash transactions [10].
The situation starts to change after Smart Contracts come into the stage of Blockchain.
The Smart Contract, first proposed by Szabo in 1996 [11], is a digital agreement which
self-executes itself. Since Buterin et al. [12] have embedded Smart Contracts in their
Ethereum Blockchain system in 2014, Blockchain has become a platform with pro-
grammable applications. This way, more possibilities and more applications in more
fields than just finance have come to the Blockchain stage. A Blockchain can be set up
in three simplified ways: as a public, private or consortium Blockchain [13].
The public Blockchain is a completely decentralized network without a higher-level
authority. Each transaction is verified and synchronized by each node of the Blockchain
before it is written to the system. This makes this variant relatively slow and very
resource-intensive, but transparent and secure. With the private Blockchain, a company
operates the system and has control over the transactions. Only one participant verifies
and writes each transaction into the system. In addition, the read rights for the trans-
actions per user can be restricted, which allows higher data protection than the public
variant. Since the size of the private Blockchain is limited by the company limits, the
828 X. Ye and M. König

resource requirements and computing time per transaction are also kept within limits.
However, when the completely decentralized approach is abandoned, part of the reli-
ability is also lost. The consortium Blockchain is a kind of hybrid of private and public
variants. Here, a group of participants shares the decision-making power over the
verification and distribution of read rights for transactions. This offers many advantages
of the private Blockchain such as efficiency and data protection of transactions without
putting the entire sovereignty in one hand. For implementation within a construction
project, it is intended to use a consortium Blockchain. The contracting parties as well as
banks, insurance companies and, if necessary, associations, chambers or the public
sector can be involved.
In the construction industry, a great deal of research has been done on using
Blockchain due to its enormous potential. For example, Turk and Klinc [14] point out
that the organizational and legal issues, which cannot be solved by BIM technology,
can be addressed by using Blockchain to manage BIM files. Wang et al. [15] explain
three categories of potential Blockchain applications that can solve three challenges in
construction engineering management: notarization-related applications for trust issue
in contract management, transaction-related applications for asset management (e.g.
equipment leasing), and provenance-related applications for supply chain management.
In 2019, Li et al. [16] reviewed 73 papers from 2014 to 2018 about the applications of
Blockchain in the construction industry. Those applications lie in smart energy, smart
cities and the sharing economy, smart government, smart homes, intelligent transport,
building information modelling (BIM) and construction management, as well as
business models and organizational structures.
However, at this moment, due to limited Blockchain storage and relatively slow
transaction speed, it is worthless, time-consuming and overloaded to store all the data
of a construction project in the Blockchain. Many researchers suggest the notion of off-
chain data storage, which is a conventional or a distributed database to store the data
outside of the Blockchain. For example, Xu et al. [17] propose an architecture using
Blockchain for connecting application layer within off-chain data and off-chain control.

2.3 CDE and ICDD

In the construction sector, the common data environment (CDE) could be used as an
off-chain data storage to connect with the Blockchain. A CDE stores all the data (i.e.
geometrical and semantical information as well as the documentation) related to the
lifecycle of a construction project [18]. Due to its functions of bringing all information
together and serving as central data management tool, the CDE is widely recognized as
a solution for implementing the BIM method [19]. Meanwhile, Preidel et al. [19] list
several existing approaches which could be an application of CDE: BIMserver.org,
A360 & Forge, BIMcloud, BIMcollab, bim+ and Trimble connect.
ISO 21497-1 was developed for the standardized data exchange of linked data
sources using a generic information container format. According to ISO 21497-1, “a
container is a file that shall have an extension ‘.icdd’ and shall comply with ISO 21320-
1 also known as ZIP64”. In this sense, the ICDD can store the 5D BIM model data and
be uploaded in a CDE.
 Framework for Automated Billing in the Construction Industry 829

A container includes a header file in the top-level folder. A container shall have at
least three folders. The ‘Ontology resources’ folder may be used to store ontologies
providing the object classes and properties that shall be used to specify the contents of
and links between the documents within the container. The ‘Payload documents’ folder
and ‘Payload triples’ folder may contain nested folders to allow groups of associated
digital resources to be held together and referenced as a group (e.g. a building infor-
mation model with its associated reference files or a set of linked spreadsheet docu-
ments) (cf. Fig. 1). A container according to ISO 21497-1 can also be used to exchange
data from 5D BIM models and forms the information basis for the approach presented
here. Building models, BoQs and QTOs are linked with the help of a container and
used in the creation of a building contract.

Fig. 1. The structure of an information container for a data drop (according to ISO 21497-1)

3 Methodology

For the definition of a Smart Contract in the construction industry and its implementation
based on distributed ledger technology, it is necessary to specify exactly which con-
tractual regulations are to be implemented and which information has to be stored. The
presented approach assumes that not all contractual regulations will be transferred into
Smart Contracts. Certain aspects such as information on insurance, cancellation policies
or regulations on the limitation of claims for defects are still described in conventional
ways. Therefore, a paragraph is included in the paper-based contract that refers to the
Smart Contract, i.e. if the conventional contract is signed, the Smart Contract is also
accepted and set up (cf. Fig. 2). To enable an evaluation, it must be ensured that the Smart
830 X. Ye and M. König

Fig. 2. Integration of a Smart Contract into a paper-based building contract

Fig. 3. Linking of 3D BIM model, BoQ, QTO and billing model

Contract can be viewed and understood by the parties involved. The textual or visual
representation of a Smart Contract will not be discussed in this paper.
The 5D BIM model describes the construction work to be commissioned. For the
payment, a billing model proposed in this paper must be developed based on the 5D
BIM model. Depending on the type of contract used, the structure and the content of a
billing model can be different. In consequence, a billing model is the digital equivalent
of a payment plan and contains single billing units (e.g. in terms of area and cubic
volumes or individual components). Additional conditions, interactions and processes
are defined so that an automatic payment can be started. For example, a payment can
only be started once the corresponding billing unit has been confirmed by the ordering
 Framework for Automated Billing in the Construction Industry 831

party. The Smart Contract is implemented on a Blockchain or distributed ledger

technology. This means that the transactions for automated payment are checked and
stored via the Blockchain.

3.1 BIM Contract Container

The 5D BIM models already provide information for the description of construction
works. Within the concept, it is assumed that a digital building model in IFC format is
linked to the Bill of Quantities in GAEB XML format (more specific, in X86 format of
GAEB XML). Single items of the BoQ are usually grouped together into larger billing
units. The items can be spatially or logically grouped together using the building
model. The billing units form an independent digital billing model that is stored in
addition to 5D BIM information. Each unit has a globally unique ID (GUID).
A simple XML-based data format has been defined to store the billing units
(Fig. 4). Beside the GUID information about costs, the delivery date and descriptions
are also stored. The corresponding links to single quantity splits of the BoQ elements
are specified by using a special payload triples document in the information container
(cf. Fig. 5).

Fig. 4. XML-based data format of the billing model

In the current approach, the schedule is not taken into account. To store the
essential 5D BIM information (the 3D BIM, BoQ, QTO and billing model) for the
construction project, a BIM Contract Container (BCC, cf. Fig. 3) is needed. The
information in this BCC is linked and stored as an information container for data drop
(ICDD) according to ISO 21497-1 (Fig. 5).

3.2 Acceptance Procedure

After specifying the data to be stored in the Smart Contract and consequently in the
Blockchain, the contractual regulations have to be defined. Depending on the
832 X. Ye and M. König

Fig. 5. BIM Contract Container according to ISO 21497-1

contractual situation, the individual rules can become extremely complex. Therefore,
the approach is that individual general rule components exist which can be combined to
form a complex set of rules. Each rule component consists of single transactions,
interactions and if-then statements.
The standard rule for each billing unit with a simple procedure for the removal of
construction defects can be described as follows (see Fig. 6). The contractor documents
that he will start work on a billing unit (e.g. BU1). The contractor later informs that he
has completed the work. The client checks the construction work performed and
documents the results. There are now various options to proceed. If no defects are
found, the agreed payment is initiated. If defects are found, the client has a claim for
subsequent performance. The billing unit is divided into a correct (BU1.C) and a defect
part (BU1.D). For the partial work performed without defects, the client defines an
appropriate payment and initiates the payment. The initiated payments (complete or
partial) are confirmed by the bank. The contractor is then requested to correct the
documented defects. The client will set a reasonable deadline for this. The open work
with the associated payment is defined as an open billing unit. Before the correction of
defects is activated in the Smart Contract, a confirmation from the contractor must be
obtained. If the contractor accepts the correction of defects, the fulfilment, acceptance,
and payment procedure is started for the open billing unit. If the correction of defects
was not accepted, an arrangement outside of the Smart Contract must be made based on
legal framework conditions.
The individual information and transitions are stored in the underlying Blockchain.
A block of the Blockchain includes a link to the BCC and the corresponding billing
unit. A block can only be added if the conditions defined in the Smart Contract are
fulfilled (cf. Fig. 7). It is very important that only the necessary information is stored in
the Blockchain. The combination of using the billing model and the Smart Contract is
the key for automated payment. Aspects of personal data protection must be taken into
account. Feedback from the participating banks is also stored in the Blockchain. In
principle, it would also be possible to use a digital currency.
 Framework for Automated Billing in the Construction Industry 833

Fig. 6. Process for automated reporting, checking and payment of a billing unit.

Fig. 7. Linking the BIM Contract Container via Smart Contract using Blockchain technology

3.3 System Architecture

During the contract negotiations, a BIM Contract Container (BCC) was agreed upon
and subsequently also contractually agreed upon. However, due to the size of the data,
it does not make sense to store a complete BCC in the Blockchain. Usually a common
data environment (CDE) is provided to collect, manage and share all the project
information. In the presented approach, the BCC is stored in the CDE and the con-
tractual partners are given access to the CDE and the BCC. Using CDE as an off-chain
(i.e. outside of Blockchain) data storage can lighten the load on the Blockchain. In this
way, only the important data (e.g. payments and processes) is recorded in the Block-
chain, and the rest data is stored in the CDE. To ensure that the BCC was not modified,
a checksum is subsequently created for the container using Secure Hash Algorithm 3
(SHA-3). The checksum is included in the Smart Contract and stored in the
834 X. Ye and M. König

Blockchain. By calculating the checksum, the immutability of the BBC can always be
guaranteed. In order to enable an automatic payment, the contractually agreed costs of
the billing units are also stored in the Smart Contract. A modification of the BCC
always results in a modification of the actual contract. Consequently, only the data
related to project processes and payments are stored in the Blockchain.
During the inspection of the work carried out, various photos, protocols or other
documents are usually generated, which are also stored in the CDE. A checksum is also
created for these additional files and stored in the Blockchain. This ensures a trans-
parent and manipulation-free documentation of the release for payment (Fig. 8).

Fig. 8. Integration of CDE and Blockchain based on URLs and hash values

3.4 User Interface Framework

Based on the system architecture, the user interface framework is proposed. The
framework is designed to illustrate how clients or contractors can interact with this
application. In this framework, the interaction with the CDE and the Blockchain
technology are divided into two tools as shown in Fig. 9 and Fig. 10, respectively.
The smart contract setup tool (Fig. 9) loads the 5D BIM data from the CDE. The
3D BIM model and the BoQ information can be used to define the billing model and
the Smart Contract. For each billing unit, the acceptance and paying procedure can be
defined. The user can select out of predefined Smart Contract templates relevant
components for the current project to specify an individual Smart Contract. Further-
more, individual Smart Contract rules can be created by using the Smart Contract setup
tool. After the client and the contractor have agreed on a billing model and digital
contract modules, the Smart Contract is digitally signed. Consequently, a BCC with a
3D BIM model, a BoQ data and a billing model is generated and uploaded to the CDE.
The CDE returns the URL and the hash value of the BCC, which will be stored together
with the Smart Contract rules in the Blockchain and become the initial data of the
Blockchain.
Once the paper contract has been signed, work can begin on the construction site.
The Smart Contract defines processes and interactions. All interactions with the Smart
Contract are stored in the Blockchain. In the following, only the acceptance by the
client is highlighted. For checking, documenting and starting the payment, the client
 Framework for Automated Billing in the Construction Industry 835

Fig. 9. The user interface framework of the Smart Contract setup tool

Fig. 10. The user interface framework of the check tool

836 X. Ye and M. König

should use a user-friendly application (e.g. an app for a mobile device, Fig. 10). During
the assessment, photos are often taken, various checklists are filled out and the entire
assessment process is documented. For this purpose, the client can navigate through the
3D BIM model, view individual contracted construction works and also check the
billing units. Furthermore, it should also be possible to document any shortcomings. If
everything is correct, the construction work can then be released. During the release,
the information and documents are uploaded into the CDE. In the next step the URLs
and hash values returned by the CDE and the original results of the checking process
are stored in the Blockchain.

4 Conclusion and Outlook

Digitization is widely considered as the solution for the optimization and automation of
processes in the construction industry. However, the current procedure of a construc-
tion project still relies on paper contracts and conventional communications, which are
time-consuming and nontransparent. Using a 3D modeling technology linked to cost
information (i.e. 5D BIM) can simplify the payment and construction process. How-
ever, the usage of 5D BIM currently is at a very early stage and still cannot automate
the construction project procedure. This paper presents a framework for automated
billing by combining the BIM Contract Container (BCC) with Smart Contracts. All the
project-required data are stored and linked in the BCC. Compared to the current
procedure of a construction project, the whole construction process proposed in this
paper could be simplified and automated. All the linked 5D BIM data and the billing
model can be stored in the CDE using BCC, and the sensitive and important infor-
mation (i.e. acceptance procedures and payments) is safely stored and recorded in the
Blockchain.
For implementing automated payment of this framework, it is vital to have a more
specific definition of the billing model and Smart Contract rules, which will be dis-
cussed further in the future. To select a suitable CDE for the proposed framework, the
feasibility tests of the existing CDE applications (e.g. bim+, Trimble connect, etc.)
should be provided in the future research. A suitable CDE should be able to return the
URL and the hash value of the uploaded files. The following five factors should be first
considered for selecting a suitable Blockchain platform: 1) Does it support Smart
Contract applications? 2) How much data can it store? 3) How fast is its transaction
speed? 4) What kind of chain (e.g. public chain, consortium chain or private chain)
does it support? 5) Could it interact with the user interfaces we proposed? For the
development of the Smart Contract setup tool and the check tool, it is essential to take
the following four points into account: 1) Are there any existing open source 3D BIM
viewers that can be plugged into the tools? 2) How can a BCC file be generated and
hashed in the Smart Contract setup tool? 3) How can the Smart Contract rules be
defined? 4) What data stored in the CDE can generate a checklist and show it in the
check tool?
As an initial attempt, this proposed framework is simplified and does not cover all
the factors of the construction process which should be considered in the future. For
example, in this framework, only the client and the contractor are taken into account.
 Framework for Automated Billing in the Construction Industry 837

However, in a real construction project, the subcontractors also play an important role
and should be considered. The different requirements for different participants also
need to be more specific. This framework supposes that the client can define an
appropriate payment for the construction project, which is not practical currently.
Moreover, as the Smart Contract rules still need to be set manually in the Smart
Contract setup tool, this framework is not fully automated yet.

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