Can Smart Contracts Support the 70% of Construction Companies That Lose Money on Projects?

According to recent data, as much as 70% of construction companies report losing money on projects that they thought were profitable. 

The research suggests that avoidable errors alone can cost 5% of total project budgets, while the net profit margin in construction sat at just 5% to 6% in 2025. 

In terms of managing fine margins, there aren’t many industries out there with less room for error. 

Despite this, many construction companies are still bogged down with traditional processes when it comes to managing their financial commitments. 

Whether firms are attempting to work with outdated accounting software, siloed spreadsheets, or relying on their own instincts, the evidence shows that it’s an industry that can benefit significantly from innovation. 

Step forward smart contracts, a blockchain-powered, self-executing digital program that can automatically broker payments based on certain conditions without the need for human oversight. But what are they, and how can they bring some much-needed efficiency to the construction landscape? 

Let’s take a deeper look at a subset of fintech that could carry a transformative impact on the industry: 

What are Smart Contracts? 

If you haven’t heard of smart contracts, the chances are that you will soon enough. According to Fortune Business Insights, the smart contracts market size is expected to grow at a CAGR of 26.3% to a value of 16.31 billion by 2034. 

With the help of blockchain technology, which is an immutable digital ledger that can ensure far greater levels of transparency when it comes to financial services, smart contracts are powerful tools that can fully automate the financial obligations of construction companies across a range of use cases. 

Because blockchains are tamper-proof, they’re the perfect location for adding self-executing code that can trigger payments immediately upon meeting certain predetermined criteria. 

In the world of decentralized finance (DeFi), this means that lending, borrowing, trading, and interest payouts can all be fully autonomous. But when it comes to construction firms, these self-executing codes can actively stamp out payment delays throughout supply chains while adding unprecedented levels of oversight throughout projects. 

Autonomous Payments

Smart contracts work by using ‘If/When/Then’ logic that’s applied to various project milestones. In terms of project management, these terms can be applied to completing groundworks or reaching a 25% build threshold, for instance. 

When the data provided by the applicable tools, whether it’s your integrated project management software platform, Internet of Things (IoT) sensors, or inspector sign-offs, validates a certain milestone, the smart contract can automatically release funds to contractors without having to manage delays caused by manual approval bottlenecks. 

Given that a recent AGC and NCCER Workforce Survey has claimed that 74% of US contractors reported at least one significant project delay this year, traditional payment infrastructures are clearly playing a role in creating bottlenecks when it comes to efficiency in project management. 

With smart contracts capable of deploying payments faster, they can help to streamline one of the most integral processes in the industry. 

Enhancing the Supply Chain

Procurement has been another cause of stress throughout the construction landscape. But smart contracts are excellent at handling material orders and fulfilment in a transparent way. 

The progress of projects can be notoriously start-and-stop in construction, with projects often adversely impacted by supply chain inefficiencies and poor coordination between subcontractors. 

But smart contracts can support large- and small-scale projects alike with a paper trail of receipts, construction contracts, and warranties. The technology can even be set up to trigger payments only when delivered goods pass their quality checks to ensure that suppliers are only sent money when the green light is received. 

Smart contracts also excel when it comes to internal processes. Automated reordering can be triggered when inventory or material weights drop below a set threshold, ensuring that the technology forms a natural protection against supply chain delays. 

Real-Time Tracking

We’re seeing blockchain pave the way for an intelligent ecosystem where smart contracts can be seamlessly integrated with IoT sensors and Building Information Modeling (BIM) to link physical site progress directly to digital lenders. 

With the help of various hardware like cameras, scales, and site sensors, it’s possible to track material deliveries, monitor weather delays, and adjust deadlines automatically to update project models in real time. 

This helps to provide firms with far greater levels of control over their projects, paving the way for a holistic view of their commitments while forecasting any possible disruptions long before invoices are sent for materials that can’t be used. 

The Future of Financial Control

The future of fintech is bright, and many different industries are set to benefit from the technological developments brought by innovations like smart contracts. 

With the ability to fully automate payments, firms can expect a far slicker process when it comes to procurement and budget management at scale, helping to address the chronic problem of projects overrunning and eating into cash flows. 

Smart contracts provide a much-needed additional layer of control for the industry, helping contractors to focus more attention towards the handling of their projects. With this in mind, the technology could be a watershed moment for the construction landscape as a whole.