Uses of Blockchain in Facility Management

*** This article was also feature on The New Deal blog on this link

Advancement in technology has affected every facet of our society and has revolutionized industry in the past couple of centuries. Corporations are at the forefront of technological advancement and applications of technology have been able to make their operations leaner, thereby reducing cost overhead and increasing efficiency. One technology that promises to continue this trend is Blockchain. There has been an unprecedented amount of hype and promotion of this technology which been touted as the next big technology revolution. It will disrupt entire industries and develop new efficiencies that will usher us into a new era of economic transparency, operational efficiency and digital security.

Blockchain technology is a machine validated recording process and allows for recording transactions in a digital ledger, distributed across several machines in a network. The different transactions, or blocks, are linked to one another using cryptographic keys, or hashes. The key terms here are ‘ledger’ and ‘transaction’ which indicate the basic functionality of the technology. For the longest time, businesses have carried some form of private ledger for bookkeeping and holding financial information that is used to create income statements and balance sheet reports among other functions. As Blockchain technology implements a distributed digital ledger over many machines, it can be applied anywhere a recording ledger is used and transactions are taking place.

We can take this a step further and apply the technology to more general use cases wherever records need to be kept such as supply chain applications. This could be tracking mining, production and ownership of precious stones such as diamonds, tracking food supply from farms to production plants to the supermarket or transferring energy from one jurisdiction to another. Keep in mind that these particular industries already have mechanisms in place to record and track such information but Blockchain technology allows for an unprecedented level of security, immutability (i.e, the details and contents of which cannot be changed as it is encrypted, stored and distributed on devices across the network) and traceability. Given that smart contracts (self-executing instructions, conditions and outcomes programmed into the Blockchain) can also be implemented, the opportunities and applications increase even further.

The applications of Blockchain extend well beyond the Finance and Financial Services industries. Corporations providing Blockchain infrastructure as a service such as IBM and SAP have made alliances to develop Blockchains with corporations in consumer products, telecom, retail, pharmaceuticals, logistics, agriculture, aerospace, industrial machinery, energy, and public services industries. Other corporations such as Microsoft and Kodak and have also made commitments to invest in Blockchain. We had a client ask us a question once “Why do you not use Blockchain to store building data?” Given that Dimax collects interval data from hundreds of points per building per minute, anyone knowledgeable of Blockchain technology will immediately know the answer to this question. While there is a lot of reason to be pragmatic about the possibilities of Blockchain technology, it is important to realize that it is not an all-encompassing technology for every application. In this case, using a private Blockchain to log in data points from buildings would not be suitable given that records would need to be updated and consensus would have to be established more than 300,000 times a day.

There are risks associated with the Blockchain technology. There are differing protocols to choose from that are not easy to integrate due to a lack of standardization. Immutability of records renders them immune to alteration and change. If there is a need to rectify a transaction after it has taken place, a new transaction will need to be carried out. This is quite a deviation from the way business is done today and requires a change of mindset. Implementing this technology in the long run necessitates the gradual upgrade of hardware equipment as consensus may require increasing levels of computational power depending on the type of consensus mechanism used.

Property Management and Real Estate is one industry that can benefit immensely from this technology. As of now, we have yet to see a Blockchain consortium of Real Estate and Property Management firms. Using Blockchain for tenant billing, equipment warranties and indoor occupancy tracking have all been suggested and there is a good case for each of them. A Blockchain enabled tenant billing system would eliminate a lot of the paper pushing and administrative costs. Using on-board sensors to monitor equipment performance for the purposes of warranty could be great way to increase confidence of building operators in purchasing equipment and getting refunds when it does not perform according to defined standards. However, various technical issues may arise when determining acceptable equipment performance standards as it depends on a lot of internal and external factors. The idea of tracking indoor occupancy for warranties might raise several privacy issues but may ultimately provide value as it will help to create digital identities and would allow a building to cater specifically to its tenants. Here are some other ways, the Facility Management and Real Estate industry can benefit from the Blockchain technology:

  1. Regularly Scheduled Service and Maintenance Contracts: All types of equipment in a building regularly needs maintenance and servicing whether it is HVAC equipment such as boilers, chillers, mechanical equipment such as pumps and fans or electrical equipment such switch gears and transfer switches. Different equipment may have separate requirements such as how often it needs to be serviced. Using a private Blockchain to keep track of regular maintenance and service visits from contractors would provide traceability and accountability. A process of executing smart contracts to release payment once work has been verified to be completed can be developed to handle and record transactions and the work involved. Most HVAC equipment comes with the option of on-board smart interfaces, sensors and controls which can verify once regular maintenance and servicing work has been completed as these tasks are specific and have an established sequence of steps. Once the specific set of tasks have been completed by the contractor, smart contracts can be initiated to automatically release payment and record and update the Blockchain.
  2. Small Purchase Orders (Contracts under $5,000): In buildings where a BAS is installed, the HVAC equipment is programmed to operate a certain way. With time, the sequences of operation require changes or updates and these changes do not cost more than a few hundred or few thousand dollars. Sequence of operation changes or small hardware installations/replacements in smaller contracts are quite precise and straightforward unlike larger contracts where the scope of work can be quite complex. Many property management firms do not issue Purchase Orders to their contractors for amounts as small as this. Some of our clients simply email their contractors and ask them to invoice the cost of the work. This process, or lack thereof, causes issues when the work is completed and needs to be revisited at a later time. Property Managers and contractors resort to older correspondence for details and a lot of time is wasted. In many cases, there is no official record of this type of work and if property managers or operations staff leave or switch jobs, the information is lost. If BAS data is being collected by an analytics platform, AI can be used to verify small sequence of operation changes. A process of executing smart contracts on a private enterprise Blockchain would be ideal for the release of payment once AI has verified that the work is completed. Having a record on a private Blockchain would provide a complete record of work done. It is important to point out that many liberties have been taken with our assumptions in this example such as having an analytics platforms, structured and classified data and AI algorithms. Effective adoption of these technologies in buildings systems is sporadic or virtually non-existent in the case of AI.  However, it shows the potential of what is possible by applying a combination of these technologies and the efficiencies and benefits are distinctly apparent.
  3. Large Contracts (Contracts over $5,000): For larger contracts for capital expenditure projects such as major equipment upgrades and large installations, using smart contracts would not be feasible due to the complexity of the work. However, recording the transactions to vendors and contractors in a private Blockchain will allow Property management firms greater transparency for record keeping purposes and would provide traceability when older invoices and contracts need to be reviewed. Security is also an added benefit of storing transaction information in a Blockchain.
  4. Energy Trading: Detailed studies into energy trading have been performed by PWCand the idea has been explored by many utility companies.  Buildings that produce energy through renewable means have the ability to feed excess energy back into the grid. Smart meters are used to calculate electricity production and consumption. Any electricity traded to other consumers and the transaction can be tracked using Blockchain.

Although the value proposition of Blockchain technology is clear, it is still theoretical in many aspects as wide-scale adoption is still in its infancy. The pace at which organizations have committed to adopting this technology has picked up very quickly. As more and more organizations adopt this technology to improve and secure their operations, we will eventually realize the benefits that it promises. It is imperative that Facility Management and the Real Estate industry at large keep up with other industries and have a serious look at adopting Blockchain technology.

Follow us on LinkedIn and Twitter