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Smart technology in construction and the legal implications

What technology is generating smart data and who is responsible for the data generated? Who else can benefit from smart data and how?

Smart connected technologies and the internet of things are starting to infiltrate the construction sector and will have a huge influence on the industry.

A recent report from McKinsey estimated that by 2025 such new technologies could potentially account for up to $6.2tn across multiple industries, including construction.

While the figures are enticing, there are a number of legal implications that are important for contractors and building owners to consider when adopting smart technologies.

What technology is generating smart data?

Other industries migrated to digital long before the engineering and construction sectors. We are perhaps one of the last to start to realise the full potential of the digital smart revolution.

One of the most important smart technologies, which was mandated for all UK government contracts earlier this year, is building information modelling. The world is not short of commentary on BIM, but it does provide a useful example of one technology where there are multiple stakeholders who have use and responsibility for the data.

BIM helps to drive efficiencies and gain savings during the building lifecycle. There is, however, a divide between the desire for new technology and an inertia resulting from the comfort of familiar commercial and contractual structures that do not necessarily support such technology (ie by encouraging collaboration).

“Framework agreements and alliances are likely to be the best way to harness the innovative potential of contractors and ensure collaborative working”

BIM provides an example of this because while collaboration is at its core, it can also conflict with the more traditional project structures and contractual framework. BIM is here to stay and so it is the project structures and contracts that will have to adapt to facilitate engagement with this new technology.

Debate persists as to the suitability of existing standard-form contracts for BIM and whether the collaborative nature required for contract structures is reflected in most standard forms of contract. Framework agreements and alliances are likely to be the best way to harness the innovative potential of contractors and ensure collaborative working.

As BIM and data management technology drive new approaches in the construction industry, there will be a need not only to consider the contractual regime, but also to challenge the traditional competitive procurement and tendering processes with more collaborative structures and approaches.

Who is responsible for the data generated?

The various datasets gathered from smart technologies and the internet of things can be passed through a number of different parties, from the application that tracks the data to the software that’s used and the hardware or company that collects the data.

It is possible for multiple parties to make differing contributions to BIM, raising difficulties in determining the true author of a part of work, an output or an end result. When numerous contributors are involved in a project, contracts must deal with the rights of each contributor. For example, a contract must consider appropriate licensing requirements for those applying BIM.

However, the BIM model is worked on by a number of different organisations in collaboration and it is not necessarily clear where responsibilities lie. One approach may be for the client to retain ownership of the final model. This will, however, create legal challenges, as the BIM model contains information from different parties and each may wish to retain rights and/or control in respect to their contributions.

Who else can benefit from smart data and how?

Data is not the exclusive concern of the client or owners.

There are a number of ways contractors benefit from the smart data produced during a build. One of the biggest areas is around using data to have more visibility of your total cost of ownership.

This could be related to monitoring to better understand, for example, when to replace important machine parts, clearer visibility of when to schedule downtime and how much time is will be required for unscheduled downtime. For example, data monitoring may show that user mistakes account for 60 per cent of machine stalls, which can then remedied by training.

Once the build is completed, smart sensors can monitor the performance of the building over time. This benefits the owners as it helps to track how efficient the building is at coping with managing energy.

“In the future smart technologies will become so prevalent the industry won’t know how they coped without them”

The use of data cannot be discussed without reference to the General Data Protection Regulation (GDPR). Trust and control are two of the key underlying themes of the GDPR, which will come into effect in May 2018.

The GDPR introduces fundamental changes to the way businesses manage data protection across the EU. Implications for non-compliant businesses are severe and can attract fines of up to 4 per cent of annual global turnover or EUR 20m. While there is no one-size-fits-all GDPR project plan, my advice is to take stock first and then to take it step-by-step.

In the future smart technologies will become so prevalent the industry won’t know how they coped without them. But as the industry rapidly evolves, there is still a way to go to ensure the appropriate legal measures and contracts are in place.

Matthew Heywood is a partner in Osborne Clarke’s construction practice

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