Content uploaded by Rajaratnam Dilakshan
Author content
All content in this area was uploaded by Rajaratnam Dilakshan on Feb 03, 2021
Content may be subject to copyright.
Effective use of blockchain
technology for facilities
management procurement process
Hasni Gayathma Gunasekara,Pournima Sridarran and
Dilakshan Rajaratnam
Department of Building Economics, University of Moratuwa, Moratuwa, Sri Lanka
Abstract
Purpose –Facilities management (FM) has become a revolutionary profession, which adds value to the
built environment. Compared to other industries, the development of the FM industry is at a preliminary
stage owing to poor adaptation of digitalisation. Although FM procurement process has improved over
time, it is still complex, inefficient and challenging with the lack of digital innovations. Blockchain
technology has emerged as a revolutionary digital technology under “Procurement 4.0”. The purpose of
this paper is to develop a framework that enables the effective use of blockchain technology for FM
procurement process.
Design/methodology/approach –Data collection using interviews was performed in two stages
adopting a mono method qualitative methodological choice using case studies and survey strategies.
Template analysis and content analysis techniques were used to analyse the collected data.
Findings –Through the findings, main steps in the current FM process were identified. It was revealed,
manual procurement has issues related to, efficiency, data security, communication and transparency.
Similarly, e-procurement systems also have issues related to data security, poor integration and transparency.
FM industry has identified the requirement of transforming into an advanced digitalised technology-based
procurement system. This study revealed, blockchain features to overcome these issues and the application of
blockchain technology in different steps of the procurement process through the developed framework.
Originality/value –The developed framework offers a solution for the future technological transformation of
FM procurement using blockchain technology.
Keywords Transactions, Facilities management, Procurement process, Digitalisation,
Smart contracts, Blockchain technology
Paper type Research paper
1. Introduction
A procurement process is necessary for the field of facilities management (FM) to manage
the service providers, to obtain the required facilities of buildings and to continue a reliable
and efficient operation in the businesses (Pun et al., 2018). Hong and Kwon (2012) stated, as
procurement processes have become more challenging and complex because of rapid
changes existing in the competitive market, it requires the adaptation of an innovative
process to be more effective. Nicoletti (2017) stated, procurement requires a quick respond
with greater agility in the near future. Author further stated, as a result of “Industry 4.0”
initiative which is based on digital transformation, “Procurement 4.0”will influence all
procurement processes which involve in the integration of information and communication
technology (ICT) and automation.
Ye et al. (2018) argued, when compared to industries such as the financial industry,
manufacturing industry and aerospace industry, the development of the FM industry is
Blockchain
technology
Received 29 October2020
Revised 7 December2020
Accepted 11 December2020
Journal of Facilities Management
© Emerald Publishing Limited
1472-5967
DOI 10.1108/JFM-10-2020-0077
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1472-5967.htm
low. Authors further stated, this major issue is caused by the poor adaptation of
digitalisation for the management practices and it is essential to adapt new
technologies for the improvement of the FM industry. When digital transformations
occur in major business organisations, Facilities Managers need to embrace the change
and adapt these technologies to fulfil the core business requirements (Jones Lang
Lasalle, 2016). According to Koch et al. (2017), there has been a series of technologies
that seems to enable FM digitalisation, such as, Building Information Modeling,
blockchain, Internet of Things (IoT), big data technology, augmented reality and
building information standards.
Conley and Richards (2018) stated, facilities managers are interested in blockchain
technology (BCT) because it can be applied for effective data sharing and data protection
while improving interoperability and reducing costs. According to Loebbecke et al. (2018),
BCT has influenced the success of the economy because of the confidence and trust available
through transactions. Authors further stated, documentation practices can be further
improved by BCT through secured and transparent transactions. Nicoletti (2017) stated,
security and safety of the procurement process can be improved by applying BCT to the
entire procurement process.
Blockchain is a decentralised ledger where a third party is not required to manage the
data and all the blocks are linked together to check all the transactions (Tavares, 2018).
According to Shu (2017), when data are recorded in the distributed blockchain ledger, this
data are verified and they cannot be changed or deleted. BCT can offer efficient and secure
record-keeping, which is useful for the maintenance and management of records for a long
time period (Lemieux, 2016).
Facilities managers have not considered the requirement of BCT for a secured and
effective procurement process. Therefore, it is required to transform the current
procurement process into an advanced digital technology where transactions and payments
could be managed automatically in an efficient and secured manner. Therefore, it is required
to analyse this gap in adapting BCT by the facilities managers for the future development of
the procurement process.
Thus, this research aims to develop a framework that enables the effective use of BCT for
FM procurement process. Recently, researches have conducted on applications of BCT, and
this is the first research to analyse this gap in adapting BCT by the facilities managers for
the future development of the procurement process. The research scope was limited to
identifying the procedures that enable the effective use of BCT for the FM procurement
process.
2. Literature review
2.1 Procurement process
The timely requirements of the organisations are identified at the beginning of the
procurement process and payments to suppliers regarding goods and services are settled at
the end (Uddin, 2015). However, Heggstad and Frøystad (2011) argued, there is a common
mistake of focussing only on the tendering, signing and awarding the contracts of the
procurement process. Authors further stated, procurement process consists of some other
important steps as illustrated in Figure 1.
Hawking et al. (2004) argued, owing to slow and unsystematic business transactions, the
manual procurement process has become an expensive business activity over the past few
years. The manual procurement process is a long and slow paper work-based process which
reduces productivity while wasting money (Shukla et al., 2016). Subsequently, authorised
persons require to identify and clarify errors related to manual procurement process which
JFM
consumes more cost and time. Because of the lack of transparency in procurement activities
of many countries, traditional procurement systems have led to unwholesome activities such
as corruption, inflated costs, progress delays of project developments and purchase of goods
and services (Hui et al., 2011). According to McConnell (2009), main process related issues of
manual procurement are procurement complexities in goods and services, availability of
many suppliers, inability to adapt to complicated procedures and lack of transparency.
The procurement process has evolved with time because of the increase of the complex
integrations among procurement functions in organisations and with the increase of
procurement relationships with suppliers (Tunisini and Sebastiani, 2015). Okinyi and Muturi
(2016) revealed, an ICT-based procurement process performs more effectively when it functions
manually. Many attempts have been carried out for procurement reengineering with the use of
different information technologies, and however, EP (E-procurement) is the most successful
goal achieved in procurement reengineering (Kothari et al., 2005). However, Premathilaka and
Fernando (2018) argued, EP adoption has a negative relationship with supplier readiness
because suppliers are reluctant to trust electronic systems in organisations.
According to Chepkmoi (2014), security is the major obstacle for EP because of
unauthorised access and hacking of systems which can damage the company’s information.
Author further mentioned, verification and implementation of procurement contracts and
protection of private information are the main legal issues. Hui et al. (2011) argued, even
though it was expected that the negative impacts of procurement will be solved by the
introduction of EP, still the main issues such as transparency, corruption, integrity,
accountability and cronyism are present.
2.2 Digitalisation of procurement using advanced technologies
Blockchain, artificial intelligence (AI)/robotic process automation (RPA), 3 D-printing and
IoT are the most prominent digital technologies which influence on the procurement process
in organisations (Karmehag and Löfnertz, 2018). Authors further stated, above technologies
can impact on future procurement process development in four different ways where BCT
could change the procurement process completely and improve more business transactions.
Nicoletti (2017) emphasised, “Procurement 4.0”is a revolution in EP and among the future
implementations, blockchain acts as a digital consensus mechanism that enables smart
contracts which act as automated contracts for thefuture of procurement.
Figure 1.
Procurement process
Pre Tendering
Source: Organisation for Economic Co-operation and Development (2009)
•Needs
Assessment
•Planning and
Budgeting
•Definition of
Requirements
•Choice of
Procedures
Tendering Phase
•Invitation to
Tender
•Evaluation
•Award
Post Awarding
Phase
•Contract
Management
•Orderand
Payment
Blockchain
technology
Many of today’s experts, who were present at the invention of the internet believe that BCT
will become outstanding than the World Wide Web (WWW) (Kinnaird and Geipel, 2017).
Lemieux (2016) stated, BCT is a database of distributed transactions in which various
computers, referred to as nodes, work together as a system to store bits in a sequential order
which are encrypted as blocks and then linked to form the blockchain. BCT has emerged
from distributed ledger technology (DLT) which provides a consensus verification
mechanism over a computer network while enabling peer-to-peer transactions without
requiring an intermediate or centralised person to update and manage transaction-generated
information (Rennock et al.,2018). Hileman and Rauchs (2017) argued, unlike other
distributed databases, network participants of the blockchain have the ability to verify the
integrity of a shared database independently without the involvement of trusted third
parties.
2.3 Application of blockchain technology for procurement process
Zheng et al. (2017) argued, although most blockchains are currently used in the financial
sector, some other applications are emerging in different areas. Authors further mentioned,
traditional industries can consider BCT and apply blockchains to their areas to enhance
operations of their systems.
According to Hileman and Rauchs (2017), the current DLT focus still exists mainly in the
use of money, which may result because first blockchains were mainly focussed on
currency-related applications. However, Nicoletti (2017) argued, a shared database can help
a variety of stakeholders who are involved in the procurement process such as the company,
its customers, suppliers, partners and regulatory agencies where necessary and it enables
reliable and uninterrupted procurement process. According to Härer (2018), through the
implementation of a decentralised plan for the purchase order process, suppliers without
long-term relationships can immediately join the process based on the information in the
process model protected by the blockchain. The applicability of BCT for different steps in
the procurement process as identified by researchers is presented in Table 1.
Studies have not further examined the application of BCT for the FM industry with an
appropriate procurement operating model. Therefore, it is required to investigate the BCT
application. Accordingly, the conceptual frameworkillustrated in Figure 2 was developed as
a guide for the effective use of BCT for FM procurement operating model.
Figure 2 illustrates the conceptual framework which is developed based on the findings
summarised in Table 1. Here, the main elements of the procurement process stated by OECD
(2009) are considered as the phases of the procurement process and the subtopics under each
phase. It is proposed to use this conceptual framework throughout this study to determine
the current level of applicability of BCT for FM procurement process.
3. Research methodology
The research process was developed based on the research onion introduced by Saunders
et al. (2016). This research is focussed on developing a framework by understanding current
FM procurement process and identifying applicability of BCT for this process. The
researcher requires to identify the research environment to identify and interpret different
views of the people. Therefore, the research inclines more towards an interpretivism stance.
Saunders et al. (2016) explained, deductive reasoning is where the theory is developed
based on literature and a research strategy is designed to test the theory, while in inductive
reasoning a theory is developed by collecting data to explore a phenomenon. Authors
further explained, in abductive reasoning a new theory is developed or an existing theory is
modified which is tested with additional data collected. The abductive approach was
JFM
Phase Steps of procurement process
Application of blockchain
technology Improvements/usages for future works Author
Pre tendering Communicate using email, electronic
data interchange (EDI) messaging, or
Business to Business (B2B)
messaging systems
Provide a unified business
messaging system
Resolve security and transparent issues in
existing messaging systems
(Banerjee, 2018)
Record information Act as a digital register Visible to all required parties
Store any type of digital information on the
Internet securely
Verify completeness of documents
Quick response
Retrieve data easily and quickly
Eliminate central authority
Act as a public database that partciapants can
see, add and unable to destroy
(Fairley, 2015)
(Nicoletti, 2017),
(Rejeb et al.,
2018)
Tendering Verify the service provider
participation to a tender or for the
qualification
Use private keys for
encryption and public keys for
decryption
Confirm request is genuine through successful
decryption
Verify the participant’s authentication without
disclosing any sensitive information
(Ying et al., 2018)
Post awarding Execute contracts Automate contracts using
smart contracts
No human involvement in executing contracts
Automate transaction processes in a secured,
trusted and decentralised manner
Eliminate the need for multiple data
maintenance
Provide a reliable centralised data repository
of terms and conditions
Enable real time data sharing
Quick response to dynamic supply chain
demands
Reduce administrative costs for
reestablishments and errors
Reduce the contractual risks and disputes
Enable procurement organisations to manage
claims using immutable data as evidence
(Banerjee, 2018),
(Nicoletti, 2017),
(Rejeb et al.,
2018)
(continued)
Table 1.
Application of BCT
for the procurement
process
Blockchain
technology
Phase Steps of procurement process
Application of blockchain
technology Improvements/usages for future works Author
Track and refine transactions Track the transfer and receipt
of payments without the
intervention of a third party
Record public history of transactions
Reliable
No single point of failure
(Nakamoto,
2008), (Ying et al.,
2018)
Execute payments Enable instant automatic
electronic payments through
smart contracts when all the
obligations of the procurement
agreement are performed
Solve the risk of buyer non-payment in
international trade
No need of third party verificaion
(Gans, 2019)
Execute financial transactions
through cryptocurrencies
Enable organisations to create their own
cryptocurrency
Improve operational efficiency
Secured monetary system
Organisations can reduce dependence on banks
(Mansfield-
Devine, 2017),
(Martínez
Martínez, 2019),
(Ying et al., 2018)
Table 1.
JFM
followed in this study. First, a conceptual framework was developed based on existing
literature related to the application of BCT for the procurement process. Then the conceptual
framework was refined using the evidence related to existing data and new data based on
the analysis of the data collected through the expert survey.
Experiment, survey, action research, case study, research, ethnography, grounded theory
and narrative research are the main qualitative research strategies (Saunders et al.,2016).
Two types of strategies were considered in this research. First, multiple case studies were
conducted regarding the selected organisations. Current procurement process followed by
facilities managers in selected organisations were identified by conducting semi-structured
interviews. Then, the applicability of BCT to each step of the above identified procurement
process was identified using an expert survey.
According to Saunders et al. (2016), a cross-sectional study is considered as the study of a
particular phenomenon at a particular time, whereas longitudinal study is considered as the
study of the change and development in measuring some variables. This research falls
under the cross-sectional study because this was conducted within the time constraints.
3.1 Case study
A case study is the most popular strategy for qualitative analysis which involves the careful
and in-depth investigation of a specific case related to a social unit (Kothari, 2004). As this
study is focussed on enabling the effective use of BCT for FM procurement, selection of
Figure 2.
Conceptual
framework
Communicate service
requirements
•Provide a unified
business messaging
system
•Act as a digital
register
Verify the Identity of
Service Providers
•Use of public keys
and private keys
Execute FM contracts
•Automate contracts
using smart
contracts
Track and Refine
Transactions
•Track everything
without the
intervention of a
middleman
Execute Payments
•Enable instant
automatic electronic
payments through
smart contracts
•Use of
cryptocurrencies
Award Contract ManagementNeed Assessment
Order and Payments
Pre Tendering Phase Tendering Phase Post Awarding Phase Blockchain
technology
multiple cases to study the current procurement process, existing issues and BCT
applicability are more appropriate. Therefore, to obtain a reliable conclusion, multiple cases
were selected and details of each case study are summarised in Table 2.
3.2 Expert survey
According to Kelley et al. (2003), survey strategy includes questionnaires and interviews.
Authors further stated, experts in the field, colleagues or members of the target population
can be selected to ensure the validity of the survey. Two types of experts are identified as
normative and substantive where normative expertise comes from experience in the field
and substantive expertise comes from the knowledge in making judgements (Meyer and
Booker, 2001). In this study, normative experts who are currently engaged in the IT field and
has contributed to developing blockchain-based solutions and projects were considered as
experts. Details of each expert are summarised in Table 3.
4. Data analysis and findings
Template analysis is where a coding template is developed using the data and then rearranged to
obtain a satisfied template (Saunders et al.,2016). In this study, template analysis was used to
analyse the collected data from case studies and the expert survey. Through the template analysis
of case studies, current FM procurement process was developed as illustrated in Figure 3.
4.1 Issues in current facilities management procurement process and blockchain features to
overcome them
According to case studies, issues in current manual procurement and EP were identified and
blockchain features to overcome them were identified through the expert survey as
illustrated in Table 4.
Table 2.
Profile of the selected
cases and
respondents
Case
Type of the organisation/
core business
Client/service
provider
Type of
procurement
system Respondent
Profile of the
respondent
A Private sector –office
complex
Client Manual R
A
Facilities manager
B Private sector –FM
services
Service
provider
Manual R
B
Director –procurement
and sourcing
C Private sector –office
complex
Client EP R
C
Manager capital
projects and FM
D Private sector –FM
services
Service
provider
EP R
D
Country finance lead
Table 3.
Profile of experts
Expert Designation Years of experience
(Expert 1) E1 Senior Software Engineer 8 years
(Expert 2) E2 Lead Consultant –Technology 7 years
(Expert 3) E3 Senior Technical Lead 8 years
(Expert 4) E4 Head of Engineering 10 years
(Expert 5) E5 Senior Software Engineer 7 years
(Expert 6) E6 Director of Software Engineering 10 years
(Expert 7) E7 Senior Software Engineer 6 years
JFM
Cases which use manual procurement have facedissues such as security issues, transparency
issues and time delays similarly as specified in the literature (McConnell, 2009;Hui et al.,
2011;Shukla et al., 2016). Additionally, communication errors were identified as another
issue of the manual system. Further, when considering cases which use EP system, still
issues are existing as specified in the literature by Chepkmoi (2014). Therefore, currently, in
the Sri Lankan context ensuring adequate transparency and security have become serious
issues in EP. Further, it was identified there is an issue of lacking a proper recording
mechanism. Therefore, it is evident that the EP system should be developed based on a more
advanced digital technology to mitigate these issues. However, in both cases, poor
integration of authorised parties,time delays in obtaining service requirements and approvals,
frauds in transactions through third-party intervention were identified as significant issues.
Therefore, in this study blockchain features to overcome each issue were identified from
expert views. However, before applying BCT it was necessary to identify the respondents’
awareness on BCT. R
A
and R
B
stated, aware of the term “Blockchain”,but not aware of its
applications.R
C
stated, as a global organisation have used blockchain for trade transactions,
but not in FM. Therefore, it was evident that application of BCT for FM industry is a
revolutionary concept. Thus the application of blockchain features for each issue were
identified as follows.
4.1.1 Issues in pre-tendering phase and blockchain features to overcome them. R
A
and R
c
stated, poor integration of authorised parties is the main issue in client organisations
because integrating authorised parties in various departments is more time consuming
when carrying out discussions with each department, as they are not integrated through a
system. E1 stated, an interface can be provided on top of the blockchain platform, data
related to issues/requirements in the building can be fed as requests and it can be
maintained as a request management ledger. E1 further stated, users can be enabled to log in
to the system and communicate service requirements in the building by giving a “User ID”
Figure 3.
Identified FM
procurement process
Generate and
Receive Purchase
Orders
Track and Refine
Transactions
Execute payments
Execute Facilities
Management
contracts
Ensure
Confidentiality of
Tendering
Information
Prepare Budgets
Obtain Approvals
Record Key
Decisions
Communicate
service requirements
Requirements
Assess service
providers
Record
Information on
Available Service
providers
Publish Tenders
and Notify Service
Providers
Submit Bids
Verify the Identity
of Service
Providers
Share Documents
FM Procurement Process
Pre Tendering Phase Tendering Phase Post Awarding Phase
Need Assessment Invitation to Tender Contract Management
Evaluation
Order and Payment
Award
Plan and Prepare Budgets
Blockchain
technology
Phase in the
procurement
Process
Current issues in FM procurement process
Blockchain featureManual procurement E-procurement
Pre tendering Poor integration of
authorised parties
Poor integration of
authorised parties
Provide an interface on top of the blockchain platform as a “Request
management ledger”where issues/requirements in the building can be fed
as requests and users can log into the system and communicate service
requirements using “User ID”
Communication errors Use the previously mentioned “Request management ledger”for the
notification of service requirements and Facilities Managers can get
notifications by logging into the system
Develop a smart contract where Facilities Managers can notify the
procurement department when a requirement rises and tendering process
requires to be initiated
Obtaining service requirements
and approvals are time-
consuming
Obtaining service
requirements and approvals
are time-consuming
Integrate with IoT to automatically update service requirements and
instantly update the blockchain regarding the service requirements
Integrate with AI to provide maintenance-based solutions through the
obtained records which can analyse and predict solutions
Automate the approval process using smart contracts and if anything is
approved it is added to the blockchain as a new block
Tendering Executing the tendering
process is time-consuming
Publish tenders and notify service providers and send tender requests as
a transaction through blockchain and they can be managed through the
blockchain
Update registered service providers automatically when a new tender is
published via the blockchain owing to the distributed nature of
blockchain architecture
Transparency issues
Lack of data security
Transparency issues
Lack of data security
Use encryption mechanism where sensitive information should be
encrypted and only the key holders can decrypt the information
Use hashing mechanism where hashes can be generated from obtained
information and these hash values can be compared and matched with
existing hashes in the blockchain
Use hyperledgers to enhance confidentiality by creating a private
transaction with the organisation and the service provider where private
data is not exposed to the entire network
(continued)
Table 4.
Blockchain features
that can overcome
current issues in FM
procurement process
JFM
Phase in the
procurement
Process
Current issues in FM procurement process
Blockchain featureManual procurement E-procurement
Post Awarding Preparing and managing
contracts and purchase
ordering are time-consuming
Purchase ordering is not
automated and it is time-
consuming
Use smart contracts between service providers and organisations in terms
of payments and conditions of contracts which is programmed on top of
the blockchain for repetitive tasks where human intelligence is not
required
Automate purchase ordering function according to the stock level
Data sharing issues Write what is private and public according to the implementation of
smart contracts and validate which particular roles have the capability to
get that information
Inefficient data retrieval
Loss of data
Absence of an automatic
recording mechanism
Track and refine transactions because blockchain is a distributed ledger
which records transactions
Enable history viewing from the details recorded in the blockchain
Frauds in transactions
through third-party
intervention
Frauds in transactions
through third-party
intervention
Eliminate intermediary and enable direct transactions
Table 4.
Blockchain
technology
to feed and view data similarto a normal system. Thus, a request management ledger with a
User ID can be used for this purpose.
R
B
stated, communication errors are existing in addressing service requirements. E1
further stated, above mentioned request management ledger can be used for the notification
of service requirements and persons who need to view such as facilities managers can get
notifications when logging into the system to solve this. However, E5 stated that use of
smart contracts to communicate the requirement of a tendering process can overcome this
issue and can be informed to the procurement department through a smart contract.
R
A
and R
C
stated, obtaining service requirements and approvals are time-consuming. E7
stated, IoT Integration to automatically update service requirements can instantly update the
blockchain regarding the service requirements. E1 expressed an opinion of using AI
integration to provide maintenance based solutions through the obtained records which can
analyse and predict solutions. As per the opinion of E3 and E5, it can automate approval
process using smart contracts to solve this issue and if anything is approved it is added to
the blockchain as a new block, then using smart contracts this approval process can be
automated.
4.1.2 Issues in tendering phase and blockchain features to overcome them. According to
R
A
,executing the tendering process is time-consuming. E2, E3, E6 and E7 stated that
blockchain can be used to publish tenders and notify service providers and send tender
requests as a transaction through the blockchain because tenders cannot be modified. So
these tenders can be saved in blockchain and it can be managed through blockchain. Further
E7 stated, when a new tender is published via the blockchain, it will update registered service
providers automatically owing to the distributed nature of blockchain architecture.
In the tendering phase, transparency issues and lack of data security are other main issues
as mentioned by all the respondents. E7 stated, keys can be used for encryption mechanism
where, sensitive information should be encrypted and only the key holders can decrypt the
information. E1 further explained, the public key is broadcasted to everyone in the network
and it can be verified only by this public key. When the message is public, data can be
encrypted using public key but data can be decrypted only by the person with the private
key. E3 described the process of using hashing mechanism as, hashes can be generated and
kept in the blockchain and then it can be verified. E2 described a different process of using
hyperledgers to enhance confidentiality by creating a private transaction with the
organisation and the service provider.
4.1.3 Issues in post awarding phase and blockchain features to overcome them. R
A
stated, preparing and managing contracts and purchase ordering are time-consuming, while
R
C
stated, purchase ordering is not automated and it is time-consuming. All the experts
agreed that smart contracts can be used for FM procurement contracts. E1 stated, it is better
to have a contract with service providers and organisations in terms of payments and
conditions of contracts. Therefore, contracts can be managed effectively by the use of smart
contracts programmed on top of the blockchain for repetitive tasks where human intelligence
is not required.
As per the opinion of E7, blockchain can be used to automate the purchase ordering
function according to the stock level by integrating stock levels with blockchain. According to
the stock level, blockchain will automatically manage the purchase ordering function.
R
A
and R
B
stated there are data sharing issues with authorised parties. E1 stated, this can
be solved using smart contracts and write what is private and public according to the
implementation of smart contracts. E2 added, there are different people with different roles,
and it is required to validate which particular roles have the capability to get that
information.
JFM
R
A
stated, there are issues in inefficient data retrieval and loss of data while R
C
stated,
there is an issue in the absence of an automatic recording mechanism. Most of the experts
stated that blockchain can be used to track and refine transactions because it is a distributed
ledger which records transactions. E3 stated, history viewing is enabled from the details
recorded in the blockchain because it has past information written in a tamper-proof way. So
basically authorised parties can refer those transactions.
All the respondents stated, occurring of frauds in transactions through third party
intervention is the main issue in the post awarding phase. All the experts stated, eliminating
intermediary and enabling direct transactions with authority integration and proper
verification can solve this issue. Thus, blockchain facilitates the storing of transacted
information in multiple locations where the trusted intermediary such as banks are removed
from the picture and direct transactions are executed through the digital trust.
5. Discussion
Data analysis and findings have revealed BCT can be applied for FM procurement beyond
the identified blockchain applied steps of procurement process specified in the literature.
Ying et al. (2018) stated public keys and private keys can be used to verify the service
provider participation to a tender or for the qualification. According to the data analysis, it
was identified it is possible. Additionally, it was identified service providers can be verified
from the “hash”of past data in each data block of the blockchain. Therefore, if these service
providers have performed their services earlier both their identity and services can be
evaluated from this past data. However, from the data findings, it can be argued that it
cannot be performed using blockchain and a different party is required for the validation of
service providers because they can fraud themselves when registering into the system and
after registering we may consider them as verified service providers.
Though Banerjee (2018) stated, blockchain provides a unified business messaging system, it
was found that information exchange is enabled only among the clients who are integrated
through blockchain. Further, it was revealed that using blockchain as a communication medium
is not the purpose of blockchain and using email as a mode of information exchange is sufficient.
As specified in the literature (Fairley, 2015;Nicoletti, 2017;Rejeb et al.,2018), blockchain is
considered as a digital register to record information. Through data analysis, it was revealed
that blockchain should be used only to store the transaction-related information and any other
information related to budgeting and service providers should be recorded in a separate
database. The unnecessary use of BCT will abuse the technology and it will be not effective.
It was revealed from literature (Banerjee, 2018;Gans, 2019;Nicoletti, 2017;Rejeb et al.,2018)
contracts can be automated using smart contracts and payments can be executed through smart
contracts. Data analysis revealed, smart contracts can be used for FM procurement contracts
between service provider and organisation in terms of payments and conditions of contracts
with a defined logic. However, here the law is an issue and it would be necessary to consider this
as a legally binding contract. Therefore, rules and regulations should be defined. As specified in
the literature (Mansfield-Devine, 2017;Martínez Martínez, 2019;Ying et al., 2018), financial
transactions can be performed through cryptocurrencies. Data analysis revealed, in addition to
cryptocurrencies a token-based system can be used. As emphasised by Nakamoto (2008),
findings proved that financial institutions can be eliminated to perform direct transactions.
It was identified that IoT can be integrated with BCT to facilitate the proper
communication of service requirements. Whitmore et al. (2015) stated IoT is where things
are able to identify, detect, process, establish networks and allow them to communicate via
the internet. Thus, requirements identified through IoT technology can be directly sent to
BCT-based system. Further, it was revealed that AI technology can be used for this purpose.
Blockchain
technology
AI is the use of intelligent behaviour to perform any task by a program or a machine with
the use of computer modelling(Hamet and Tremblay, 2017;Heath, 2018). Thus requirements
can be identified through programming.
5.1 Framework for the effective use of blockchain technology for facilities management
procurement
In addition to the BCT features to overcome the issues in current FM procurement process, all
the positive responses expressed by experts in applying BCT for procurement process were
selected to for the purpose of developing the framework to ensure the applicability. Further,
details in the conceptual framework were used similarly in the framework. Definition of
requirements and choice of procedures under pre tendering phase were not considered for
developing the framework because they are not significant for the application of BCT.
Expected users of this framework are the clients and FM service providers who face
issues because of the prevailing manual procurement and EP systems. This can be guided to
understand the applicability of BCT for an advanced digitalised procurement system.
Further, blockchain developers can use this framework to develop a BCT based future
solution for FM procurement process (Figure 4).
6. Conclusions and recommendations
Through this study, the main steps of the FM procurement process were identified and
presented in a concise manner under three phases of procurement; pre tendering, tendering
and post awarding phase. FM industry has identified the requirement of implementing an
advanced digitalised procurement system for both manual procurement and EP systems.
As a future implementation of “Procurement 4.0”, BCT can be considered as an important
digital innovation for FM industry. When considering the identified steps in FM
procurement process, BCT can be applied to solve the current issues in both manual
Figure 4.
Framework that
enables the effective
use of BCT for FM
procurement
Tendering Phase
Communicate service requirements
Provide an interface on top of blockchain
platform
Maintain as a request management ledger
ProvideanUserIDtouserstologintothe
system
Communicate requirement of a tendering
process and summary of transactions through
smart contracts
Integrate IOT with blockchain technology and
automatically update service requirements
Assess service providers
Monitor and assess requests to take necessary
precautions
Use AI for providing maintenance solutions
Integrate the assessment details to the system
Record Information on Available Service Providers
Use permissioned based blockchain for
confidential procurement
Enable registering of service providers by
creating accounts within blockchain system
Provide an authentication mechanism to
verify the identities of registered service
providers
Programme smart contract to register service
providers through the system interface
Prepare Budgets
Keep as a private ledger/ separate database
Obtain Approvals
Automate approval process using smart
contracts through information sharing
Record Key Decisions
Maintain key decisions in a separate database
Need Assessment
Publish Tenders and Notify Service Providers
Keep tendering in a blockchain where tender
requests send as a transaction through
blockchain
Update registered service providers
automaticallyand instantly when a new tender
is published via blockchain
Submit bids
Enable encryption mechanism for parties to
use their own shared key which is known by
bidder and organisation
Useofhashingmechanismforbidding
Ensure Confidentiality of Tendering Information
Encrypt information and keep only the hashes
of information
Encrypt information using anonymised keys
for tenders and allow only the key holders to
decrypt it
Use hyper ledger by creating a channel for
each private transaction
Verify the Identity of Service Providers
Generate digital signaturesusing keys
Generate public key to everyone in the
networkand verification is performed by this
public key
Present a hash of past data in eachdata block
of the blockchain
Share Documents
Use hashing technology to preserve
confidentiality
Useofdataencryption
Execute Facilities Management contracts
Use in a context where logic can be defined
and programmed on top of blockchain and for
repetitive tasks where human intelligence is
not required
Use as a contract between service provider
and organisation in terms of payments and
conditions of contracts
Write what is private and public accordingto
implementation
Define new lawsand regulations
Generate and Receive Purchase Orders
Generate purchase order as a blockto service
providers
View details through history
Generate payment order locally and execute
blockchain networktransaction
Integrate stockdetails to blockchain and
automate purchase ordering function
according to the stocklevel
Track and Refine Transactions
View historyto refer transactions
Record transactions pseudo chronological
order in multiple locations in a distributed
network
Execute payments
Feedpayment related information and create a
block
Eliminate intermediary
Use a token based system for payments
Contract Management
Plan and Prepare Budgets
Order and Payment
Invitation to Tender
Evaluation
Award
Provide a unified business messaging system
Act as a digital register
Useofpublickeysand private keys
Automate contracts using smart contracts
Trackeverything withoutthe involvement of
an intermediary
Enable instant automatic electronic payments
through smart contracts
Use cryptocurrencies
Details in the Conceptual
Framework
Pre Tendering Phase Post Awarding Phase
JFM
procurement and EP systems in terms of data transparency, data security, time delays, poor
integration of authorised parties and third party intervention. It was revealed, by developing
a“Request management ledger”on blockchain platform for the communication of issues/
requirements in the building is the first step of this significant transformation. IoT
integration to automatically update regarding service requirements and AI integration to
analyse and predict maintenance-based solutions were identified as further improvements
in this development. Other blockchain features such as, data encryption mechanism,
hashing mechanism and hyperledgers can be used to overcome the main issues of data
transparency and security. Further, enabling direct transactions by eliminating
intermediary is a key blockchain feature to solve the main issue of frauds in transactions
through third-party intervention. It was revealed that smart contracts which is programmed
on top of blockchain for repetitive tasks can be executed between service providers and
organisations in terms of payments and conditions of contracts. However, new rules and
regulations should be defined to consider them as legal contracts.
The main contributions of this research are identification of the FM procurement process and
development of the knowledge on the applicability of BCT for FM procurement process by
identifying the existing issues in manual procurement and EP. IT industry will be benefitted by
the outcomes of this research and it can be recommended to use them by considering only the
most appropriate activities related to the procurement process without overusing BCT to
develop a BCT based procurement system. Further, research findings will be beneficial for
clients and service providers in the FM industry to transform into a BCT based procurement
process to enhance the efficiency. Although the research aim was achieved at the end, some
unavoidable limitations were encountered while carrying out the research study. The main
limitation was the lack of professionals in the IT field with experience and explicit knowledge in
BCT because BCT is still at its preliminary stage in the Sri Lankan context. However, adequate
information was obtained from the seven experts selected and the data saturation was achieved.
References
Banerjee, A. (2018), “Blockchain technology: supply chain insights from ERP”,Advances in Computers,
Vol. 111, pp. 69-98.
Chepkmoi, E. (2014), “Challenges of e-procurement implementation among multinational tea companies
in Kericho county, Kenya”, Doctoral dissertation, University of Nairobi.
Conley, B. and Richards, C. (2018), “The past and future of blockchain in FM”, available at: http://fmj.
ifma.org/publication/?i=483818&article_id=3041474&view=articleBrowser&ver=html5 (accessed
12 September 2020).
Fairley, P. (2015), “The future of the web looks a lot like bitcoin”, available at: https://spectrum.ieee.org/
computing/networks/the-future-of-the-web-looks-a-lot-like-bitcoin (accessed 21 September 2020).
Gans, J.S. (2019), “The fine print in smart contracts”, working paper [25443], National Bureau of
Economic Research, Cambridge, January.
Hamet, P. and Tremblay, J. (2017), “Artificial intelligence in medicine”,Metabolism, Vol. 69, pp. S36-S40.
Härer, F. (2018), “Decentralized business process modeling and instance tracking secured by a
blockchain”, in Bednar, P.M, Frank, U. and Kautz, K. (Eds), 26th European Conference on
Information Systems: Beyond Digitization –Facets of Socio-Technical Change, ECIS 2018, AIS
Electronic Library, Portsmouth, pp. 1-17.
Hawking, P., Stein, A., Wyld, D.C. and Foster, S. (2004), “E-procurement: is the ugly duckling actually a
swan down under?”,Asia Pacific Journal of Marketing and Logistics, Vol. 16 No. 1, pp. 3-26.
Heath, N. (2018), “What is AI? Everything you need to know about artificial intelligence”, available at:
www.zdnet.com/article/what-is-artificial-general-intelligence/ (accessed 22 September 2020).
Blockchain
technology
Heggstad, K.K. and Frøystad, M. (2011), The Basics of Integrity in Procurement, U4 Issue, Chr.
Michelsen Institute.
Hileman, G. and Rauchs, M. (2017), “2017 Global blockchain benchmarking study”, Working paper
[3040224], Cambridge Centre for Alternative Finance, University of Cambridge, 21 September.
Hong, P. and Kwon, H.B. (2012), “Emerging issues of procurement management: a review and
prospect”,International Journal of Procurement Management, Vol. 5 No. 4, pp. 452-469.
Hui, W.S., Othman, R., Omar, N.H., Rahman, R.A. and Haron, N.H. (2011), “Procurement issues in
Malaysiya”,International Journal of Public Sector Management, Vol. 24 No. 6, pp. 567-593.
Jones Lang Lasalle (2016), “Reinventing facilities management for the digital world”, white paper, The
Global Association for Corporate Real Estate, December.
Karmehag, J. and Löfnertz, E. (2018), “How digital technologies will impact the procurement process
and organization”, Master’s thesis, Chalmers University.
Kelley, K., Clark, B., Brown, V. and Sitiza, J. (2003), “Good practice in the conduct and reporting of
survey research”,International Journal for Quality in Health Care, Vol. 15 No. 3, pp. 261-266.
Kinnaird, C. and Geipel, M. (2017), Blockchain Technology: How the Inventions behind Bitcoin Are
Enabling a Network, ARUP, London.
Koch, C., Hansen, G.K. and Jacobsen, K. (2017), “Yet another trojan horse? Is facility management ready
for digitalisation?”, in Ruddock, L., Van-Dijk, H. and Houghton, C.A.M. (Eds), International
Research Conference 2017: Shaping Tomorrow’s Built Environment Conference Proceedings,
University of Salford,Salford, pp. 300-311.
Kothari, C.R. (2004), Research Methodology: methods and Techniques, New Age International (P) Ltd.,
New Delhi.
Kothari, T., Hu, C. and Roehl, W.S. (2005), “E-procurement: an emerging tool for the hotel supply chain
management”,International Journal of Hospitality Management, Vol. 24 No. 3, pp. 369-389.
Lemieux, V.L. (2016), “Trusting records: is blockchain technology the answer?”,Records Management
Journal, Vol. 26 No. 2, pp. 110-139.
Loebbecke, C., Lueneborg, L. and Niederle, D. (2018), “Blockchain technology impacting the role of trust
in transactions: reflections in the case of trading diamonds”, in Bednar, P.M, Frank, U. and
Kautz, K. (Eds), 26th European Conference on Information Systems: Beyond Digitization –
Facets of Socio-Technical Change, ECIS 2018, AIS Electronic Library, Portsmouth, pp. 1-11.
McConnell, D.J. (2009), “An analysis into the factors affecting the uptake of applications of
e-procurement, within the UK public sector”, Doctoral dissertation, Loughborough University.
Mansfield-Devine, S. (2017), “Beyond bitcoin: using blockchain technology to provide assurance in the
commercial world”,Computer Fraud and Security, Vol. 2017 No. 5, pp. 14-18.
Martínez Martínez, C. (2019), “Applications of blockchain in procurement”, Master’s Thesis, Valladolid
University.
Meyer, M.A. and Booker, J.M. (2001), Eliciting and Analyzing Expert Judgment: A Practical Guide,
Society for Industrial and Applied Mathematics, Philadelphia, PA.
Nakamoto, S. (2008), “Bitcoin: a peer-to-peer electronic cash system”, available at: https://git.dhimmel.
com/bitcoin-whitepaper/ (accessed 20 September 2020).
Nicoletti, B. (2017), The Future: Procurement 4.0, in Agile Procurement, Palgrave Macmillan, Cham pp. 189-230.
Okinyi, T.O. and Muturi, W. (2016), “Factors affecting efficiency of procurement in public institutions: a
case of public entities in Homabay country”,International Journal of Social Sciences and
Information Technology, Vol. 2 No. 2, pp. 1-14.
Organisation for Economic Co-operation and Development (2009), OECD principles for integrity in
public procurement, OECD Publishing.
Premathilaka, K.M. and Fernando, R.L.S. (2018), “Critical success factors affecting e-procurement
adoption in public sector organisations in Sri Lanka”,15th International Conference on
JFM
Business Management (ICBM 2018), University of Sri Jayewardenepura, Colombo,
pp. 334-360.
Pun, K.P., Choy, K.L. and Lam, H.Y. (2018), “A cloud-based fuzzy multi-criteria decision support system
for procurement process in facility management”, in Kocaoglu, D.F. (Ed.), 2018 Portland
International Conference on Management of Engineering and Technology (PICMET),Honolulu,
HI,IEEE, pp. 1-8.
Rejeb, A., Su†le, E. and Keogh, J.G. (2018), “Exploring new technologies in procurement”,Transport and
Logistics: The International Journal, Vol. 18 No. 45, pp. 76-86.
Rennock, M.J., Cohn, A. and Butcher, J.R. (2018), “Blockchain technology and regulatory investigations”,
Practical Law Litigation, pp. 35-44.
Saunders, M., Lewis, P. and Thornhill, A. (2016), Research Methods for Business Students, Pearson
Education Limited, London.
Shu, Y. (2017), “Blockchain for security of a cloud-based online auction system”, Doctoral dissertation,
Auckland University of Technology.
Shukla, A., Khan, M.A. and Shah, M. (2016), “Literature review of adoption of e-procurement practices by
constriction industries”,AIMA Journal of Management and Research, Vol. 10 Nos 2/4, pp. 1-25.
Tavares, N.F. (2018), “Using blockchain and smart contracts in a reverse auction syndicated e-procurement
platform”,Master’s thesis, Porto University.
Tunisini, A. and Sebastiani, R. (2015), “Innovative and networked business functions:customer-driven
procurement”,Journal of Business and Industrial Marketing, Vol. 30 Nos 3/4, pp. 302-311.
Uddin, M. (2015), “The prospects and challenges of e-procurement in government purchases: a study on
e-procurement in LGED, Narayanganj district”, Doctoral dissertation, BRAC University.
Whitmore, A., Agarwal, A. and Da Xu, L. (2015), “The internet of things –a survey of topics and
trends”,Information Systems Frontiers, Vol. 17 No. 2, pp. 261-274.
Ye, Z., Yin, M., Tang, L. and Jiang, H. (2018), “Cup-of-water theory: a review on the interaction of BIM,
IoT and blockchain during the whole building lifecycle”, in Teizer, J. and König, M. (Eds), 35th
International Symposium on Automation and Robotics in Construction (ISARC 2018), Germany
IAARC Publications, Berlin, pp. 1-9.
Ying, W., Jia, S. and Du, W. (2018), “Digital enablement of blockchain: evidence from HNA group”,
International Journal of Information Management, Vol. 39, pp. 1-4.
Zheng, Z., Xie, S., Dai, H., Chen, X. and Wang, H. (2017), “An overview of blockchain technology:
Architecture, consensus, and future trends”, in Karypis, G. and Zhang, J. (Eds), 2017 IEEE
international congress on big data (BigData congress),IEEE,Honolulu, HI, pp. 557-564.
Further reading
Antwi, S.K. and Hamza, K. (2015), “Qualitative and quantitative research paradigms in business
research: a philosophical reflection”,European Journal of Business and Management, Vol. 7
No. 3, pp. 217-225.
Bengtsson, M. (2016), “How to plan and perform a qualitative study using content analysis”,NursingPlus
Open,Vol.2,pp.8-14.
Corresponding author
Hasni Gayathma Gunasekara can be contacted at: hasnigunasekara@gmail.com
For instructions on how to order reprints of this article, please visit our website:
www.emeraldgrouppublishing.com/licensing/reprints.htm
Or contact us for further details: permissions@emeraldinsight.com
Blockchain
technology
