By Steve Wightman Sawbucks, Inc.

Swinging a hammer seemed like a pretty romantic livelihood as a young guy. It was great physically, and you had something standing to show for it the end of every day. It wasn't about the money but it was about the livelihood.

It's the "livelihood" side of this romantic scenario where things were not always what I imagined. I ended up working for two construction companies that went under almost overnight, and I have seen it happen to many more. Construction is one of the biggest industries worldwide and has nearly the highest five-year failure rate of any. Even the most highly skilled master builders or giant general contractors are subject to failure, running strong one day and shutting down the next. Building plumb, straight and level does not necessarily go hand-in-hand with success. Success in competitive construction has everything to do with cash flow.

Even before the first chalk-line is struck the owner and contractor need to agree on certain cash flow issues. Who will pay for that first load of materials? The owner is inclined to want to see the materials on site before making any payment. The owner most often has a financial institution in their corner that wants to see materials installed before releasing draws for payment. Material suppliers would like to see payment from the contractor on materials that were picked up "on account" weeks or months ago, before extending more credit for this new project. Then there is retainage held back, lien releases, performance bonds and subcontractors' cash flow difficulties competing for control of project payment and demanding further tax on the project cash flow. The smaller contractor may even be forced to ask the owner to put a significant percentage of the project down in order to start the project - if he can get it. If not - payment quickly becomes a focal point of contention for all the parties.

The contractor is typically in the middle of a payment tug-of-war, which distracts from delivering a successful project. In the real world of construction, funds provided by one owner and allocated for the payment of subcontractors and suppliers may get used to help keep another project alive. Once the funds from several fast-paced projects get commingled and something stumbles on one project, then severe problems can arise. If you are a material supplier or subcontractor you are even further from the original source of allocated funds which means you are at higher risk and it may take longer to receive your payment. One exceptionally slow payment at the wrong moment can quickly jeopardize a series of projects.

The positions of each project participant are perfectly reasonable. They all must protect their livelihood - and attempting to control payment has been that key. It is each project participant's overlapping need for control over these funds that stimulates contention, adds significant costs and serves to decrease true payment control for each party. The industry obviously needs a "smart" solution to channel the correct payment to the right place at the right time to finally create a payment control win for everyone in construction.

Smart card technology used for making payment appears to be that solution. By combining intelligence at the card level with intelligence at the card reader level and at the back-end transaction processing level, you begin to accumulate important pieces required for simplifying a complex payment puzzle. Add the Internet and wireless technology and the solution takes on real possibility. Controlled payment with security, transparency, flexibility, mobility, speed, a degree of automation and interoperability with other important technology - like estimating and project management systems - become possible. A solution that works like cash, takes funds from where it should, and has more control to allow allocated funds to move through the system fast, efficiently and to its proper destination is possible - but is it deployable?

Technology for the sake of having technology has shown as little promise in construction as in many other industries. The rush to bring Internet technology to one of the largest, most fragmented industries has not been spared big failures. The failures have taught us that if technology is going to work in construction then it must first be practical, be sensitive to business relationships and bring hard value. The real power of a smart card based solution is that project participants interface with card technology that they are already accustomed to using without really needing to know what the chip technology is doing for them. They know what card technology means - the bottom line - it means getting paid. The card gets swiped; the materials are procured without purchase orders, accounts receivables or paper receipts. Key data goes where it needs to be whether displayed online or carried on a chip in the contractor's wallet. All the project participants attain a level of adequate control, and can see the flow of money on the project in real-time so that decisions can be made more quickly - including decisions to release more payment to pay a supplier or a subcontractor.

Deployment boils down to: whether suppliers are willing to eliminate accounts receivable and accept a card for immediate payment; whether contractors are willing to pass through their payment responsibilities to subcontractors and suppliers; and whether financial institutions are willing grab the savings for their customers.

A pilot payment exchange for construction using smart cards begins this fall in the U.S. northeastern states. It will include several insurance company customers paying for reconstruction of property loss claims and includes about 100 material providers. It will be supported by several contractor networks and will begin to test wireless technology for contractors to make and receive payment while in the field. Custo-mers, contractors and material providers will monitor the pilot closely for hard value it can deliver and for overall acceptance.

Perhaps this smart-card payment system will provide the long-sought solution to a pervasive problem in an old but thriving industry. And if successfully implemented to the eventual point of institutionalization, the children today dreaming of a construction career will enter an industry - unlike the one I entered - free of complicated payment issues.