Adaptive Contract Governance: Stabilizing Construction Project Performance against Macroeconomic Volatility Using Smart Contract Automation

Effectively managing construction projects requires governance processes that can respond to rapid changes in macroeconomic conditions. Inflation, supply chain stress, and interest rate shocks introduce external pressures that traditional contract structures often fail to absorb. Sequential approvals, delayed payments, and slow dispute pathways create contractual frictions that accumulate over time and intensify cost escalation, schedule delay, and cash-flow strain. This study examines how automation-enabled governance mechanisms, modeled as smart contract functionalities, can reduce these frictions during volatile periods. A system dynamics model representing a generalized construction project integrates macroeconomic drivers with feedback processes associated with payment timing, administrative responsiveness, information delay, and dispute latency to assess how automation influences the propagation of shocks across project systems. Scenario simulations reflecting conditions from 2019 to 2023 show that targeted reductions in contractual delays can lower execution-stage cost escalation by approximately 15%–20% and reduce total project-level cost overruns by 5%–6%, while also moderating schedule delay and dispute escalation. The degree of stabilization depends on the severity of external shocks, yet the results demonstrate that automation-oriented governance mechanisms enhance system responsiveness by modifying the timing of corrective action within core feedback loops. By quantifying how digital automation reshapes governance delays under volatility, this study extends prior system dynamics and smart contract research and provides a quantitative basis for adaptive contract governance strategies aimed at enhancing project resilience.