Modular construction has been implemented to achieve shorter project duration, lower cost, and higher productivity for construction projects. This option is especially helpful to reduce on-site activities and interaction under and after COVID impact. However, additional planning and support in engineering, procurement, and delivery are required to facilitate modular construction. Unreliable prefabrication and delivery can deteriorate subsequent activity productivity and overall project performance. This research aims to develop an automatic incentive—penalty enforcement system for modular construction based on the situation awareness of delivery tracking. The research selected a high-rise residential project in Singapore as a case study. The project used modular construction for making and installing 120 Prefabricated Bathroom Units. Based on the empirical data of delivery, on-site lifting, and installation, we built STROBOSCOPE simulation models to understand the impact on productivity and schedule from five scenarios at various delivery reliability levels of the Prefabricated Bathroom Units. Smart Contract rules were developed based on the impact. A Blockchain platform was established so that once a real-time delivery is identified and the information is entered into the Smart Contract, the associated incentive or penalty can be triggered instantly. The Smart Contract based incentive—penalty enforcement system will be beneficial for construction projects to monitor and track modular delivery, motivate reliable supply, reduce payment disputes, and improve productivity.