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This feature is a part of the “The Dotted Line” series, which has a thorough look at the complex legal landscape of the construction industry. To see the whole series, Click here.
From the outside, a data center structure looks like a simple warehouse. His construction contract would reveal a different story.
Data Center construction is booming In the report of US contractors on the report report in the initial stage activity, even In the midst of the worries of a slowdown.
For example, Apple presented plans earlier this summer to invest at least $ 20 billion in two data centers in Pennsylvania. Hyperscaler Coreweave also recently selected a joint company of Turner Construction and Wohlsen Construction of Lancaster, Pennsylvania, to build it Installation of $ 6 billion.
For contractors seeking to participate in action, math is simple. Win a Data Center Award, collect a large check. To land the right contract, however, is anything that is simple.
“Data center projects are usually relatively simple structures with really sophisticated power and utility needs and really unique team requirements,” said Andrew Greene, office manager at the Perkins Coie law firm office. “From the point of view of risk management, this is more problems in the supply chain, dealing with work problems.”
Andrew Greene
Courtesy of Perkins Coie
Most data centers use engineering, recruitment and construction contracts or key handful models, where a contractor designs and builds the installation, said Trent Cotney, partner and leader of the construction team in Tampa, Florida, Adams and Reese law firm office. This structure simplifies the property, but creates a heavier elevator for the contractor.
“What makes it more complicated is the amount of regulation included in many of these contracts,” Cotney told Construction Dive. “There is grip on fire codes, NFPA, NEC, allowing related problems, all these types of things.”
Fast Track Delivery
Developers are more eagerly than ever to capture the demand for artificial intelligence as quickly as possible. Cotney has become a quick delivery of data center projects, said Cotney.
But speed also increases risks.
The rush to build quickly “is a great load on the contractor,” said Cotney. Greene said that many projects are in remote places, where it is difficult to get a specialized job. The combination means a greater potential for errors.
“We make a lot of defense of the Osha for construction and the general industry and, unfortunately, we have had some incidents in these types of projects,” Cotney told Construction Dive. “Each time it is high voltage, this fast track level requires operational excellence. Browse safety in this type of environment is absolutely critical.”
Materials at the spotlight
Copper occupies one of the most key entrances to these jobs, given its central role in the distribution and energy wiring. Recent Rates to the material They have caused a number of problems for contractors with data center projects.
“Copper is a very important element of many teams that enter these types of projects,” Greene told Construction Dive. Prices have fluctuated significantly in the last year and is expected to continue during the coming year and a half, he said.
“This fluctuation of prices tends to affect projects indirectly, through the availability and cost of the equipment that is installed,” said Greene.
Cotney emphasized the rates related increases will not be immediately displayed in the data. Instead, these impacts work through the supply chain for four to 12 months, depending on the speed of inventory and whether the distributors absorb part of the added expense.
Trent Cotney
Courtesy of Adams and Reese Llp
This delay makes contractors more difficult to predict cost impacts.
To protect -Cotney said many companies insert Price acceleration provisions that allow contracts adjustments if a material increases more than 5%or may use specific clauses of rates linked to customs data in the United States. Others follow strategies such as the previous purchase or negotiation of direct purchase orders where the owner purchases the material directly.
“The end result is where you basically go to the end user, the owner or the developer, and to say that here is the success of the rate. Here is the direct impact of this. Here is a reflected change order,” Cotney said to Construction Dive. “And you have a contractual base to do it.”
Lawyers also set other sensitive contributions. Equipment from internationally, such as transformers or generators, often dominate the risk profile, said Greene, as availability and shipping schedules lead the entire project time.
Cotney added aluminum, fiber optics, lithium batteries and refrigerants can also complicate the negotiations. Refrigeration systems, in particular, represent unique challenges.
“In the past there have been several EPA regulations that thundered which cooling systems can be used,” Cotney told Construction Dive. “There is one Great agenda about this administration As for filming some things, but as I know, some of these are still in the air. Therefore, being able to obtain the refrigerants needed to feed these giant cooling systems within these data centers is a unique thing. “
He added that emerging technologies in this area, such as fluid cooling, could change even more as contracts address these risks in the coming years.
“I think there will be a great evolution of how we are going to cool these things to do -the most efficient,” said Cotney. “But for the moment, the refrigerant is a concern.”
Labor force and cybersecurity
Work is another point of pain in contracts conversations.
The construction projects of the data center require many electricians and qualified mechanical workers, many of whom may have a temporary immigration state. This creates challenges of compliance for owners and developers, who may require certified payroll even when they are not federally obliged, said Cotney.
“A lot of the template I see is used in these data center projects are under H-2B or temporary protection state, depending on what is being done,” he said. “Immigration and labor force are obviously Great theme for the entire construction Right now. ”
Security adds another layer. With these scale facilities, there are AI and Cloud systems, and protective design and construction documents is more important than ever.
“What we do to protect the information that will be transmitted in this construction because access to how this thing was built could, if it falls into the wrong hands, it can be a huge cybernetic threat,” said Cotney. “Therefore, confidentiality, cybersecurity protection, even in terms of contract and contract documents, is essential due to the amount of information.”
Follow the money
Despite the risks, the construction industry coincides with the construction of the data center Lucrative business by 2025.
“This is where money is found right now. There is a lot of money than the government and the private industry to advance this speed of light,” Cotney told Construction Dive. “Therefore, tons of benefits, but also a lot of risk and I think it must be evaluated in your contract.”
