Datacentres are the current hot topic in the construction sector. Designated as critical national infrastructure in 2024, the demand for datacentres continues to grow. The government wants the UK to become a leader in AI technology, which means there is little chance demand will slow anytime soon. London is now Europe’s largest datacentre market, with additional hubs in Wales and Manchester.
Contract Complexities
Building datacentres is complex, even by construction and engineering standards. Whilst the shell is often thought of as a big shed, in reality they are far more complicated. You might be required to coordinate multiple disciplines including utilities, power, cooling, telecoms, and security to name but a few. Those challenges are often compounded by very high project values and tight city-centre sites. Limited access, restricted logistics and interface risk all place even greater pressure on planning, sequencing and delivery.
When it comes to contracting, design and build (D&B) contracts are usually preferred but engineering, procurement and construction (EPC) contracts are also popular. There are a number of factors which might influence which contract you use, including the experience of the contractor, the appetite for risk and the speed of delivery. King and Spalding have a helpful article comparing contractual options.
Supply Chain Challenges
The need for specialist contractors and materials mean that procurement can be a challenge. With datacentres in high demand, speed is often of the essence. But rushed decisions in the early stages can have large knock on effects down the line.
There is a shortage in the UK of contractors with the required skills and experience to build datacentres. Those that do have the expertise are in high demand. Be sure you allow enough time to develop robust procurement processes. Similarly, as you go down the supply chain, be wary that specialist, high-tech pieces of equipment can have long lead times. Adjust your programmes appropriately to avoid delays.
Risk allocation also needs careful thought. On projects of this scale and complexity, employers and main contractors will often seek to share risk through the supply chain. They may do this by passing down design responsibility, programme obligations, performance requirements or delay exposure. This approach may be commercially necessary, but it needs to be realistic. Risks should sit with the party best able to manage them, otherwise pricing, procurement and delivery can all suffer.
Contract Administration
Getting the right contract and procurement process in place is only the first step. As your project progresses, being on top of your contract admin will be key. Core things to look out for include:
• Project programmes: An effective programme will allow you to allocate resources, track progress, manage information and ensure that the project stays on schedule. As the project progresses, keeping the programme updated will allow you to anticipate potential delays and the impact of changes before they become major problems.
• Change management: Due to the fast pace of technological advancements, datacentres often require more changes than a typical project. In some cases, elements of the design are still being developed in parallel to the construction works. Having a strong change management process, which adheres strictly to the contract provisions is vital.
• Records: Maintain detailed, contemporaneous record keeping throughout the project. This includes progress reports, as-built programmes, meeting minutes, photographs and site diaries to name just some of the records required.
• Notices and claims: Follow the contract and adhere to your obligations. Be wary of timebars or condition precedents, and issue notices and claims in the exact format specified by the contract.
Whilst this advice is not too different to most construction projects, the complexity and value of datacentre projects means failure to get it right can have catastrophic results with large liquidated damage provisions.
Avoiding and Managing Disputes
The points mentioned above plus supply chain issues, cost overruns, delays in planning or technical failures during construction mean that datacentres are a breeding ground for disputes. Failure to effectively manage your contract is likely to result in increased construction costs, delay revenue generation and threaten project completion.
Clear communication and early collaboration across the supply chain can help avoid changes and delays leading to full scale formal disputes. Proactive management of the programme and adhering to the contract provisions are also key steps. This along with good record keeping will help you establish and demonstrate the cause and effect of delays and disruption
If these measures fail, it’s likely that your contract will set out the dispute resolution options available to you.
Find Out More
Here at Overford, we have represented clients throughout the supply chain on both live and legacy datacentre projects. That breadth of experience means we understand the commercial drivers, technical challenges and contractual risks that define this fast-moving sector. Whether supporting project delivery, resolving live issues or handling disputes after completion, we bring practical, market-informed advice shaped by hands-on experience across the datacentre lifecycle.
If you are planning, procuring or delivering a datacentre project, or dealing with issues that have already arisen, our experienced team can help you manage risk, protect your position and keep the project moving. Get in touch to find out how Overford can support you at every stage of the datacentre lifecycle.
