Common issues in data centre construction – and how to avoid them

In last year’s Annual Review, Lyndon Smith wrote that the demand for data centres was on a meteoric rise. This year, Philip Hancock takes up the baton. As he notes, that demand looks set to continue; see for example the recent news of Google’s staggering £5 billion investment in UK artificial intelligence, including the expansion of a US$1 billion data centre in Hertfordshire.[1]

Unsurprisingly, we are also seeing an increased number of disputes relating to data centre projects. Far from being ‘big sheds with lots of M&E’, they are technically complex, challenging projects which can give rise to all manner of issues and disputes. In this article, Philip explains more.

I enlisted the help of AI, powered by a data centre somewhere, to identify some mitigation tips. It came up with some good suggestions of how to mitigate the risks inherent in data centre construction:

“Mitigation Tips:

• Involve specialist consultants early (especially for MEP and commissioning).
• Conduct thorough site surveys for refurbishments to uncover legacy issues.
• Use BIM and clash detection to pre-empt integration issues.
• Have a robust change control process with client sign-off protocols.
• Allow generous time for system commissioning and testing.”

That’s a pretty good start, but what about the detail? Data centre projects are a construction project like most others and so the three typical issues and sources of dispute will apply, namely:

1. Time (i.e. delays to completion);
2. Cost (i.e. cost overruns); and
3. Quality (i.e. defects and technical issues).

Time – delays to completion

• Design changes. These may arise from different approaches to procurement, for example initial design carried out by different specialist designers with resulting interface issues. There is often mismanagement of sequential trades – many data centres are built following a construction management model, which can have the downside that the construction manager has less exposure to risk and so less incentive. There are also often design changes during the works, for example due to tenant requirements that are not known until late-on, or due to technological changes. Different end users may have different requirements or specifications.
• Access delays. The largest single scope of work in a data centre is the M&E, which is often usually the final trade to begin work, usually with a long commissioning period at the end. Delays to preceding trades can have a big effect on data centre construction, and there are often issues with earlier works (e.g. openings for services) which can lead to re-work.
• Supply chain delays. Lots of data centre equipment are long-lead items and so late design decisions and design changes can have a big impact where it delays procurement.
• Site conditions. Due to the demand for data centres, there is more incentive to convert existing buildings or retrofit old data centres. The unknown site conditions inexisting buildings carry a greater risk than a new build.
• And, commissioning! Data centres invariably require a large amount of commissioning of complex interrelated systems, more than many other types of project. Commissioning is often carried out by a variety of subcontractors, sub-subcontractors and suppliers, making it a complex and time-consuming process. The numerous stakeholders will often not feed into the construction programme at the outset, meaning that commissioning can be a much larger and more involved process than anticipated.

Cost overruns

• The most obvious cause of cost overrun is delays, as discussed above. On data centres, delays can be particularly costly. Tenants often impose very high delay liquidated damages which can be difficult to pass down to the supply chain, because they are much higher than on a typical construction project. That can mean contracts are not back-to-back, increasing exposure for delay losses.
• Inflationary pressures. We are in a period of high inflation. Most construction costs have risen significantly over the past few years. That can be pronounced in data centres where several of the components may come from a variety of different countries. Trade wars and tariffs, together with supply chain disruption, may drive costs up exponentially. A survey by Turner & Townsend in 2025[2] found that two-thirds of respondents reported 6% or more average increase in tender/bid prices for data centres, citing AI and inflation.
• Variations. The risk of variations is high on data centre projects. Changes due to tenant requirements, changes in technology, and unavailability of components all frequently occur. Further, the need for multiple systems to work in harmony can mean that one variation can have a knock-on impact.
• Disruption claims. We see a lot of disruption claims particularly among M&E subcontractors, who may have a significant amount of the work but who are dealing with challenging supply chains and may be working around issues caused by preceding trades. There may be workfronts available but out of sequence, leading to disruption but not necessarily critical delay. Many tenants also request to begin their fit out works at an early stage, and so there can be a situation where the M&E subcontractor is working around tenant fit-out works.

Quality

• Data centres contain large amounts of specialised technical equipment from many different suppliers. Issues may be difficult to pinpoint, determine responsibility and address. That is exacerbated by interface issues and risk. Data centres are also sensitive environments and equipment, which does not always mix well with a live construction site (and even more so when rectifying defects post-completion, during operation).
• On that subject, resolving defects when the data centre is operational can be a nightmare. Access can be greatly restricted; the environment is carefully controlled. Downtime risk is huge and any issue that may threaten the operation of the data centre is very difficult to resolve.
• Further specific issues that can arise include the risk of OFCI (owner furnished contractor installed) / CFCI (contractor furnished contractor installed) equipment, and tenant requirements. Who takes the risk of any issues?

Other risks to consider

• Complex contractual situation. There are often many parties involved in the construction and operation of a data centre, with different roles. The matrix of contracts is very complex, and terms and scope are very often not back-to-back. As noted above, there may be huge damages payable for downtime which may not be flowed down to the supply chain (it may not be possible to do so). The supply chain is very international, and the risk of costly cross-border litigation is higher. Companies should take particular care that they have clear, signed and effective contracts in place, with effective risk management. Terms like limitations of liability, governing law and dispute resolution, defect liability, and standards of care are particularly important.
• Power supply. One of the buzzwords of the industry over the past few years, the issue of effective power supply to data centres (and the risks associated with grid connections and downtime) is something to keep in mind and manage (Is there enough power? How long will connection take?). Water cooling can also be an issue.
• Procurement. I mentioned above that a large proportion of data centre projects use a construction management model. Others may involve a M&E contractor taking on the role of a main contractor, because their package of work is by far the biggest. However, M&E contractors are often not experienced performing the role of a main contractor and so that can pose issues, e.g. in effective management of other trades and in contract administration. Different models have advantages and disadvantages. There can also be scope gaps where packages are broken down too much, causing disputes.

Conclusions and mitigation tips

So, what are some ‘top tips’ to mitigate risks in data centre projects? We started off with AI’s Mitigation Tips, which are pretty good. I have some further suggestions and lessons learned:

• The usual tips for any project – records and contract administration. Make sure to keep good, thorough contemporaneous records including progress records, programmes, correspondence. And ensure to submit notices, claims, etc. on time.
• Early engagement and work with the supply chain, including careful attention to the programme and in particular the commissioning programme, will pay dividends.
• Keep ‘on top’ of progress, pay attention to programme updates, check they are an accurate reflection of progress, work closely with the M&E contractor, key subcontractors, and consultants, to issue-spot and problem solve effectively before problems spiral out of control.
• Draft contracts carefully, consider the risks you may be exposed to, include effective and robust limitations of liability, ensure terms are back-to-back where possible.

Data centre construction shows no sign of a slowdown in the near future. It’s a potentially huge opportunity for many in the industry. Just stay on the right side of some of these issues (and, if in doubt, ask a construction lawyer!).

[1] https://www.bbc.co.uk/news/articles/crmek723dz9o

[2] https://reports.turnerandtownsend.com/data-centre-construction-cost-index-2025/data-centre-cost-trends