The demand for access to digital data has grown substantially in the last decade with the evolution of technology in our increasingly digitalised world. The outbreak of COVID-19 impacted significantly on this demand, as the pandemic led to a move towards remote working, which in turn increased the need for fast and reliable access to data. The surge in online shopping, the rapid advance of artificial intelligence and the implementation of 5G networks have all led to the need for additional data centres to store and distribute data. But how, asks Lyndon Smith, can this be done?
Virtually all data that is stored, processed and distributed to consumers, and all data flowing across the internet, goes through a data centre. They are the home of cloud and artificial intelligence systems and are heavily reliant on electricity and cooling systems to ensure they can run, distribute and store the vast data that they hold. In short, data centres comprise a warehouse facility fitted out with extensive mechanical and electrical equipment, including IT hardware and software. For this reason, data centres are extremely power intensive.
The geographical location of the consumer is vital to the speed of data delivery; the closer the consumer, the faster the data is received. This is because the latency levels are lower. Latency, or network latency, is the delay before a transfer of data begins – it is essentially the length of time a system waits to receive data before delivering it to the user. The lower the latency level, the faster the data is transferred, which results in a more efficient data centre. It is for this reason that the UK market is predominantly London-based, although there is currently a shortage of data centres in and around London to meet the increase in demand.
It is, therefore, unsurprising that data centres are on the rise and are making up a larger share of the construction market. This is welcomed by the construction industry given the decrease in larger-scale public sector projects and a slower housing market. Data centres are also attractive to developers and investors as they are seen as less susceptible to recessionary pressures.
Unsurprisingly, we are seeing more of our clients move into this market.
Issues to be considered in the construction of data centres
Whether to retrofit or rebuild
Retrofitting data centres avoids the need to locate a new site and tackle planning laws. However, the main concern associated with retrofitting is whether the original equipment, such as the cooling systems, will function compatibly with the latest modern equipment. This can cause difficulties in contract negotiations between the developer and contractor regarding who takes the risk of compatibility.
Powering the data centre
The continuous power necessary to operate the systems that hold the data, and the associated cooling systems, is often greater than what the grid provider can deliver. This can cause higher latency levels and, therefore, problems for providers. To help counter this, the UK government has announced a significant increase in investment to the national grid to provide additional capacity.
The lack of skilled labour
Although there are several established contractors with data centre experience, there remains a general lack of skilled labour in the industry. The construction of a data centre is specialised, with complicated mechanical and electrical fit-out works, as already mentioned above. Therefore, not all contractors are able to do this work. Proposals for greater investment in modular and prefabricated construction methods and AI solutions have been made to help solve the problem. However, these proposals are yet to be implemented.
Programming
Given the complexity of constructing a data centre owing to the highly technical nature of the work, it is not unusual for there to be programming issues between the parties, causing delays and, in turn, disputes. Therefore, it is imperative for parties to be aware of who carries the risk for delay-related events. Parties should be au fait with their notice provisions and timings for the substantiation of any claim in the event that, for example, a contractor is delayed and needs to apply for an extension of time and a loss and expense claim.
The risk of human error
Upgrading a data centre is essential to keep up with the increase in demand. However, a major problem with updates and upgrades is human error. To mitigate the risk of human error, it is important to diligently plan and supervise any updates and upgrades that are required as well as to enforce strict adherence to industry best practices. Data centre providers should also ensure their employees receive proper training to ensure human error does not occur during day-to-day management.
The risk of fire
The design, construction, operation, management and specification of fire protection is crucial. A fire outbreak can be catastrophic. In March 2021, a fire broke out in a data centre in Strasbourg causing losses of more than €105 million. The fire affected 65,000 customers, who were unable to access their data. The operator suffered reputational damage, which impacted its value. The incident highlighted some of the main challenges faced when a fire breaks out in a data centre, such as the lack of automatic fire extinguisher systems and the delay in electrical cut off, which makes it difficult for firefighters to extinguish the fire.
The fire itself is not the only issue posed by a fire outbreak within a data centre: there is also the lack of continuous power that electrical cut off causes in the course of extinguishing the fire. Any cut in power may lead to breaches of contract, given the obligation to provide customers with continuous power. The lack of continuous also causes cybersecurity concerns as the systems are more vulnerable and susceptible to cyberattacks.
National Security and Investment Act 2021
For obvious reasons, data infrastructure has been identified as a sector which could give rise to national security concerns. The National Security and Investment Act has implemented a notification regime whereby individuals or companies acquiring data centres must notify the government in certain circumstances so the government can assess potential national security risks. There are two parts to the notification regime, as follows:
- The first is a mandatory notification regime where certain acquisitions crossing specified thresholds must be notified and cleared before completion can take place. An example includes the acquisition of all shares in a data centre.
- The second is the voluntary notification regime which applies where acquisitions of interests, that are not caught by the mandatory notification regime but present potential national security concerns (e.g. the land neighbours a data centre facility used by the UK government), need to be notified (but do not need approval for completion), and may be called in within five years for a national security assessment. If a party does not know whether their acquisition presents a potential national security concern, they can submit a voluntary notification with the view of obtaining confirmation from the UK government.
The government has powers to investigate not just data centre transactions, but also the acquisition of property as well as the leasing and the financing of data centres.
Key takeaways
It is unquestionable that the development of data centres is on the rise and, given the complicated and technical nature of these projects, we are seeing an increase in disputes associated with data centres. The common themes we are experiencing are disputes resulting from changes in the scope of works (generally increased scope), which impacts on programming and the date for completion, delays because of late technical design information, delays because of the late provision of technical equipment to be installed, defects in the installation of equipment resulting in the data centre not operating as intended, and problems associated with power demand and cooling.
Therefore, although these are exciting times given the opportunity that the development and construction of data centres provide for many of our clients, they do come with a health warning, as highlighted above.