Data Center Development: Managing Construction Risk Early

Bart W. Reed
Partner, Construction

Abstract

Data center projects carry risks that go well beyond conventional commercial construction, especially when schedule certainty and budget certainty are mission-critical. Bart Reed, a partner in Stoel Rives’ Seattle office and co-chair of the firm’s data center service group, explains why early legal involvement can help developers, contractors, design professionals, and other stakeholders identify risks before contracts are negotiated and finalized.

The discussion highlights how thoughtful contract provisions can allocate, mitigate, and manage construction and development risks from the outset. Reed also outlines the broader legal support data center projects often require, including environmental regulation, land permitting, water issues, energy, corporate transactions, and dispute resolution through negotiation, mediation, arbitration, or litigation when claims arise.

Transcript

Hi, I'm Bart Reed. I'm a partner in the Seattle office of Stoel Rives working in the construction and design group. I'm also co-chair of the firm's data center service group. Data center construction and development poses many risks beyond just the normal or conventional construction and development for commercial projects. Data centers are often mission critical projects where schedule certainty and budget certainty is so critically important. As a firm, as a data center service group, we help data center developers, contractors, design professionals, and other disparate interest groups take care of their contracts through allocation of risk, mitigation of risk measures and various other means. And hopefully we get those parties in very early in the process before contract formation, before contract negotiation, so we can identify those risks and help to design provisions within the contracts to mitigate, allocate, and manage the risks accordingly.

So, beyond my practice with regard to construction and design assistance helping clients both transactionally and through the claims process, our firm also offers many different practice areas to support schedule certainty and budget certainty, as well as other facets, all aspects of data center development, environmental regulatory issues, land permitting, water issues. We also have service providers that deal on the corporate side of things as well—mergers, acquisitions. So, we offer a full service package, A to Z for data center development for the big data center developers, not only hyperscalers, whom we routinely represent, but also the mid-size and small data centers and data center adjacent providers.

If that doesn't happen well then We are here as well to help manage the process during construction, for example, or identify and assist with issues that arise even beyond the construction sphere, maybe dealing with environmental regulatory issues, permitting site selection, or if claims arise after construction. If claims arise after construction, then we'll look to the dispute resolution provisions of the contract, hopefully that we've crafted, and then we can help the client with either mediation of the claims, maybe negotiation of the claims between the executive management teams assisting that process, or if it comes to it, then we can assist with litigation or arbitration.

There are multiple practice groups within our firm that can assist and support data center development, not only on the construction and design side, but of course on the energy side, the corporate side and the environmental side in terms of regulatory issues that frequently arise from these projects.