The Need for Speed: Managing Risk in Fast-Track Data Center Construction Projects

One of the many challenges in any large-scale construction project is efficiently and effectively managing design development, particularly in complex infrastructure and energy projects requiring multiple engineering disciplines. Certain design aspects will inevitably advance quicker than others due to a variety of factors, including the complexity of detailed design and the extent of any necessary modifications. Under these circumstances, the parties might agree to a “fast-track” strategy in which certain construction works proceed in parallel with design development. This will enable the contractor to progress aspects of the work that do not necessarily require a fully detailed design.

The goal of the fast-track strategy is typically to increase efficiency and achieve final completion under a compressed schedule so that the project can begin generating revenue as quickly as possible. This is particularly pertinent for ongoing and forthcoming hyperscale data center projects. The Wall Street Journal recently reported that 67 percent of data center capacity planned for 2027 is not yet under construction or is experiencing construction delays.^[1] Developers must look for solutions to break this drag.

The fast-track strategy can be effective but also carries inherent construction risks, including those related to disputes over project delays and scope changes. These inherent risks must be mitigated. In particular, developers and contractors should be aligned from the outset as to the specific fast-track structure and agree to appropriate contractual mechanisms to reflect that structure.

This article provides an overview of fast-track projects, while offering some general takeaways for avoiding possible pitfalls and effectively managing risks.

Fast-Track Projects in General

Consider the example of a hyperscale data center with a behind-the-meter natural gas power plant. At a minimum, the design and construction of such a facility will require complex civil, mechanical, and electrical engineering design. These various disciplines are closely related, and design interface and coordination are therefore crucial. In this hypothetical project, there are certain civil works that can proceed before the fully detailed mechanical and electrical designs are complete. These include, for example, stripping out vegetation and hauling it from the site; excavation of the project site to make way for concrete structures; and the pouring of concrete foundations. The power plant scope has a gas turbine and generator configuration that is particularly complex as it pertains to the number of units, capacity sizing, and interconnection with the data center’s power distribution architecture. In our hypothetical, configuration of step-up transformers, switchgear, and voltage distribution gear are all still being finalized during early civil works. The actual data center structure is comparatively less complex, but the developer is still considering how to best optimize cooling infrastructure, including whether to deploy traditional air cooling, rear-door heat exchangers, or direct liquid cooling. This decision could drive mechanical design changes post-execution.

For that reason, the parties agree to a fast-track structure whereby they will execute an EPC contract on the basis of a preliminary design, and the contractor will then proceed with certain civil works while the design team finalizes the detailed design based on updated issued-for-construction drawings, taking into account the developer’s requirements. The purpose of this arrangement is to maximize efficiency by allowing work under certain scopes to commence because they are not dependent on the completion of design work in other scopes.

Fast-track projects carry risk and require several key considerations. This article focuses on two of those considerations: (1) agreeing to and implementing precise and sensible provisions for changes in scope; and (2) understanding potential causes of critical delay and taking appropriate measures to manage that risk.

Changes in Scope

One of the most significant obstacles to fast-track projects achieving their goals is bottlenecks caused by the change order process. Both the developer and contractor must accept that changes in the scope of work are all but inevitable in a fast-track project. Effective planning and management can help minimize the risk of significant change order backlogs compromising a fast-track strategy. This entails, at a minimum, three key steps.

First, it starts with agreeing to sensible contractual change order provisions that are specific, easy to understand, and not overly burdensome. The goal is to adopt procedures for identifying and notifying changes in scope, and efficiently assessing the cost and schedule impacts of those changes. Returning to the example of the data center with a behind-the-meter power plant, one of the most common types of design-related changes will likely relate to changes in the bill of quantities (“BOQ”) to add components of the detailed mechanical design. Both the developer and the contractor should take steps to ensure that accurate material take-off analysis can be performed and verified in short order. This will require close coordination with the design team immediately after revised BOQs are issued. It will also require specific pricing mechanisms related to compensation for change work. Some contracts will offer a choice between lump sum pricing, time and materials and/or cost-plus structures. The parties should be aligned as to which mechanism will be used in a particular change order and how the materials and labor will be priced. This will streamline the processing of change orders concerning differences between issued-for-bid and issued-for-construction documents. Hyperscale data centers are also unique when it comes to changes in scope, as the hyperscaler client (which could be, for example, a large technology company) is often driving design changes as a third party. It is crucial to understand the specific mechanisms for these types of client-initiated changes and how they flow through the contractual structure. This is another area where precise drafting can help ensure that these types of changes do not stand as an obstacle to the fast-track goals.

Second, complete and accurate recordkeeping is crucial. This is something that can sometimes suffer in fast-track projects, where the tendency can be to focus on the goal of achieving the completion date at all costs. This goal can be compromised by poor document management. In circumstances where significant changes in scope are likely, the developer will have an interest in controlling its costs, while contractors will seek to be fairly compensated for change work. It is in both parties’ interest to have access to accurate backup documentation evidencing actual costs incurred. Transparency in this regard can help ensure that parties are aligned and the change process can move forward efficiently. Gaps in backup documentation can delay the processing of change requests and potentially lead to disputes over the pricing and/or entitlement to changes.

Third, the project management team must have an intimate understanding of the change order process and implement it according to the relevant contractual terms. It is important to establish that understanding before first issuance of company instructions and/or change order requests. This might require up-front training, discussions with legal counsel and/or the adoption of detailed site protocols, each of which can be an effective way of ensuring that the parties benefit from these contractual provisions and minimize the risk of waiving them.

Scheduling Provisions and Delay Risk

Fast-track project schedules are aggressive by nature, and come with increased risk of delay. It is often inevitable that the project schedule at the time the contract is executed will be viewed as preliminary and/or aspirational and will not reflect the ultimate reality of the project. This can result in disputes concerning, for example: (i) which schedule is the actual baseline schedule for purposes of assessing critical delays; (ii) the extent to which the project might be delayed at any given time; and/or (iii) which party is responsible for a critical delay. The parties need to understand the risks of critical delays and take measures to protect against them. At a minimum, in a fast-track project this would include taking four key steps.

First, and most obviously, understand the consequences of critical delays. Delay liquidated damages provisions are particularly sensitive in this regard and must be carefully negotiated, taking into account the feasibility of the completion date and the risk of critical delays. This is a pressure point in data center projects that often require long lead time equipment and owner-furnished equipment, both of which raise important questions about risk allocation and integration. If these issues are not properly addressed in the agreements, they can result in execution-stage disputes that can frustrate the purpose of a fast-track project.

Second, understand the potential causes of critical delays specific to this project. Again, returning to the example of the data center and power-plant project, in this type of fast-track project, common causes of critical delays include late issuance of rely-upon information necessary to complete the design; procurement delays due to supply chain issues; and/or changes in design requirements and the construction rework necessitated by those changes. In the data center space, rely-upon information might include utility interconnection data, power purchase or fuel supply commitments, and IT load specifications from the hyperscaler client, and any significant shifts can result in cascading design changes. Early identification of these potential issues will help parties better protect against them.

Third, make sure that the parties are aligned as to the baseline schedule, and that it takes into account contingencies and float. In a fast-track project, the project schedule can be somewhat of a moving target and is typically developed without access to complete information. This poses obvious risks that need to be taken into account in the scheduling process. The absence of an agreed baseline schedule will make a delay claim more speculative and difficult to prove. In addition, a poorly crafted schedule could result in increased exposure if the project faces a critical delay. This is an area where hyperscale data center projects once again provide added complexity, particularly when dealing with phased development that contemplates partial completion and phased commissioning. This again underscores the importance of precise drafting, to help avoid uncertainty about what constitutes “completion” for liquidated damages purposes and what triggers a transfer in title and/or risk of loss.

Fourth, the importance of proper record keeping again cannot be underestimated. This includes not only maintaining documents demonstrating the root causes of critical delays, but also maintaining a clear record of project correspondence that follows the procedures set out in the contract. Again, waiver can be a concern if disputes arise. Documenting delays and their causes can protect against this and can lead to more efficient dispute resolution.

Conclusion

Fast-track projects will continue to be quite common given the many different commercial motivations for adopting this structure. Parties should not lose sight of the unique contractual and legal risks that come with these types of projects. Experienced construction litigators can help clients identify and manage those risks, both during contract negotiations and project execution.

^[1] Katherine Blunt, America’s Data-Center Build-Out Is Falling Way Behind Schedule, Wall St. J. (June 3, 2026, 1:25 PM), https://www.wsj.com/tech/ai/americas-data-center-build-out-is-falling-way-behind-schedule-e408a9a8.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.