Risky Business: Data centers

Source: AXA XL

Data centers

Data centers have become “mission critical” components within the world economy. With more individuals working  remotely, and their subsequent reliance on the “cloud”, along with the seemingly infinite demand for storage space  and processing power, the rate of new data center construction projects has grown steadily. It is estimated that data  center construction projects will increase at an annual rate of approximately +5% over the next five years. Along with the rising demand for these projects comes an increasing level of complexity in design and construction objectives.  These are no longer “server warehouses”, but rather sophisticated buildings requiring a specialized environment set  up with safety and security precautions in place to protect proprietary data and expensive equipment – data centers  are much more about substance than “style”.

Potential Concerns

  • Inadequate HVAC system design to maintain a controlled environment for the current and future adaptability, flexibility and expansion of the data center building
  • Power demands of the facility being adequately met by the utility grid or alternative power supply sources at  the specific project location
  • Lack of thoroughly planned systematic redundancy for the data center mechanical and electrical systems
  • System failure due to design error leading to economic loss from extended downtime
  • Inadequate prequalification of specialty contractors and their experience working in the specific geography
  • Current supply chain disruption effects on a data center construction schedule, and the implications of not being “online” by a promised date


  • City administration data center suffers large loss when cooling system fails and large banks of servers overheat and shut down, ceasing data operations for almost 6 weeks, resulting in large property loss and professional negligence claim
  • New corporate data center is temporarily shut down due to lack of adequate power supply for local diurnal temperature ranges, and can only run at 65% of projected on-line capacity, leading to multiple claims against  design/builder and specialty subs
  • Modular data center components are determined to be too small to adequately house the data processing hardware, resulting in economic loss claim alleging negligence by the EPC contractor

Action Items

  • Familiarize yourself with the job site-specific conditions, geography, and regional requirements up front,  arguably before design is even contemplated
  • Communicate precisely to your project estimation team the heightened design criteria and performance characteristics of the modern data center
  • During pre-qualification of subcontractor, make sure key specialty subcontractors (HVAC, mechanical, electrical) have strong experience with data center projects, and have worked in this specific geography
  • During pre-construction, make sure that project stakeholders understand the realistic utility/power supply  situation, and back up redundancy plans
  • Understand which party is contractually responsible for the risk of connection to the power grid
  • Consider utilizing one of today’s technologies to monitor air quality, humidity and temperature, such as Pillar Tech. Or consider a subcontractor prequalification technology such as Bespoke Metrics or Trade Tapp and/or a water mitigation technology such as Eddy Solutions, WINT or Pillar Tech.

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