Randall Coxworth, Jon Critelli and Michael Mansueto | StoneTurn
Data center construction is accelerating at an unprecedented pace, but with that growth comes heightened risk of costly disputes. This article unpacks how overruns, delays, and complex project dynamics translate into financial claims and how stakeholders can navigate them with precision. Learn how disciplined cost tracking, forensic analysis, and clear contractual frameworks can protect your bottom line and strengthen your position in high-stakes disputes.
The data center construction boom shows no signs of slowing. Fueled by surging demand for artificial intelligence (AI) infrastructure and cloud computing capacity, developers and hyperscalers are racing to bring new facilities online at an unprecedented pace. But that speed comes at a cost, not just in dollars, but in risk. When project complexity collides with compressed timelines and constrained supply chains, the financial fallout from overruns, delays, and loss of rental/operational revenue can be enormous.
Overruns and delays are not just operational headaches. They generate disputes that often require rigorous forensic analysis to determine an equitable outcome to owners and contractors. For project owners, developers, and contractors alike, the path to resolution runs through disciplined cost quantification, causation analysis, and structured claims processes. Tracing project dollars with precision is what distinguishes defensible, recoverable costs from the unresolved claims that often drive data center construction disputes.
Why Data Center Projects Are Uniquely Dispute-Prone
Data center construction carries a risk profile that sets it apart from traditional commercial building. Several factors converge to make these projects especially vulnerable to disputes.
Speed-to-market pressure is currently one of the most critical drivers. Demand from AI workloads and cloud migration has compressed construction timelines dramatically, leaving little margin for error. Many projects now prioritize accelerated delivery and early operational readiness so facilities can be commissioned and placed into service fast enough to capture market demand before technology shifts or capacity needs change. However, that urgency often creates downstream risk during startup, turnover, and ongoing operations.
Phased delivery adds another layer of complexity, particularly when critical path activities drive commissioning sequences and the deployment of labor, equipment, and specialty resources needed for subsequent phases. On data center campuses, delays in one phase can disrupt turnover, constrain access, and interfere with the carefully timed execution of later phases, especially where ongoing work must be performed in partially commissioned, occupied, or operationally sensitive environments. In those circumstances, responsibility often becomes difficult to isolate, and questions of delay causation, resource disruption, and liability can quickly multiply.
Procurement dependencies are a persistent source of friction. Critical electrical and mechanical equipment carries long lead times and limited supplier options. Coordination issues exacerbate this risk in cases of components that are partially Owner Furnished Contractor Installed (OFCI) and partially Contractor Furnished Contractor Installed (CFCI). Material and equipment substitutions can carry high cost and performance implications, while procurement delays often cascade through the project schedule, disrupting critical path activities, sequencing, and downstream trade coordination.
Infrastructure constraints can introduce substantial risk once a project is underway, particularly when unforeseen limitations related to power availability, utility capacity, or municipal infrastructure emerge after construction has started. These conditions can disrupt planned execution, delay commissioning, and create complex disputes over responsibility, timing, and the resulting cost impacts.
The common thread across all of these factors is ambiguity—and ambiguity is where claims are born. When scope boundaries, sequencing responsibilities, turnover requirements, procurement assumptions, infrastructure readiness, or commissioning obligations are not clearly defined and consistently documented, parties begin operating from different expectations of what was required, when it was required, and who was responsible for delivering it. In complex data center projects, those gaps rarely remain administrative; they quickly translate into delay allegations, disruption claims, cost overruns, and disputes over accountability. As schedule pressure intensifies and multiple trades, vendors, and operators intersect across phased delivery and startup activities, even small areas of uncertainty can compound into significant commercial conflict.
When Projects Go Wrong: Anatomy of a Construction Dispute
For data center disputes, there is no one-size-fits-all solution to mitigating risk. What makes these disputes complex is how they develop: the snowball effect often compounds quickly. Unforeseen conditions generate change notice requirements. Review and response timelines are compressed or missed entirely. Parties begin using contract language and contemporaneous documentation, or the lack of it, to position themselves for formal claims. What may begin as a field-level disagreement can escalate quickly when the financial stakes run into tens or hundreds of millions of dollars.
Subcontractor pass-through claims add procedural complexity, as general contractors manage liability exposure across multiple tiers of trade partners. The contractual delivery method structure itself—whether guaranteed maximum price (GMP), lump sum, or cost-plus—shapes the nature and magnitude of dispute exposure from the outset.
Under lump sum contracts, that risk is often magnified because pricing is fixed against a defined scope that may later prove incomplete, evolving, or differently interpreted once procurement, coordination, and field conditions unfold. In that environment, disputes frequently arise over whether added costs stem from true changes, design development, access restrictions, sequencing inefficiencies, owner-driven revisions, or impacts that the contractor was expected to absorb within its original price. The tighter the contract sum, the greater the pressure on assumptions, exclusions, contingency usage, and notice compliance, all of which can become focal points in claims involving extra work, delay, disruption, and acceleration.
By contrast, GMP contracts cap the owner’s exposure above an agreed ceiling while placing cost-management risk on the contractor, and cost-plus structures generally leave the owner more exposed to overruns while reducing pricing tension over incomplete scope at the outset. From the owner’s perspective, managing these risks requires clear scope definition, disciplined change management, timely decision-making, and strong documentation of directives, interfaces, and evolving project requirements. From the contractor’s perspective, effective risk management depends on clearly stated assumptions and exclusions, rigorous cost tracking, early notice of impacts, and consistent documentation tying changed conditions or owner actions to measurable cost and schedule consequences.
The table below summarizes common claim types and how they manifest from both the owner’s and the contractor’s perspectives.
Key Claim Types in Data Center Construction Disputes
| Claim Type | Owner-Related | Contractor-Related |
| Delay and Disruption | Owner-driven design changes, late tenant scope decisions, ASIs, evolving IT requirements, delayed OFCI releases, or slow approval cycles cause resequencing, stacked trades, and productivity loss in critical spaces like data halls and electrical rooms—impacting commissioning and energization milestones. | Contractor underperformance, mismanagement, labor or resource shortages, trade miscoordination, and delays procuring CFCI equipment create workflow bottlenecks, rework, and inefficient trade stacking—reducing productivity without formally extending the schedule. |
| Acceleration | Owner directs or implicitly requires acceleration to meet fixed completion or tenant-lease milestones, resulting in overtime, shift work, and commissioning compression. | Contractor attempts to recover from self-inflicted delays by accelerating, sometimes claiming compensation without clear owner direction. |
| Change Order Disputes | Scope interpretation issues, incomplete design documents, or tenant-driven changes. generate contested COs. | Contractor submits COs for work already included in contract documents, or claims scope gaps attributable to internal coordination failures. |
| Unforeseen Conditions | Unexpected subsurface issues, undocumented utilities, unsuitable soils, or unforeseen drainage conditions delay foundations or underground duct banks. | The contractor improperly characterizes the condition as unforeseen even though it was reasonably foreseeable or expressly identified in the geotechnical or civil reports. |
| Escalation | Procurement delays or design changes extend lead times, causing cost increases for OFCI items or long-lead MEP equipment. | Contractor claims material or labor escalation due to market conditions or internal procurement delays. |
| Additional Work | Owner requests enhancements—redundancy upgrades requiring work beyond the original design. | Contractor asserts “additional work” resulting from its own field errors, incorrect layout, fabrication mistakes, or sequencing issues requiring rework. |
| Non-Conforming Work | Owner or Design team specifies work that does not meet standards, code, or commissioning criteria. | Contractor installs defective, incorrect, or out-of-spec MEP, electrical, or structural components requiring rework or replacement. |
| Termination | Owner terminates for convenience or performance issues, triggering cost recovery claims for completed work, demobilization, or lost profit. | Contractor termination for cause—due to chronic schedule delays, safety issues, or quality failures—leads to claims for unpaid work or damages. |
| Liquidated Damages | Owner may face liquidated damages exposure if owner-caused delays push past tenant lease or completion milestones. | Contractor faces LDs if contractor-caused delays impact Substantial or Final Completion milestones tied to the tenant lease agreement. |
| Warranty | Owner pursues warranty claims for issues arising after turnover that may have been caused by the end user or tenant. | Contractor is responsible for correcting defective installations, equipment failures due to workmanship, or unresolved commissioning deficiencies. |
| Liens or Stop Work Notices | Owners face risk when subcontractors or suppliers file liens or stop work notice due to nonpayment—often triggered by disputes, missing documentation, or GC cash-flow issues—which can delay funding, or halt draw approvals. | Contractors and subcontractors file mechanics’ liens and / or stop work notices when payment is delayed, disputed, or withheld; both are commonly tied to pay-app documentation gaps, disputed COs, or payment chain breakdowns. |
Quantifying the Damage: Forensic Cost Analysis
Once a dispute takes shape, the central question is straightforward: how much did it cost, and who is responsible? Answering that question rigorously is the work of forensic cost analysis.
In construction disputes, the strongest position usually belongs to the party whose documentation and contract language clearly distinguish base contract work from change order work, disputed extras, and delay-related costs. Clear written records—especially signed change orders, contemporaneous notices, directives, meeting minutes, and correspondence—often determine whether a cost is recoverable or remains disputed. When a change order is unsigned, the issue becomes far more contentious, particularly where the owner verbally directed the work but later refuses to execute the change order. In those situations, the dispute often turns less on abstract causation and more on whether the contractual requirements, project records, and contemporaneous communications clearly establish what was requested, what was performed, and who accepted the associated cost and schedule risk.
Schedule analysis is the backbone of most construction claims. Critical Path Method-based delay forensics has been the U.S. industry standard for over 40 years. A rigorous schedule analysis identifies the critical delay drivers, quantifies their duration, and apportions responsibility to the appropriate party. Productivity loss quantification—through methods such as measured-mile analysis, industry studies, and earned-value analysis—provides an additional dimension of damages support.
Data center projects introduce sector-specific complexity into this analysis. Quantifying the cost impact of delayed power delivery, critical procurement failures, commissioning failures, or community-driven disruption requires specialized knowledge of how these facilities are designed, built, and brought online.
Common evidentiary challenges include incomplete job cost records, commingled costs, and poor contemporaneous documentation—problems that underscore the importance of proactive project monitoring. Forensic accountants and construction dispute experts who are engaged early can identify cost and schedule risks before they escalate, assemble the documentation needed to support or defend a claim, and, in many cases, help resolve issues before they become formal disputes. That early engagement preserves relationships between parties and avoids the significant expense of a formal dispute process.
Apportioning Liability: Who Pays and How Much?
Quantifying damages is only half the equation. The other half—apportioning liability—is often where construction disputes become most contested.
Concurrent delay is among the most complex issues. When both parties contribute to schedule slippage, apportionment becomes highly fact-specific. Distinguishing between owner-caused, contractor-caused, and excusable delay requires careful documentation, clear definitions, and a credible analytical framework. Overlapping claims are common, and the burden of proof can shift depending on the contract and the jurisdiction.
Design liability adds another dimension. When architect or engineer errors drive cost overruns, professional liability claims must be layered into the overall dispute, often introducing additional parties and coverage questions. Subcontractor and supplier liability involves its own complexity, including back-charges, indemnification chains, and the practical limits of recovery down the contractual chain.
Force majeure arguments have taken on new relevance in a supply-constrained environment. What qualifies as a force majeure event, and what does not, is being tested with increasing frequency, and tribunals are scrutinizing these claims closely. Insurance and surety considerations, including builder’s risk policies, professional liability coverage, and performance bond claims, round out the liability picture.
Resolving Construction Disputes: Forums and Strategies
The choice of dispute resolution forum carries strategic implications. Negotiated settlement, mediation, arbitration, and litigation each offer different tradeoffs in terms of cost, speed, confidentiality, and finality. With respect to data centers, arbitration may be dominant for large-scale disputes due to its relative speed, its confidentiality protections, and the ability to appoint arbitrators with relevant technical expertise. For owners and developers who want to avoid public disclosure of project economics or tenant relationships, confidentiality alone can be a decisive factor.
Dispute resolution boards have gained traction on large infrastructure and data center projects, providing a standing panel that can address issues in real time rather than after positions have hardened. Expert witnesses play a critical role in these proceedings, and their credibility and effectiveness at the hearing often determine outcomes. The best experts combine technical fluency with the ability to present complex financial and scheduling analysis in a clear, defensible narrative. More broadly, there is a growing trend toward real-time dispute avoidance mechanisms that address conflicts as they arise on complex projects, rather than allowing them to accumulate into large-scale claims.
For that reason, the dispute resolution forum should be addressed deliberately during the contracting phase, not deferred until a conflict arises. Clear contractual provisions governing venue, arbitration or litigation requirements, mediation prerequisites, panel procedures, and timing for claims can significantly reduce uncertainty once a dispute emerges. Establishing that framework early helps preserve project momentum, reduces legal spend, and minimizes the risk that procedural fights over where and how a dispute will be resolved will themselves cause additional delay.
Lessons for Project Owners and Contractors
The most effective way to manage construction dispute risk is to address it before disputes arise. That starts with contract drafting: well-structured change order procedures, clear notice requirements, appropriately calibrated liquidated damages caps, built-in milestone buffers, and dispute escalation clauses that hold up under pressure are all essential. Contracts that move directly to arbitration or litigation without first requiring negotiation or mediation often forfeit the opportunity for a faster, more cost-effective resolution before the parties become entrenched in their respective positions.
Pre-construction due diligence—identifying cost, schedule, and site risk before work begins—sets the foundation for accountability throughout the project lifecycle. Documentation discipline is equally important. Parties that maintain rigorous contemporaneous records and hold each other to contractual requirements, such as schedule revisions, change order notices, and formal notifications, are far better positioned when disputes arise. Lack of documentation discipline is one of the most common reasons otherwise valid claims fail.
Early warning systems, including cost forecasting, schedule monitoring, and independent project oversight, provide the visibility needed to identify problems before they compound. And when issues do escalate, bringing in forensic and claims expertise early—rather than waiting until positions have hardened and costs have multiplied—can produce better outcomes and lower total cost of resolution.
Conclusion
Data center construction disputes are a microcosm of broader construction claims challenges—amplified by the sector’s extraordinary pace, scale, and technological complexity. What makes these disputes especially difficult is not simply the size of the dollars at issue, but the number of moving parts that must be untangled to determine responsibility. Accelerated delivery demands, phased turnover, procurement volatility, commissioning dependencies, utility constraints, and the integration of highly specialized systems create a project environment in which even minor disruptions can cascade into sizable cost and schedule consequences. In that setting, claims often turn on whether the underlying facts, assumptions, and contractual obligations can be reconstructed with clarity and precision.
Rigorous forensic analysis of costs, schedules, and causation is the foundation of any credible claim or defense. That analysis requires more than identifying that a project incurred greater cost or finished later than expected; it requires disciplined evaluation of what changed, when it changed, who directed or caused the change, how it affected sequencing and productivity, and whether the resulting impacts are supported by the contract and project record. The most persuasive positions are built on contemporaneous documentation, clearly segregated costs, and a defensible narrative that connects technical events in the field to measurable financial and schedule outcomes.
For owners, developers, and contractors alike, the ability to follow the money distinguishes recoverable losses from unresolved disputes. In practice, that means tracing costs to specific events, directives, disruptions, and contractual responsibilities rather than relying on generalized assertions of overruns or delay. Parties that can clearly document scope allocation, cost movement, schedule impact, and decision-making are far better positioned to resolve disputes efficiently—whether through negotiation, mediation, arbitration, or litigation. In a sector where speed to market often drives every major decision, the parties best equipped to manage dispute risk are those that pair technical execution with disciplined contractual and financial accountability from the outset.
When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 801.641.8304, or email experts@adviseandconsult.net.