AI – Market Update and Tips for Contractors and Consultants

It is difficult to identify an aspect of the construction industry that artificial intelligence (“AI”) does not have the potential to disrupt. From bid preparation and market analysis to contract management and design optimisation, AI presents significant opportunities to improve efficiency and accuracy across the project lifecycle. However, the use of AI also brings its own challenges and risks, which parties should ensure are fully addressed in appointment documents.

Last year, we highlighted the key trends that we are seeing in contracts as parties begin to grapple with AI-related risks. More recently, we explored the practical steps, legal risks and opportunities for the use of AI in construction. Please see our articles here and here. Below, we revisit some of those issues and provide an update on the AI-related challenges that parties should consider addressing in contracts and tips for contractors and consultants when reviewing related clauses.

Type of AI systems

Generally, we are not seeing clauses that exclude the use of AI in connection with appointments. However, we are seeing provisions that limit the type of AI systems that can be used. For example, restrictions on the use of ‘high-risk’ AI systems without the client’s permission.

One of the drivers for this appears to be the EU AI Act, which classifies certain AI systems as ‘high-risk’ and subjects those systems to additional requirements, e.g. certain AI systems intended to be used as safety components in the management and operation of critical digital infrastructure, road traffic, or in the supply of water, gas, heating or electricity. Whilst the UK is no longer a member of the European Union, the EU AI Act could still be relevant to UK companies if, for example, their tools or services are used in the EU or involve EU stakeholders. Therefore, it is perhaps unsurprising that clauses alluding to its terms are finding their way into English law contracts. Please see our article on the EU AI Act here.

When considering whether to use AI in connection with a project, contractors and consultants should therefore consider not only how the AI system will be used, but also whether there are contractual and/or statutory restrictions on the system’s use because of the nature of the relevant system.

Restrictions on data

In addition to limits on the use of certain types of AI system, we are also seeing restrictions on the data that can be used to train or deliver AI systems. For example, exclusions on inputting the client’s data into the AI system. We expect that this is due to concerns that some clients may have with regards to information input into an AI system becoming public and/or falling into the hands of competitors.

Before using an AI system in connection with a project, we therefore also recommend that contractors and consultants consider the scope of information that they intend to input into it, and whether that is permitted under the terms of their appointment.

Responsibility for AI systems

We are also seeing requirements for contractors and consultants to take full responsibility for the functionality, control, maintenance and output of AI systems that they use, and the services that those systems perform or facilitate (and obligations to indemnify the client where something goes wrong).

Such obligations could create significant liabilities, and lead to particular difficulties if the relevant AI system is being used under licence from a third party, where the contractor or consultant is unlikely to have much control over it, rather than an in-house tool. Therefore, we suggest that contractors and consultants resist such obligations and instead try and limit their responsibility for use of AI to AI systems that are within their control; and such that the contractor or consultant is required to exercise “reasonable skill and care” when using those AI systems.

It may also be possible to mitigate some of the risk of this responsibility through ‘force majeure’ drafting and/or other clauses dealing with events outside the parties’ control (combined with an appropriate limit of liability and deleting / watering down indemnities). For example, by ensuring that the contractor or consultant is not liable where an AI system is unavailable because of maintenance being performed by the provider, or problems with infrastructure on which the AI system relies (e.g. data centres), but this will require careful drafting to ensure those clauses ‘bite’ in the relevant circumstances.

Standard Templates

Finally, we are also increasingly seeing consultants and contractors include provisions in relation to AI in their standard terms.

Primarily, the focus of those provisions is on sub-contracts, i.e. setting out the extent to which the sub-contractor is entitled to use AI, and including clauses that reduce and manage risks associated with AI. Typically, the provisions cover responsibility, intellectual property ownership, data protection, confidentiality and tie into an organisation’s AI policy, amongst other things.

Some in the industry are also including provisions in their client facing templates to deal with some of the points raised above; and in this regard we note that RICS, in its recently effective professional standard on “Responsible use of artificial intelligence in surveying practice” requires terms of engagement, contractual documents, service agreements and other relevant documentation used by members and RICS-regulated firms to govern their client relationship to detail (amongst other things) if available, the extent of professional indemnity cover for use of AI systems by the firm.

Key takeaways

As the use of AI continues to grow in the construction industry, it is important that parties are aware of the challenges and risks that it brings from a contractual perspective. The proposed type of AI system and the scope of data that will be input into it, as well as responsibility for the relevant system and associated statutory obligations, are all important factors that need to be considered in this regard.

Any provisions in relation to AI should be carefully considered in light of the subject matter of the contract, aligned with the intended approach and focussed as much as possible. The addition of AI provisions to existing template documents should also be considered.

If you have any questions regarding the information discussed in this article, please contact Andrew Croft or James Hughes.