With great power comes great responsibility – managing risk on data centre projects

In January 2025, OpenAI announced The Stargate Project (‘Stargate’), a new company with intentions to invest $500 billion building new AI infrastructure in the United States over the next four years.[1] President Trump has described it as ‘the largest AI infrastructure project by far in history’. Earlier this month, it was confirmed that construction is underway at Stargate’s first supercomputing campus in Abilene, Texas. Alongside this, a programme called OpenAI for Countries has been rolled out – an initiative within Stargate aimed at pursuing 10 projects in individual countries or regions outside the US.[2]

With rapid advancements in AI and an increased reliance on data continuing to fuel demand for data centre projects, there are clearly significant opportunities for both contractors and consultants with experience across the built data centre infrastructure landscape. However, recent reports of Microsoft’s abandonment of some projects in the US and Europe show that these projects are not immune from the impact of the ‘turbulent’ current global climate.[3]

We are regularly being asked to advise on contracts in the sector, and in this note we set out five practical tips to consider when reviewing data centre contracts to help manage the contractual and practical risks associated with them.

1. Liability – data centres are a critical part of modern infrastructure. This means that if things go wrong on a project, the potential value of a claim could be substantial. For this reason, it is sensible to request an overall cap on liability under or in connection with an appointment. The value of this cap is a commercial decision which needs to be considered on a contract-by-contract basis. However, typical factors to consider when determining the amount include the contract sum, the level of insurance(s) required under the contract, and the possible nature/value of a potential claim.

Ideally, the cap should be expressed as a value in the aggregate (i.e. the combined sum of all claims under the appointment cannot exceed the value of the cap), as opposed to each claim (i.e. each claim cannot exceed the value of the cap, but there is no limit on the number of claims), with exclusions to it (i.e. matters for which potential liability remains unlimited) restricted to those matters for which liability cannot be limited or excluded by law, such as fraud.

For further information on caps on liability, please see our recent article here.

2. Standard of care – on any construction project, data centres included, it is very likely that your client will request that certain types of insurance (such as professional indemnity insurance (‘PII’)) with minimum limits of indemnity are maintained. You may hold these insurances in any event as a matter of course. Inevitably, those insurance policies will be subject to terms and conditions that set out when cover is available and various exclusions, endorsements and/or extensions.

In the case of PII, one common term is for the policy to provide that it will only respond to claims where the insured has been negligent and/or where it has breached an obligation which required the exercise of ‘reasonable skill and care’ (i.e. the common law position). Where that is the case, it is sensible to include an overriding standard of care in your appointment, which sets out that the obligations therein are each subject to the use of ‘reasonable skill and care’ or similar. The intention being that this clause ‘trumps’ any more onerous standards which may remain in the appointment, such as strict obligations, to ensure that the insurance responds in the event of a breach.

For an example of a decision concerning the enforceability of an overriding duty of care clause, please see our recent article here.

3. Payment – given the many high-profile insolvencies that we have seen in the construction industry over the past few years, the phrase ‘cashflow is king’ is perhaps truer than ever. This applies equally to those working in the data centre sector where, to take advantage of available opportunities, prompt payment on one project could be crucial to ensuring that you can bid for the next. It is therefore important that appointments include clear payment terms that specify when payments become due, and the pricing mechanism that will be used (e.g. fixed price, target cost, cost reimbursable or otherwise).

If payment is contingent on providing certain deliverables and/or milestones, these should be feasible, and associated timescales considered very carefully (and never guaranteed), with an appropriate ‘float’ for potential delays outside of your control. Similarly, given recent market volatility, it is sensible to include a mechanism which allows for adjustment of rates at regular intervals to take account of inflation, and provision for suspension/termination for non-payment.

4. ESG – according to the International Energy Agency, data centres account for about 1–1.5% of global electricity use.[4] With many contractors / consultants (and clients) now placing an increased focus on ESG-related issues, including sustainability and environmental emissions, consideration should be given as to whether specific terms are required to ensure that the appointment is consistent with your firm’s internal policies or commitments in this regard.

5. Suspension/termination – whilst Stargate’s recent announcements are clearly a cause for optimism, over the past few months we have seen indications that some data centre developers are scaling back their ambitions. For example, in March it was reported that Microsoft had abandoned a number of data centre projects in the U.S. and Europe in the last six months.[5]

In view of the above, it is important that appointments address the parties’ respective rights if a project is suspended and/or terminated. This includes setting out when suspension/termination rights accrue, who has the right to exercise them, and what happens, both from a practical and financial perspective, after the rights have been exercised.

From a ‘what happens’ perspective, one of the most critical points to consider is responsibility for the costs of demobilisation on a project. It is not uncommon for contractors/consultants to make significant financial commitments to suppliers in anticipation of a project moving forward, and in those circumstances, it is clearly important that those, and other breakage costs, can be recovered.

Concluding comments

Data centre projects represent a significant opportunity for contractors and consultants domestically and internationally, both now and in the years to come. However, as with other projects, it is important that related appointments are drafted and managed carefully from both a commercial and liability perspective and reflect a fair balance of risk. Key considerations in this regard include liability caps; ensuring that terms are consistent with insurances; clear payment terms; considering interfaces with ESG issues; and providing for suspension/termination provisions that do not leave you exposed to irrecoverable costs.

If you would like to discuss any of the above items and how to address the same within your construction contracts, professional appointments or subcontracts, please contact Andrew Croft or James Hughes.

[1] Announcing The Stargate Project | OpenAI

[2] Introducing OpenAI for Countries | OpenAI

[3] https://www.reuters.com/technology/microsoft-pulls-back-more-data-center-leases-us-europe-analysts-say-2025-03-26/

[4] Data centres & networks – IEA

[5] Microsoft pulls back from more data center leases in US and Europe, analysts say | Reuters