Data Center Construction Contracts: What Owners and Contractors Should Know

April 27, 2026

By: Wiss Team

Wiss Team

The data center construction boom is generating enormous opportunities for developers and contractors. According to McKinsey, companies are projected to invest nearly $7 trillion globally in data infrastructure capital expenditures by 2030, with approximately 40% of that spending expected in the U.S. With that volume of money moving through construction contracts, understanding how risk is allocated before a project starts is not optional.

Two attorneys at Chicago-based law firm Seyfarth Shaw outlined the critical contracting considerations for data center developers and contractors in a Construction Dive column published April 10, 2026.

EPC vs. Design-Build: The First Decision That Shapes Everything

The authors identify the choice of contract type as foundational. Data center projects typically use either engineering-procurement-construction (EPC) contracts or design-build contracts, both of which shift design responsibility toward the contractor.

Under an EPC contract, the owner specifies the desired outcome and the contractor delivers a turnkey facility. Owner involvement is minimal. Design-build contracts follow a similar structure but include greater owner oversight of design elements and may leave the procurement of certain systems, such as specialized infrastructure, in the owner’s hands.

The authors note that both approaches require a high degree of trust between owner and builder, given the owner’s dependence on the contractor to deliver on time, on budget, and to specification. The degree of control an owner wants to retain should drive the choice of contract from the outset.

Long-Lead Equipment and Procurement Risk

Cooling units, backup generators, servers, and uninterruptible power supply systems represent significant cost items, and their procurement timelines can derail a project if not addressed early. The authors recommend that owners consider issuing early purchase orders for long-lead equipment, with provisions to amend those orders or enter separate agreements for the full scope of installation, integration, and testing later.

Owners should also clarify at the start which contracting parties are responsible for transporting, offloading, installing, and testing specialized systems. Suppliers may not offer full-service delivery, and contractors may lack the equipment or training to handle certain components. Leaving those questions unresolved until mid-project creates schedule and cost risk.

Liquidated Damages, Dispute Provisions, and Tariffs

The authors flag three specific contract provisions that require particular attention in data center builds.

Liquidated damages clauses, which set a daily charge for contractor delays beyond the completion date, need to be calibrated carefully. A rate set too high can cause subcontractors and suppliers to inflate their bids to self-insure against the risk of the downstream flow.

Because data center projects typically cannot tolerate suspension, dispute provisions should require that construction continue while any disagreement between the parties is being resolved separately.

Tariff exposure is the third pressure point. The authors advise that contracts should clearly define which party bears the risk of unforeseen material price increases due to tariffs, and whether supply chain disruptions caused by tariff impacts extend the contract timeline. Leaving this undefined, they write, invites disputes.

Phased Projects and Master Agreements

Many data center developments are built in phases. The authors describe a master agreement structure as one way to manage this: a single agreement with a contractor carries the general terms and conditions through the full project, while separate work authorizations govern each phase. This approach provides continuity while preserving an exit if an earlier phase goes poorly. The trade-off is that pricing will likely be renegotiated at each phase, with outcomes depending on market conditions at the time.

What Contractors and Owners Should Do Next

Contract structure is a legal question. Financial structure is a different one, and equally consequential. How a data center contract is structured directly affects job cost accounting, revenue recognition under ASC 606, cash flow timing, bonding capacity, and tax planning. Those dimensions require a different kind of advisor.

Wiss works with mid-market construction companies across New Jersey and New York on the financial and accounting side of complex project work, including job costing, contract billing strategy, CFO advisory, and tax planning. If you are pursuing data center work or managing a project portfolio with increasing complexity, contact Chris Cowan or the Wiss construction team.

AI Disclosure: This article was produced with AI writing assistance and reviewed by the Wiss editorial team. Original reporting by Ryan Gilchrist and Ashley Sherwood, partners at Seyfarth Shaw, published April 10, 2026, in Construction Dive. The opinions expressed in the source article are those of the authors. This summary does not constitute legal advice. Readers should consult qualified legal counsel regarding construction contract matters.