Early contractor involvement (ECI) to de-risk the construction of data centres

Generally, when considering what the definition of a successful project (such as a data centre) is, it is a project that is completed:

• On time
  
• Within budget
  
• In line with the specifications
  
• Without disputes

Traditionally the focus with the contractual set up of contracts dealing with a construction project is to have three types of parties involved: the employer, the designer/engineer and the contractor. Each party has its own role during a construction project, and does not venture into the scope of the other two parties. In respect of construction contracts, these tend to be focused on dividing and allocating tasks and risks. Whilst they work together on a project, each party stands on their own if there is an issue. This has been a very successful model, especially for projects with a relatively low risk profile and/or sufficient time & resources to identify and manage risks during the preparation phase.

However, projects are increasingly turning complex and when, as for data centre projects, these involve the complex interrelationships between different components, it is easy to see that this method might create problems. A large number of data centre projects are still one-off projects, with project specific challenges related to for instance soil conditions, use of technological components, permitting, and ever changing requirements from stakeholders (such as end-users, local authorities and local interests groups). Other sources of challenges may be from increasingly complex circumstances set by for instance the supply chain, local utility providers/grid connectors and investors/financiers.

One way to decrease the risk profile, or in any case a contractor’s assessment thereof, is to be involved early on and have sufficient opportunity to assess, mitigate and price risks. Such early involvement is also referred to as early contractor involvement (ECI). ECI is an approach we have been adopting in a range of data centre projects, through ECI contracts which are sometimes also referred to as preliminary or pre- construction services agreements (PCSA).

Applying early contractor involvement (ECI) during the preparation stage amongst others:

• Improves the knowledge of contractors & suppliers and allows them to do research before starting construction, therefore improving the chance of success.
  
• Can allow for further optimizations (i.e. from price, safety, sustainability, planning or technical perspectives).
  
• Can ensure that the price finally agreed upon with the contractors & suppliers is a good reflection of the actual costs, rather than a ‘guesstimate’.
  
• Can allow the employer to weed out any contractors & suppliers who are not up for the job before having them starting the works (should they be uncooperative, not-proactive, unknowledgeable etc.).

To further boost the usage of ECI, our partner Andrea Chao’s role as chair of Task Group 17 of FIDIC has co-initiated & co-developed the model ECI contract DG2020. This model seeks to incorporate both a legal and project management approach to this form of contract, and has specific attention for the type of collaboration and behaviour expected. Currently, this model is being updated in order to allow the incorporation of experiences from the procurement of hundreds of projects with a combined value of Billions of Euros. A new version is scheduled to be launched early 2025. This model can be found here: Model Agreement Early Contractor Involvement.

Bird & Bird have extensive experience with such contracts for the purpose of development of data centres, ranging from procurement and drafting up to contract management. Please do reach out to us if you want to explore how this approach could support the delivery of your project.

For more information, please contact Andrea Chao and Marco Nicolai.