Data Centres: Canada

As is the case in many jurisdictions, Canada has experienced tremendous growth in the construction of data centres, which is anticipated to continue across the country. Potential challenges include aligning commonly used standard contract structures to accommodate the fast pace of these projects. Canada’s standard construction forms (CCDC contracts) are widely understood in the local markets and can be adapted for data centre design and construction, whether on a fixed-price model, a cost-plus approach or a guaranteed maximum price (GMP). A design-build structure (through the use of the standard CCDC-14 contract or similar contract) can be used in the construction industry generally for scenarios where a particular design is to be repeated for multiple projects.

Where international players prefer the use of bespoke or other contract forms with which they are already familiar, it is critical to understand how to adapt such contracts to address legal requirements that are specific to numerous Canadian jurisdictions, such as statutory prompt payment rules and construction liens. The relatively new adjudication regimes in many provinces facilitate interim, binding resolutions of payment disputes that ought to mitigate the common problem of disputes growing and aggregating over the course of complex projects. 

To assist with supply chain uncertainty where the late delivery of critical equipment can have a significant impact upon aggressive construction schedules, provisions can be negotiated for the pre-ordering of long lead or other essential equipment. However, such arrangements will carry with them the need for important negotiations over storage, additional insurance costs and the commencement and duration of warranty periods. While liquidated damage provisions can be used to create greater certainty for parties on the impact of construction delays, it is important to anticipate the negotiations that are attendant with such clauses and their potential impact on other commercial terms.

With the exciting Canadian opportunities that are available for projects that commonly reach hundreds of millions of dollars in costs and are only growing in size and scale, planning for and understanding the legal landscapes in which these projects are being constructed are critical steps to avoid disputes and be prepared for them when they arise.