The global data center market is expected to grow by 7.5 percent in the next 10 years to US$209.8bn. The projected UK growth sits much higher, rising by a compound annual growth rate of 10 percent over the same period, reaching a value of nearly US$7.4bn by the end of 2032.
Building the facilities needed to make this growth happen will come with challenges, particularly amidst the current landscape of rising costs and increased risk. However, both barriers can be tackled by adopting the integrated project delivery (IPD) model that ensures a collaborative approach to contracts as early as pre-concept phase.
Here's a look at how this works.
Get stakeholders onside
Unlike the more traditional early contractor involvement (ECI) followed by a guaranteed maximum price (GMP) model, where the contractor bears the additional financial risk should a project exceed its budget, the IPD approach ensures all project stakeholders collaborate from the outset on one contract. This means contractors would gain more design clarity and cost certainty to reduce the risks on delivery timelines and cost escalation. Stakeholder risk is also more appropriately allocated to provide more long-term stability and assurance.
Here's how this mitigates the challenges of the current market: The collaborative nature of an IPD model allows clients to gain better quality completion by preventing schedule delays and budget overruns. According to an academic study, 68 percent of the experienced practitioners reported better project quality, 67 percent shorter schedules and 63 percent cost savings when switching to an IPD model. It also offers the potential for much less contractual conflict between multiple stakeholders, as their focus remains on the collective project outcome.
In the long-term, contractors are afforded greater certainty surrounding project pipelines allowing them to secure materials faster, reduce risks on delivery timelines and address and mitigate the escalation of costs. Clients are able to have better oversight on rates, much like a traditional framework agreement.
Despite the clear benefits of the IPD model, its use is still in its infancy across the data center sector compared to its use in other areas of construction.
There are several reasons for this. In many cases, the rapid pace of growth of the data center market has resulted in contractors and consultants falling behind in terms of more innovative approaches being used elsewhere in construction. In addition, projects are not always at the scale required for IPD to be effective or are simply not set up to accommodate an integrated approach. It would require projects worth over £80M or a campus of projects delivered in phases for IPD to reach its full potential.
In other cases, the IT infrastructure and data privacy policies held by each project stakeholder do not meet a sufficiently high standard for efficient collaboration. Data centers require security, confidentiality and adherence to stringent GDPR compliance, and the notion of sharing information regarding the facilities’ construction, layout and capacity, as needed with an IPD approach, could be a potential risk for some clients.
Another factor limiting IPD’s rollout is the perception that it is a new, relatively untried, and untested way of doing things. As a newer concept within the data center market, it currently lacks the use case examples many clients want to see before adopting.
Despite these barriers, the IPD approach undoubtedly has advantages and has the potential to increase the speed to market, so it should be considered now more than ever.
For clients to embrace IPD, they would need reassurance on several points, not least those relating to data security and non-disclosure issues. While this may be a challenge, the benefits of greater collaboration between stakeholders and greater certainty around project costs can be persuasive, especially given the data center sectors’ vulnerability to external factors, including changing interest rates. Case studies should be sought too, by speaking to those who operate the model in other sectors.
In the right hands, the IPD model can deliver for the data center sector, not least in a world where uncertainty would otherwise render a project undeliverable.