The delay risk on data center projects has escalated, and the contracts have not caught up. Everyone drafting these agreements in 2023 and 2024 was worried about supply chain and labor. Reasonable worries. But the delay most likely to stop data center construction in 2026 is not a late transformer. It is a county commission, a governor or three neighbors with a lawyer. New York recently passed legislation pausing state environmental permits for new hyperscale data centers drawing 50 megawatts or more—a move that could signal the direction of future data center legislation in other states.
A Sudden Regulatory Roadblock
On July 14, 2026, Governor Hochul signed Executive Order No. 62, pausing state environmental permits for new hyperscale data centers drawing 50 megawatts or more, for up to a year, while DPS develops a generic environmental impact statement and the state assembles a regulatory framework. The legislature passed the Responsible Data Center Development Act in June. The Governor did not sign it. She issued the order instead, which took effect immediately.
New York is first. It will not be alone for long. Moratorium bills are pending in a dozen-plus states with sunsets running out to 2030—and local government got there ahead of everyone, despite positive economic studies from communities that host these centers. Hill County, Texas barred commencement of data center construction countywide in May. A developer sued for a declaration that the moratorium was ultra vires, alleging roughly a million dollars already sunk into land rights and entitlements for a 1,235 MW project. While the county backed down and rescinded, the project still suffered months of delay, and nobody reimbursed anybody for them.
Then there is the private bar, which has noticed that data centers are large, unpopular and well capitalized. Builders have faced noise nuisance class actions over generators and cooling equipment; groundwater suits; Article 78 and open-meetings challenges to the rezonings and special use permits that let the project exist in the first place; and other challenges. Injunction practice against these facilities is now live in approximately two dozen states, and the plaintiffs’ firms filing them are the same ones that ran the mass tort playbook a decade ago. They are not going to get bored.
None of this is the contractor’s fault. All of it stops the work. So, who pays?
Your contract answers that question in four places, and in most contracts those four places disagree with each other. As typically drafted and interpreted, these four provisions stack the deck against contractors. But smart drafting and execution can fix that.
Changes Clause
The owner will point you here first. Sometimes it works. If new legislation forces a design modification, a mandated setback, a water use restriction, an acoustic package to satisfy a consent condition, that is owner-directed scope. Price the change, take the time, move on. Standard stuff.
But a moratorium does not change the design—it stops the job. An injunction does not add a line item; it locks the gate. The changes clause is built for scope, and pure suspension is not scope. Owners cite it anyway, because the alternative is the delay clause, and the delay clause is where the money is.
Delay
This is the provision that decides the case, and it is the one contractors trade away for a schedule concession they will never use.
The standard formulation, and AIA A201 § 8.3.1 is the ancestor of most of them, gives relief for delays caused by the owner or by parties within the owner’s control. Look at what that excludes on a data center project. A county commission is not within the owner’s control. The DEC is not within the owner’s control. Neither is a citizens’ group with a preliminary injunction motion. Under that language the contractor eats the full cost of a delay that neither party caused, on a site that only one party selected.
To protect against this scenario, contractors must draft to causation instead of to the identity of the actor. Entitlement should run to any event or any act or omission of any third party outside the contractor’s control that adversely affects performance. Then, because general language never carries a specific risk as far as you want it to, enumerate: permitting delays or the suspension, revocation or non-issuance of any permit or approval; any moratorium, stop-work order or similar restriction imposed by any governmental authority; the introduction, pendency or enactment of any legislation, ordinance, regulation or executive order affecting the project; any litigation, appeal, administrative proceeding or injunction brought by any third party relating to the project or to any approval for the project; utility interconnection or energization delays; and unavailability of or extended lead times for long-lead equipment.
Owners will call the list overbroad. It is not overbroad. Every item on it has stopped a real project in the last eighteen months.
Force Majeure Clause
Here is where contractors get hurt, usually because they assume this clause is on their side.
Three things go wrong. Force majeure conventionally buys time and not money, so if a moratorium lands inside the force majeure definition, the contractor absorbs extended general conditions, escalation and demobilization while the clock runs. Most definitions also require that the event be unforeseeable, and an owner in 2027 will argue with a completely straight face that hostility to data centers was foreseeable when the contract was signed. That argument gets better for them every month. And these clauses carry exclusions, of which the most common and most dangerous is delay in governmental approvals.
These provisions taken together point to the worst possible outcome for contractors: no money under the delay clause because the government is not within the owner’s control, and no time under force majeure because permitting delay is carved out.
So reconcile them. If the delay clause covers governmental and third-party events for time and money, carve those same events out of force majeure expressly, and kill the catch-all that would otherwise swallow the carve-out. Strike the unforeseeability qualifier if you can. If you cannot, define foreseeability as of the contract date and with respect to the specific site, which at least gives you something to argue about.
Change in Law
This clause should grant time and compensation when a law, regulation, ordinance or executive order adopted after the contract date affects the cost or duration of the work. Define the trigger to include executive orders and administrative guidance. Executive Order 62 is not legislation. A clause keyed to “enacted statutes” misses the most consequential regulatory event in this industry to date.
Now the harder question, and the one nobody drafts for. A bill is introduced. It has not passed. It may never pass. The owner suspends the work while the legislature sorts it out. Who pays for that?
That is a suspension for the owner’s convenience, and the contract should say so in terms, because A201 § 14.3.1 does not reach it cleanly and the owner will argue the suspension was compelled rather than elected.A201 § 14.3.1 is titled Suspension by the Owner for Convenience and provides that “the owner may, without cause, order the contractor in writing to suspend, delay or interrupt the work, in whole or in part for such period of time as the owner may determine.” However, if A201 § 14.3.1 is triggered, the contractor recovers time and cost for any suspension the owner directs in anticipation of, or in response to, pending or proposed governmental action.
One more thing: Make sure change in law is not also sitting in your force majeure list. Half the forms I read have it in both places. That conflict resolves against the contractor, every time, because the owner gets to pick which clause it litigates under.
Read Them Together, Then Rank Them
These four provisions get negotiated by different people, at different times, out of different forms, and nobody ever reads them side by side. Do that. Redline all four in one sitting and eliminate the overlaps. Then add an order of precedence provision: Where an event is addressed by more than one clause, the clause affording the greater relief controls. It is one sentence. It has settled more arguments for my clients than any other single sentence I put in a construction contract.
The Subcontractor’s Problem Is Worse
Everything above assumes leverage. Trade subcontractors do not have any.
The prime terms flow down by incorporation, often in one sentence buried in Article 1, and then the subcontract adds its own liquidated damages for energization and rack-readiness milestones the subcontractor cannot control. The curtainwall or electrical sub ends up bearing schedule risk created by a governor it has never heard of, on a permit it never applied for.
Demand three things. Make the flow-down reciprocal, so the sub receives whatever time and money the contractor obtains upstream on account of the sub’s impacts. Identify the pass-through and liquidating agreement mechanism in the subcontract, not in the middle of a fight. And cap delay liquidated damages at a stated dollar figure rather than a daily rate multiplied by whatever the owner’s schedule turns out to be.
On no-damages-for-delay, New York enforces these clauses, and it has since Kalisch-Jarcho Inc. v. City of New York. However, Corinno Civetta Constr. Corp. v. City of New York preserves four exceptions, and one of them is delay not contemplated by the parties. A statewide moratorium announced after execution is a serious candidate for that exception. The way to preserve the argument is to build a record now, during negotiation, of what the parties actually knew about regulatory risk at the site. Correspondence, risk registers, the bid qualifications. That file is worth more later than anything you will draft. Document potential delays, document actual delays and provide timely notice as soon as possible. Build delays into your bids.
The Coverage Question Nobody Asks
Contract drafting is half of risk management. Check the insurance policies, because owners and contractors both assume that builder’s risk insurance backstops schedule risk, and it usually does not.
Delay in start-up and soft cost coverage sits inside the builder’s risk form, and standard forms condition it on delay resulting from physical loss or damage to covered property. A moratorium involves no physical damage. Neither does an injunction. Unless the form has been endorsed, the DSU coverage everyone is paying for will not respond to the delay most likely to occur.
Look at the rest of the tower too. Look for contingent business interruption. Look for any political risk or regulatory change coverage placed on the project financing. Determine whether the contractor’s own programs pick up losses from an owner-directed suspension. And make sure the contract’s insurance requirements and waiver of subrogation actually line up with the delay and change in law clauses you just negotiated. Carriers read those provisions during the claim, and every mismatch becomes a reservation of rights letter.
Notice, Early and Often
Execution of even a perfect contract clause often dies on grounds of untimely notice, and these contracts run short notice periods with express waiver language. Five days. Sometimes ten.
Governmental delay does not cooperate with that structure, because it creeps. A permit review stalls. Then a bill gets introduced. Then somebody files suit. Then the agency issues guidance. There is no single event to date your notice from, which is exactly the ambiguity the owner will exploit when it argues you noticed too late.
So notice all of it, early and repeatedly. Notice the introduction of the bill, not just its passage. Notice the complaint, not the ruling on the motion. Update the schedule contemporaneously and show the governmental event on the critical path the week it lands there, not eleven months later when your expert reconstructs it. A claim documented in real time beats the claim assembled at the end, and the gap between them widens in front of an arbitrator who has actually built something.
Where This Leaves You
Owners will keep driving hard bargains on data center schedules, because contractors keep lining up for the work. Nothing in this article changes that.
What can change is the contractor’s willingness to sign a delay clause drafted for a risk profile that no longer describes the project. Negotiate the four clauses as one instrument. Name the governmental and third-party events. Fix the force majeure conflict before it becomes a defense. Confirm that the insurance responds to the delay you are actually going to have.
The regulatory risk on these projects is real and it is getting priced into everything except the construction contract. Somebody will bear it.
SEE ALSO: FROM CLAIM TO COURTROOM: HOW DOCUMENTATION SHAPES CONSTRUCTION DISPUTES
