American Global Analyst Outlines Preconstruction Risk Strategies for Data Centers

In an analysis published by Construction Dive, Shane Callahan, a surety analyst at American Global, outlined key preconstruction and delivery risks facing data center projects. Callahan emphasizes that facilities can be physically completed yet remain unable to operate if utility interdependencies fail to converge on schedule. Citing U.S. Department of Energy estimates, data center electricity consumption could increase from a 4.4% share in 2023 to nearly 12% by 2028, alongside growing water requirements. Consequently, project schedules should integrate substations and cooling systems with separate contractual milestones for physical completion, energization, and operational readiness. Callahan also highlighted regulatory shifts, such as New York's 2026 Executive Order pausing certain environmental permit applications, as well as counterparty risks, illustrated by Oracle's September 2026 force majeure notice concerning Project Jupiter in New Mexico. The analysis recommends early engagement with surety and insurance advisors to implement utility payment bonds, rolling OCIPs, and risk engineering studies before finalizing contracts.

Key takeaways

• External power and water constraints require delivery schedules to set separate contractual milestones for construction completion, energization, and operational readiness.
• Surety instruments such as utility payment bonds and site improvement bonds can secure obligations while preserving developer liquidity.
• Shifting environmental regulations and tenant funding tensions highlight the need for contractors to verify owner liquidity and contract relief terms.
• Early insurance reviews and risk engineering studies, such as PML evaluations, help address commissioning exposures and equipment lead times before contract execution.