As demand for data centers has surged, so, inevitably, have challenges around delivery. Lead times for some essential equipment have doubled since 2022, and costly delays caused by legal disputes with contractors have risen sharply. It doesn’t help that traditional procurement models push most of the risk onto suppliers, leading to bottlenecks and cost overruns.

But there is a solution, and one that can be deployed without having to compromise on the scale of ambition for data centers. Timely and cost-efficient project completion can be achieved using an approach called integrated project delivery (IPD).

Working together wins every time. A poll by McKinsey of more than 100 businesses and organizations across multiple sectors revealed that those companies that regularly collaborated with suppliers could demonstrate higher growth, lower operating costs, and greater profitability than their industry peers.

What is it

IPD’s big advantage is in bringing together project stakeholders, including suppliers, contractors, and developers, early in the proceedings to improve planning. This collaborative approach shifts a project from being a potentially adversarial situation to one of shared risk and reward, creating stability among project parties. It can also encourage long-term supplier agreements, reduce lead times, and, crucially, lower cost volatility.

For this to manifest itself across data center delivery, developers must lead the process by putting in place more cooperative contracts as part of an IPD approach. The days of combative relations among stakeholders have to be a thing of the past.

Risk

By harnessing IPD, risk and reward across the supply chain can be better balanced. Currently, standard contracts push all the risk onto suppliers and trade partners. This often results in defensive behaviour, with disputes, claims, and delays likely to loom large as the project develops.

For the clients, this will see a move from one main contractor (single point of contact) to multiple contractors responsible for smaller portions of the work. These relationships will need to be managed and coordinated to ensure sufficient collaboration and information sharing is in place.

Adopting IPD will require a shift in mindset since it relies on a more open, trust-based approach. While IPD can make a significant difference, it is important to recognise there will be resistance to change, along with a default to the familiar way of doing things, even if this results in project delays and cost overruns. If it is to succeed, it must embrace greater supply chain transparency and early planning.

Procurement attitudes also need to change. Buying teams should be measuring success based on final project cost certainty, not just upfront savings which can – and often do – fall by the wayside.

Reward

Looking ahead, should more of the industry move towards delivery through IPD, the supply chain will inevitably become increasingly digitised, utilising cloud technology and just-in-time strategies while also creating a greater degree of competition in that part of the market. Consequently, the more it is adopted, the more the market will grow to ensure there is an optimum match between supply and demand.

Using IPD allows for better supply chain visibility and lowers last-minute procurement delays. By helping to forge stronger supplier and contractor relationships, such collaboration creates more reliable, scalable supply chains.

Flipping the Switch

There are those who mistakenly believe that by using IPD, they will deliver projects more cheaply. This is missing the point of IPD, which is designed to give greater cost and program certainty from the outset, avoiding a race to the bottom on pricing, along with the claims, delays, and additional costs that often follow.

Conversely, IPD ensures that cost, risk, and profits are shared fairly, making projects more stable and predictable. With IPD, contractors and suppliers are incentivised to focus on overall project success, not just their own survival.

IPD works most effectively when there is a pipeline of work available, since it takes significant effort – both in time and money – to set up operations and governance structures to effectively deliver a project using this approach.

It is also important that clients are on board with IPD. Clients need to drive behaviors that focus on the project’s delivery, not those which put all the risk onto the supply chain.

For supply chain management, IPD has the potential to solve many of the current challenges by providing greater efficiency, predictable costs, shorter timelines, and, ultimately, more much-needed data centers.

For some, modularization is the next natural step in this journey to optimize data center construction. This slots nicely with the IPD models, moving more of the traditional trades work off-site and into a controlled environment within the vendors’ or integrators' facilities. This offers the opportunity to reduce schedule time on-site and helps increase first-time quality. The flipside to this is that much of that schedule risk can become less visible to the client, so once again, enhanced trust is required amongst all project parties.

IPD is not a one-size-fits-all approach. It will require decisions be made with a project-first focus, requiring strong stakeholder collaboration, where trust and transparency are vital. However, Linesight has witnessed that once adopted, properly governed, and embedded operationally, IPD can be remarkably successful.