For the past five years, the construction industry, specifically data centers, has seen a huge uptick in $1B+ “mega” projects across the United States. The need for high-speed access to information, the growing number of users through mobile devices, and the dependency on technology across all industries was driving the demand even before the COVID-19 pandemic.

More recently, the construction of these projects has been complicated by the compounding supply chain and labor shortage issues, pressing our teams to refine old processes and get creative with new ones to meet the demands of these large-scale efforts while staying on schedule and on budget. The data center industry is one that has been tasked with building simultaneous mega projects under some of the tightest speed-to-market conditions.

The terms “mission critical” and “data center” are often interchangeable. Mission critical refers to the 24/7, no downtime requirement of the business while data center is typically the physical location that houses the hardware needed to support mission critical services. Data center owners are generally confidential with strict protocols.

GROWTH

One of the key characteristics of a mission critical construction project is the required speed to market. Once demand or lease dates are triggered, we are typically required to have the facility powered and ready within 12-16 months. Couple this with the fact that the data center market is currently doubling in size year after year, and you can easily see how crucial it is to employ a coordinated and collaborative approach.

The primary reasons behind this growth are the combination of cloud computing and machine learning (work from home and online training), edge computing (data sits between hard-wired network and cloud, low latency is crucial), an E-commerce retail spike, remote learning, IoT / 5G mobile consuming exponentially more data, and an increased need for cloud storage.

In the first half of 2022, more than 1,600 MW (megawatts) were under construction. That number was more than twice what was produced in 2021. At JE Dunn Construction, we had 306 MW under construction in 2022 and we will have 536 MW under construction in 2023. The global data center market increased by 22% (an increase of $616B) between 2021 and 2022, with 35% of that in North America.¹

ENERGY

One such restraint is the energy required to power these facilities. The mechanical and electrical components of data centers typically account for approximately 60-70% of the total construction cost of a data center. When adding in the value of owner-furnished equipment and costs of new substations to energize the site, this percentage can grow to 70%-80% of the overall project value. Strains to our nation’s power grid not only pose potential issues for some of these mega projects, but they also create concerns about power availability, which is a factor in our clients’ site selection process. While many regions have vast plots of land and offer development and economic incentives to attract hyperscalers, we are seeing that in many cases power companies are at capacity and cannot meet the energization dates clients need. In one example, space has been leased for a facility whose construction completion is five years out. The front-end planning is a monumental effort to ensure every base has been covered and budgets in excess of a billion dollars are maximized.

SUPPLY CHAIN

You can’t discuss resources and trends and ignore supply chain issues. In recent years, switchgear (used to distribute and protect the electrical load) lead times have increased from 26 to 86 weeks while generator lead times have increased from 30 weeks to over 90 weeks! The one thing that is consistent throughout the construction industry is an understanding that everyone should plan for a fractured supply chain through mid-2024.

JE Dunn is using multiple strategies to address these issues. With the delays discussed here, the earlier we can identify long lead equipment and materials with the owner and designer, the better. JE Dunn has a team of engineers devoted to tracking and monitoring long-lead equipment regardless of whether the owner or GC holds the contract. By setting up these dedicated teams, we can identify and release the equipment earlier and modify the design documents to accommodate material equipment that has already been released. In addition, this team helps track and identify any potential delays in the manufacturing process to bring them to light and minimize any resulting cost and schedule impacts. Doing this also helps us not only provide certainty of outcome when it comes to schedule, but also helps eliminate costs from creeping up due to inflation.

In addition, we are seeing owners negotiate and bulk purchase major equipment direct from manufacturers at a program level even prior to site selection. When allowed to work with vendors on a national program level, compared to a site level, owners have better purchasing power and can better pivot their needs based upon immediate demands. When you have an owner who starts up multiple hyperscale campuses annually, the time and money savings realized with this strategy are monumental.

WORK FORCE

Just as owners must look at available energy during site selection, the available labor force to build and staff the facility has also become a factor. We’ve discussed the labor shortage in previous articles, and the construction industry had 388,000 open jobs as of November 2022. This is a shortage we anticipate for at least the next decade. In response, we have clients shifting to new markets with lower demand for resources and lower land costs such as Omaha, Neb. or Boise, Idaho.

Another strategy that can ease workforce challenges is to prefabricate as much as possible. Prefabrication is nothing new, but it does require extensive early coordination. On such large-scale projects, the efficiencies gained can provide significant relief to the labor shortage. Prefabrication does not make sense for all scopes on a project, however there are big advantages to a project if key labor hours can be shifted offsite. We have experienced successful projects in which we have shifted more than 50% of electrician and pipe-fitter hours offsite by modifying the design to implement a skidded electrical room approach as well as prefabricated electrical feeder/pipe distribution systems. This combined approach helps reduce the peak workforce curve, which in turn leads to a faster construction schedule, reduced safety incidents, and increased quality.

We are also addressing staff shortages by teaming with minority business partners. In teaming with diverse partners, the goal is to bring new talent to mission critical and an opportunity to increase their technical and operational capacity in mission critical construction and ultimately create capacity in the industry. In addition, we’re encouraging our suppliers, manufacturers, and distributors to include diverse partners in pricing to build capacity in all facets of the industry.

RESPONSIVE PARTNERSHIP

Proactive and collective partnership between all stakeholders is the foundation of success for these projects.
One of our clients recently said, “The challenges being presented by supply chains, be it lead times, constrained resources or pricing changes, have all necessitated the need to step back and look at the bigger picture and then define a strategy to minimize the impacts of current market dynamics. That in itself is only one aspect, you have to keep running those assessments. More importantly, you need to maintain dialogue with your partners and work together to maintain the right strategies to meet the needs of our business.”

It’s no small task to secure large sites, amass the skilled staff to build these facilities, accelerate the schedules, put up millions of square feet of structure, and keep it all quiet at the same time. We have found that by applying national strategies and sharing resources instead of just looking at each individual project’s potential hurdles, we’ve helped all our teams across the U.S. meet the demands of these fast-paced mega projects and scaling requirements of the owners.

Source: 1) prnewswire.com