Contracting for connected construction: bringing construction and technology together

Traditional infrastructure contracts and technology contracts are very different, and simply adopting one approach or the other is not going to work.

Traditional construction-based approaches to ‘works information’, charging models and risk allocation and liability regimes are unlikely to be appropriate or acceptable to technology providers. Contract terms in relation to data and intellectual property are unlikely to be adequate for dealing with technology requirements.

Projects deploying technology or technology enabled solutions will invariably involve a number of technology providers and the arrangements are likely to be underpinned by various technology licensing, service-based contracts and vendor standard terms. This makes for greater complexity from a technical and operational perspective and raises challenges from a contractual perspective, for example, around interfaces, integration and risk allocation between procurers, main contractors and the supply chain.

Traditional contractual models and standard and other forms of contract commonly used between construction project owners and main contractors, between joint venture partners, and at the subcontractor and supply chain level need to be revisited. These must be more appropriate for technology-enabled projects and solutions.

For example, more technology-based contractual approaches to determining and documenting requirements, scope and responsibilities may need to be factored in. This may extend beyond design and build/ initial deployment, potentially into ongoing service provision and support and maintenance. Additional requirements may need to be considered, for example, relating to security, resilience, business continuity and disaster recovery, technology refresh and upgrades. Bespoke clauses may need to be drafted, or standard product and service descriptions and service level regimes may need to be developed or reviewed.

It may also be appropriate to introduce clauses for testing, acceptance processes for technical and documentary milestones and deliverables, and mechanisms for triggering contractual relief that are linked to pre-agreed external dependencies.

Traditional charging models may need to take account of technology deployment milestone-based, service-based or licensed-based, and incentivisation regimes which incorporate liquidated damages, service credits and potential bonuses.

Change mechanisms may need to be developed to provide certainty and flexibility for change. Change clauses might, for example, make provision for certain ‘in scope’ changes to be provided without additional cost, changes to be provided at pre-agreed charges, and changes which should be scoped and costed separately. So-called change in law risk should be considered as part of this exercise as it may be appropriate to set out in the contract who is liable for the risk and cost associated with delivering technology changes driven by future legal requirements.

Intellectual property rights (IPR) ownership and licensing provisions will also require careful consideration and potential development. Questions to answer may include who will own and be assigned or licensed IPRs in relation to relevant technology, data, know-how, content and branding? The ownership and licensing arrangements will need to be understood and addressed, for example, to take account of embedded third party IPRs and open source software. The provisions may also need to take account of different rules and laws in respect of patents, copyright, design rights, trademarks, software, domain names, databases and know-how.

Contracts will need to deal with the control, protection, safeguarding and sharing of data. Consideration of these issues might extend beyond issues of data protection, privacy, ethics, consumer and competition law, to data management and governance, contractual data rights and matters of confidentiality. This may need to move beyond bilateral contracts to multi-party data sharing arrangements.

A further range of issues concerning warranties, indemnities and liability need to be considered too.

Traditional ‘fitness for purpose’ obligations and design and defects liability provisions are unlikely to be relevant or appropriate in technology-based contracts, which are typically more focussed around the technical solution. Software contracts, for example, set out agreed specifications for performance, require the software to be free from material design and programming errors, and that the programme does not infringe any third party IPRs.

In the UK, service-based arrangements will potentially introduce TUPE risk and the need for appropriate indemnity and liability provisions.

The liability provisions will also need to address loss and damage of data, breach of data provisions and provide clarity on what losses are recoverable or too remote. This will require careful consideration and commercial agreement between the contracting parties.

Infrastructure businesses, contractors and technology providers should work together to determine how contracting structures and liability regimes can be developed to best allocate risk and open up or limit liability. This will be necessary to avoid a situation where the risks main contractors are being asked to accept cannot be passed down to technology providers and outweigh the reward of their contract.