Data Center Pauses Are a Cash-Flow Risk Your Subcontract May Not Cover
The delay most likely to stop a data center job in 2026 is not a late transformer. It is a county commission, a governor or a neighborhood group with a lawyer, and many contracts do not pay for it. That is the core argument of a Construction Executive analysis by attorneys Jason Kosek and Keith Lazere, who say delay risk on these projects has escalated while contract language has stayed put.
For subcontractors, the point is cash flow. A pause stops production, but standby, extended general conditions and demobilization costs keep running. The question is whether your agreement lets you recover them.
Background
According to the Construction Executive piece, Governor Hochul signed Executive Order No. 62 on July 14, 2026. It pauses state environmental permits for new hyperscale data centers drawing 50 megawatts or more, for up to a year. During that time the state Department of Public Service develops a generic environmental impact statement and the state assembles a regulatory framework. The legislature passed the Responsible Data Center Development Act in June, but the Governor did not sign it. She issued the order instead, and it took effect immediately.
The authors say New York will not be alone. Moratorium bills are pending in more than a dozen states, with sunsets running out to 2030. Local governments moved first. Hill County, Texas barred commencement of data center construction countywide in May. A developer sued, alleging the moratorium exceeded the county’s legal authority and citing roughly $1 million already spent on land rights and entitlements for a 1,235 MW project. The county rescinded, but the project still lost months, and the article notes nobody reimbursed anyone for them.
Private litigation adds to the exposure. The authors cite noise nuisance class actions over generators and cooling equipment, groundwater suits, and challenges to the rezonings and special use permits that allow projects to exist. They say injunction practice against these facilities is now live in about two dozen states.
Analysis
The article’s central point is that four contract provisions each address regulatory delay, and in most contracts they conflict. Here is how each plays out for the party doing the work.
Changes clause. Owners cite it first. It works when new law forces a design change, such as a setback, a water use restriction or an acoustic package. But a moratorium does not change the design, it stops the job. The authors say the changes clause is built for scope, and pure suspension is not scope.
Delay clause. This is where the money is decided. Language modeled on AIA A201 § 8.3.1 gives relief for delays caused by the owner or parties within the owner’s control. A county commission, a state agency or a citizens’ group seeking an injunction is none of those. The contractor then absorbs the full cost of a delay neither side caused. The authors recommend drafting to causation rather than to the identity of the actor, then listing specific triggers: permit suspension or non-issuance, moratoria and stop-work orders, pending or enacted legislation and executive orders, third-party litigation and injunctions, utility interconnection delays, and long-lead equipment problems.
Force majeure. Contractors often assume this clause protects them. The authors identify three problems:
- It conventionally buys time, not money.
- It usually requires unforeseeability, and owners will argue that hostility to data centers was foreseeable at signing, an argument they say strengthens monthly.
- It commonly excludes governmental approval delays.
The combined worst case is no money under the delay clause and no time under force majeure.
Change in law. The authors say the trigger must cover executive orders and administrative guidance. Executive Order 62 is not legislation, so a clause keyed to “enacted statutes” would miss it.
The hardest scenario is the one nobody drafts for: a bill is introduced, has not passed, and the owner suspends work while the legislature decides. The source characterizes that as a suspension for the owner’s convenience. That is the situation where a sub needs standby compensation spelled out before the pause, not argued after it.
The reconciliation advice matters more than any single clause. If the delay clause grants time and money for governmental and third-party events, force majeure has to carve those same events out, or the exclusion swallows the protection.
What It Means for Subcontractors
The source says trade subcontractors often lack leverage, and prime terms flow down by incorporation, sometimes in a single sentence. The authors say to demand reciprocal flow-down so the sub gets the same relief the GC gets from the owner. Based on the authors’ analysis, subcontractors should take these steps:
- Read the incorporation sentence first. On any data center subcontract, find the flow-down language and confirm that delay and change-in-law relief the GC receives from the owner also reaches you, in both time and money.
- Test the delay clause against a governmental actor. If relief runs only to delays by the owner or parties in its control, a county moratorium or state order falls outside it. Push for causation-based language that names moratoria, stop-work orders, injunctions and interconnection delays.
- Check force majeure exclusions. If governmental approval delays are carved out of force majeure, make sure the delay clause covers them for money. Otherwise you may have neither time nor compensation.
- Confirm the change-in-law trigger names executive orders. For projects in New York, where Executive Order 62 pauses state environmental permits for 50 MW-plus facilities for up to a year from July 14, 2026, this is the live test.
- Ask what happens on a pending bill. Get written terms for standby, demobilization and remobilization if the owner suspends before any law passes. Also review the termination-for-convenience payout. This last point is our own recommendation, not drawn from the source.
- Calendar your notice deadlines. The authors stress noticing everything early and repeatedly, including the introduction of legislation. Missing a notice window can forfeit a claim that was otherwise valid.
- Check no-damages-for-delay language. The authors say New York enforces these clauses. If your subcontract has one, it can defeat even a well-drafted delay entitlement.
- Review insurance with your broker. The article notes that delay-in-start-up and soft cost coverage sits inside the builder’s risk program, and recommends looking at contingent business interruption cover as well.
This is a contract-review issue, not a bidding opportunity, for packages you are already pricing or signing. For another angle on how a pause plays out under a force majeure clause, see our earlier coverage of the Oracle New Mexico force majeure story.
