Using AI in your construction project: The potential risks and rewards
Since its inception, AI has been a divisive subject, introducing new risks in terms of potential misuse and privacy breaches. But when used correctly, the benefits to any business or project are indisputable, from increased efficiency to reduced human error.
When it comes to construction projects, AI could offer a wealth of benefits, but it's crucial to understand the risks attached and what you need to know in terms of your contracts.
Solicitor apprentice, Ellen Williamson, and partner, Ross Galbraith, explore the use of Artificial Intelligence (AI) in construction projects and discuss its practical implications.
How could AI be used in a construction project?
AI could have a variety of different uses on a construction project – these could broadly cover the following categories:
- Assistance in the selection of the most suitable procurement model – An AI tool could be used to run different procurement models for clients, saving them a lot of time and money. This may also be useful for clients with limited experience in procuring construction projects.
- Producing terms and conditions – AI could be used to assist either a client or contractor in the drafting of standard terms and conditions, or to bring together individual precedent clauses to form a coherent construction contract. It could also be used to assist either party during the negotiation process, for example, to see if proposed amendments have been agreed on in similar projects or to check terms and conditions for internal consistency or inconsistencies.
- Produce contract documents – You could use AI to produce contract documents, such as invitations to tender, tender submissions, specifications, work programmes, bills of quantities, as well as conception designs, and so far as detailed drawings; and
- During a project – Generally, AI could be used throughout a project to detect possible issues with items brought to site, and the implications of any variations of the works, as well as the ability to assess compensation events and general project tracking. Additionally, it could be used for improved and efficient record-keeping, particularly in relation to the golden thread of information for higher-risk buildings.
Standard form construction contracts
Despite the huge growth in AI usage across the globe, the construction and engineering sector has been relatively slow to adopt AI. Unsurprisingly, this is reflected in industry-standard forms of contracts.
The most commonly used forms of construction and engineering contracts in the UK (such as JCT, NEC, etc.) neither address nor have been reviewed by their publishers to confirm that they are appropriate for use on a project using AI technology. That doesn't mean they cannot be used, but the standard form contracts may need to be amended if it is anticipated that the project will be using some form of AI.
What to expect from contracts in the future
It's likely that standard forms of contract will develop over time to reflect AI-related issues (i.e. the format and presentation of standard forms of contract will develop to facilitate their use by AI). For example, the International Federation of Consulting Engineers (FIDIC) has stated that it will:
- Build a specialised AI tool to create a "virtual contracts expert", which will assist users in navigating and understanding its contracts. This functionality will be known as FIDIC-GPT; and
- Create a secure electronic contracts management platform to hold signed versions of contracts that can be interrogated by AI.
Although the latest JCT suite of contracts were only released in 2024, we expect future versions will cater for the increased use of AI.
Building contracts drafting issues
There are numerous drafting issues that may arise from using AI on construction projects, these include:
1. Standard of care
Building contracts usually require the contractor to exercise reasonable skill and care when providing design services as part of their works.
In relation to AI, a client might want to check that the wording used in a building contract doesn't allow the contractor's performance to be assessed against a lower benchmark than that which applies when assessing the performance of more traditional construction design services.
A contractor shouldn't be able to argue that what constitutes reasonable skill and care is somehow different in relation to AI because construction professionals have less expertise in that field.
Clients may also want to check the level of proficiency of an individual who will be using AI tools. Legislation may impose competence requirements in certain situations, which clients may wish to refer to.
2. Copyright/Intellectual Property
It may be the case that AI is used to create written or visual content in relation to a construction project. A client should ensure that they have the right to use the material and consider the chance that the source material used may infringe on a third party's copyright.
Aside from copyright provisions, contracts should have clear provisions about who holds the intellectual property that is produced as a byproduct of the use of AI. For example, if AI produces useful innovations that are not directly linked to the project.
Copyright licences included in building contracts should ensure that the client is granted a copyright licence over material produced by AI. They should also ensure that the client has the right to use the material produced by AI for all necessary purposes. Additionally, the parties should consider whether the client requires the use of the AI software itself rather than just the copyright over the results.
3. Confidentiality and Data Protection
There is a risk that if AI is using a large pool of data provided by the contractor or other third parties, some of this data may be protected by GDPR and other data protection legislation. For example, any piece of correspondence fed into the AI model may include an individual's personal information, such as their personal email address or telephone number, even if that data is incidental to the AI model's use of the document in practice.
4. Insurance
Parties should consider whether their professional indemnity insurance provides cover for the use of AI. Insurers may take the stance that AI cannot be held liable, and therefore the party using AI will be.
The use of AI may have implications beyond professional indemnity insurance, provided that it's relevant to other forms of insurance (such as Construction All Risk Insurance (CAR)).
While professional indemnity insurance is key to liability issues arising from professional/design-type services, it is possible that AI will be used in aspects of the works that are traditionally covered under a CAR policy. For that reason, it is also possible that AI-related liability will be addressed in a project-specific insurance policy, even if it is in order to limit or exclude the amount of cover it provides.
5. Caps on liability
Both parties to a building contract should assess AI risk to check whether it raises concerns regarding liability arising from the use of AI. This should be tied in with any overarching limitations of liability under the building contract - it may be important to consider whether:
- The risk should result in a lower (or perhaps in some cases, higher) cap; and/or
- The risk should be carved out or excluded from the existing cap so that the AI-related risk is uncapped or is subject to its own specific cap.
6. Sub-Contracting & Collateral Warranties
A contractor should consider whether the use of AI on a project may be subcontracted and, if so, should ensure that the building contract allows for this.
If the contractor subcontracts any AI-related aspects of a construction project, it will be important for the client to obtain a collateral warranty from the subcontractor.
Practical Implications
As the use of AI increases, both a client and a contractor on a construction project will need to consider the extent to which any AI will be used from the outset and how any such risks will be managed/mitigated in the relevant construction contracts.
Existing standard form contracts, such as the JCT and NEC, do not address AI usage. If AI is to be used during the course of a construction project, then this should be addressed in any amendments to the building contract. It should clearly identify which party is responsible for each risk and highlight the potential consequences of failing to manage the risk of using AI.
For more information on anything discussed in this article or on construction law in general, please contact Ross Galbraith using 0191 211 7999 or [email protected].