What Do You Need to Know About AI in Construction and How Do Contracts Help?

May 13, 2026

Artificial intelligence (AI) tools are increasingly becoming part of everyday work in the construction field. Service providers are embracing AI tools for performing tasks ranging from design to project management. Even if you never directly use their AI tools yourself, your service providers may be using them behind the scenes. These tools can save time and money—but they also create new risks.

Your contracts are one of the best ways to manage those risks. If they stay silent on AI, you may end up responsible for problems you never expected.

What are the Two AI Risks That Matter the Most?

Your Data May Be Used in Ways You Don’t Expect

The construction industry uses numerous digital tools to manage complex projects, including Procore, Autodesk and others. In order to use these tools, construction companies upload sensitive project data, including drawings, specifications, schedules and cost data to the platforms. Most digital platforms are using AI. The terms governing the use of some AI tools say that once data is uploaded, it may:

no longer be confidential
may be used to train the AI system or
may even be used by the AI vendor for its own commercial purposes.

AI-Generated Work Can Create Liability

AI tools sometimes produce incorrect, incomplete, or copied content. This can affect designs, engineering analyses, and schedules. If AI-generated outputs infringe on or misappropriate a third-party’s intellectual property or other proprietary rights, or cause project problems through AI-driven mistakes, you—not your provider—will likely face the claim and bear the loss when you use or rely on those outputs.

How Can Contract Language Reduce These Risks?

Simple Contract Language

If you are an owner, we recommend including in your contracts with your construction service providers short, clear contract language that prohibits AI use unless approved in writing. The goal is to give you control by forcing service providers to disclose their AI use, allowing you the flexibility to impose conditions on that use through your approval right, and making unauthorized use a contract violation.

Requiring disclosure of and approval over AI use in this way helps you make informed decisions and police the use of your data. While not all service providers will accept including such language in their contracts, adding it will start a conversation over how they are or intend to use AI, providing you with much-needed transparency and a chance to reconsider the extent you may share especially sensitive information.

If you are a construction service provider that leverages AI or plans to do so, we recommend including terms in your contracts that explicitly permit the use of AI technologies.

We also recommend ensuring that these terms do not conflict with other provisions of your contracts. For instance, your confidentiality obligations may inadvertently prevent you from processing your customers’ information using AI tools (and other tools, for that matter) that you access via the cloud.

When Do More Detailed Terms Make Sense to Use?

Where AI use is expected from the start, consider preparing and using more detailed, bespoke contract terms to:

define how AI may be used
how data will be protected and
assign responsibility for AI-created issues.

In addition to requiring advance notice, these terms often set out clear representations and warranties about how AI tools operate and how data may be processed, and allocate (or even limit) exposure to AI-related claims and losses.

We recommend using these provisions selectively. In projects where AI is not expected or plays a limited role, detailed terms may add unnecessary complexity when negotiating and managing contracts. Short-form protections may be enough.

What Tips Should You Remember From This?

While AI offers significant advantages, it also introduces new risks that require careful consideration. These are risks that many construction contracts do not yet address.
Clear contract language is an effective way to manage AI risk before disputes arise.
Transparency helps you track AI use and align AI practices with the needs and requirements of your business and operations.
By proactively addressing these risks, you can harness the benefits of AI while minimizing potential liabilities.

Please contact Jeff Andrews, Kelsey Kornick Funes or any member of the Phelps Construction/Design and Business teams for guidance.