Apple fires Campus 2 contractors as 'spaceship' faces delays, spiraling costs

Posted:
in General Discussion edited June 2015
Apple has reportedly severed its relationship with general contractors Skanska and DPR -- the two firms responsible for overseeing construction of its new "spaceship" headquarters -- with near-immediate effect, a rare mid-stream shakeup that follows a string of delays and increasing costs.




Skanska and DPR, who won the bid in a joint venture, "will transition completely off the project in the next several weeks," according to an internal email seen by the Silicon Valley Business Journal. The companies were "unable to come to an agreement during negotiations for the revised scope of work," Skanska USA chief Richard Cavallaro wrote.

Word that Skanska and DPR were in trouble first surfaced last week, when a trade magazine reported that Skanska was set to depart after completing the core and shell of the main building, a setback that would cost the Swedish company some $800 million in lost revenue.

While it's not uncommon to replace contractors between building phases --?Apple retained Rudolph & Sletten for the interior build-out, rather than Skanska --?switching in mid-stream is nearly unheard of for projects the size of Campus 2. The change hints that there may be deeper problems with the operation that is already more than a year behind and $2 billion over budget.

Some have suggested that the timeline may have slipped even further, moving into 2017. Apple initially planned to complete the campus in 2015, and now says it will begin occupation in late 2016.

The Journal believes that oversight of Campus 2 will fall to Atlanta-based Holder Construction, which built Apple's North Carolina datacenter. Holder is already involved in the Cupertino project, handling mechanical, electrical and plumbing systems.
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Comments

  • Reply 1 of 63
    saareksaarek Posts: 1,157member

    Surprised they don't have a fine structure built in for every days delay.

  • Reply 2 of 63
    melgrossmelgross Posts: 31,977member
    I've my own experiences with this kind of problem, though on a much smaller scale. When the contractor(s) responsible for overseeing the work is released midstream, it's because of major problems. It's unusual. $2billion over cost on a project like this is dramatic. I wonder what went wrong with them. It should be fairly straightforward.
  • Reply 3 of 63
    melgrossmelgross Posts: 31,977member
    saarek wrote: »
    Surprised they don't have a fine structure built in for every days delay.

    We don't know, likely they do.
  • Reply 4 of 63
    Assuming the mess is large enough I expect the costs to rise even more because of all the fixes that will be needed.
  • Reply 5 of 63
    saareksaarek Posts: 1,157member
    Quote:

    Originally Posted by melgross View Post





    We don't know, likely they do.



    True, but if there is a fine structure in place it would be unusual to get rid of them. Ride it out and rake in the cash for their mistakes.

  • Reply 6 of 63
    thrangthrang Posts: 783member
    I don't recall 2015 as a move in target, and AFAIK no one knows except Apple how much, if any, the are over cost. Where does a $2bn number come from?
  • Reply 7 of 63
    quinneyquinney Posts: 2,526member
    doomdoggle
  • Reply 8 of 63
    ceek74ceek74 Posts: 324member

    Better cash-out all your Apple stocks, they are clearly doomed.

  • Reply 9 of 63
    When the employees arrive at their new Swedish work stations, they'll have to assemble the chairs and desks themselves anyways. :lol:
  • Reply 10 of 63
    schlackschlack Posts: 703member
    Welcome to Atlanta where the playas play and Holder construction is building Spaceships like every day...
  • Reply 11 of 63
    quinney wrote: »
    doomdoggle

    First solar panels on fire, then chlorine gas, now this. Another sign of Tim Cook's failure to manage his supply chain. Steve Jobs would never approve of this lavish construction project, despite the fact that it was his idea. /s
  • Reply 12 of 63
    jameskatt2jameskatt2 Posts: 720member
    Apple brutally fires people who are incompetent - particularly those who have responsibility - like Vice Presidents at Apple. They have no excuse not to get their job done.

    Obviously Skanska and DPR were incompetent. Delays and a $2 BILLION cost overrun are inexcusable.
  • Reply 13 of 63
    blastdoorblastdoor Posts: 1,961member

    That's pretty bad publicity for Skanska. The disagreement must have been massive in order for them to pull out. I'd think they'd rather accept a small loss than take the publicity hit, so they must have been looking at a pretty big loss if they remained involved. 

  • Reply 14 of 63
    joe28753joe28753 Posts: 77member
    Quote:

    Originally Posted by Suddenly Newton View Post



    When the employees arrive at their new Swedish work stations, they'll have to assemble the chairs and desks themselves anyways. image

     

    You joke, but this actually happened to me. "Welcome to your renovated office. See that pile of Ikea boxes in the middle of the room? Claim your stuff and build it." They even made a video of it. 

  • Reply 15 of 63
    blastdoor wrote: »
    That's pretty bad publicity for Skanska. The disagreement must have been massive in order for them to pull out. I'd think they'd rather accept a small loss than take the publicity hit, so they must have been looking at a pretty big loss if they remained involved. 

    Hardly. They can advertise that they were fired by none other than Apple. Sure, if you read fine print it mentions budget and schedule overruns, but hey...its construction. Do you want a half-finished building now or a finished one later for more money than we agreed to up front?
  • Reply 16 of 63
    maestro64maestro64 Posts: 4,675member
    Notice the article said the issue was over Scope of Work changes.

    It is not unusually for projects like this to have changes along the away and before the change goes into affect the contractor submits their new costs quotes for the change. Depending on the change the cost can go up or down. However, many time contractors will low ball bid projects like this and make their profits on the change requests. They will hit you with high costs to make a change since you are less likely to dump them mid stream and will just pay. This is why you usually see large cost over running on public projects as well. Most is due to the fact our public offical poorly scope the project or requirements and contractors know this and hope public officals got it wrong and they can charge them for it.

    I been involved in a couple of capital improvement projects, and I found it interesting when contractors would come in and tell you they could not do something and they had to change how it was design and how much more it was going to cost. Sometime they are valid and other times you have to challenge them on their assumption about the change. They will tell you the change will make things better in reality they are no better than the original solutoin it just means they get to charge you for the change.

    It sounds like this got really bad with the Apple project and good for apple to tell the contractor to back their bags and trailer and get the hell out. This will send a clear message to the new contractor they can not play that game.
  • Reply 17 of 63
    pembrokepembroke Posts: 220member

    Two BILLION OVER budget? Two thousand million? That can't be right!? How much was the project supposed to cost at the point the plans were finalised? Surely it should be 2 million. 

  • Reply 18 of 63
    joe28753joe28753 Posts: 77member
    Quote:

    Originally Posted by pembroke View Post

     

    Two BILLION OVER budget? Two thousand million? That can't be right!? How much was the project supposed to cost at the point the plans were finalised? Surely it should be 2 million. 


    Consider a tiny old house in the area costs a cool million, and they're building a state-of-the-art ginormous space ship office, designed by the best in the world. It's probably more than 2 million bucks for a few feet of those glass walls.

  • Reply 19 of 63
    evilutionevilution Posts: 1,373member
    They were probably like all the other companies. Know that Apple have loads of money and got greedy. Manufactured reasons why they wanted more and expected Apple to pay up.
  • Reply 20 of 63
    ds92jzds92jz Posts: 90member
    A major construction project delayed?! No way!
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