San Antonio Express-News (Sunday)
Texas contractor sues Microsoft
Alleges lack of payment over data center being built on far West Side
Microsoft Corp. ranks as one of the nation’s most valuable companies, but that isn’t fazing a Texas construction company from taking on the giant software maker over its massive San Antonio data center.
Dallas-based Rogers-O’Brien
Construction LLC, which has a San Antonio office, alleges it’s been stiffed $34.2 million for work on the far West Side data center.
So, in March, Rogers-O’Brien filed a mechanic’s lien on two buildings in the data center. The buildings, identified as the SAT 9/ 10 Facility at 15434 Lambda, are a nearly combined 400,000 square feet.
Last month, Rogers-O’Brien took the unusual step of filing not one, but two, lawsuits against Microsoft. The complaints were filed May 15 in state District Court and federal court in San Antonio.
Rogers-O’Brien has opted to pursue its claims in the federal court case, however. On Wednesday, the company filed an amended lawsuit that laid out its beefs with Microsoft in greater detail.
Rogers-O’Brien wants the court’s OK to proceed with a foreclosure of its lien.
The general contractor says in the lawsuit it’s “entitled to an Order of Sale and Writ of Possession to be issued by a sheriff or constable…directing him/her to seize and sell said property” to satisfy Microsoft’s alleged obligations.
A Microsoft representative declined to comment on the dispute. The company has not yet filed a response in the case.
The Redmond, Wash., company can’t plead it doesn’t have the cash. It had more than $11.7 billion in cash on its balance sheet as of
March 31. Its market value is more than $1.4 trillion.
In fact, the amount RogersO’Brien is suing for is less than the $42.9 million in total compensation that Microsoft CEO Satya Nadella received in its 2019 fiscal year. Almost $30 million of that was in stock awards.
The far West Side’s cheap and plentiful electricity, thanks to the numerous substations that CPS Energy has there, has made it a desirable location for data cen
ters. San Antonio’s low probability of natural disasters such as hurricanes and ice storms also makes it well-suited for data centers.
The area has more than a dozen data centers, according to developer Marty Wender. Westover Hills, which he was instrumental in building, has 10.
Companies like Microsoft, Frost Bank and Valero have data centers for their own use on the far West Side. Other companies, such as CyrusOne and Stream Data Centers, host space for servers for multiple companies — including those that may be too small to need their own data center.
Other companies are interested in building centers, Wender said.
“I think the world has changed, and the need for companies to operate from different locations has made the internet and data centers even that more important,” he said.
Microsoft has been engaged in a 15-year effort to cluster data centers in San Antonio. The company has four centers, based on information on the Bexar Appraisal District’s website. Combined, they have an assessed value of about $655 million.
In late 2015, Microsoft bought 158 acres in the Texas Research Park, about five miles west of Loop 1604, to build a reported $1 billion, 1-million-square-foot data center. That’s where RogersO’Brien has performed work on the SAT 9/10 Facility.
The work on the center is about 70 percent complete, the Bexar Appraisal District’s website shows.
The project had been expected to be completed in 2022, the Express-News reported in 2015 at the time of the land purchase. It also was anticipated the project would increase the amount of Microsoft’s data center space in San Antonio to about 2 million square feet.
Data centers have few workers relative to their size. Microsoft’s 1million-square-foot center reportedly was expected to employ about 150 workers when completed.
Rogers-O’Brien has been a general contractor for 50 years and has built data centers for other companies.
Rogers-O’Brien entered into a contract to complete the SAT 9/10 Facility in 2017. The construction company says in its suit that by early 2018 it had informed Microsoft of delays in the project because of “continued errors in design, software, and ultimately manpower supplied by Microsoft’s outside vendors.”
Microsoft failed to address the issues, adversely affecting RogersO’Brien’s construction schedule, the suit says.
In addition to the delays, Rogers-O’Brien says the SAT 9/10 Facility has experienced significant water intrusion related to air handling units, which condition and distribute air within a building. Water leaks most recently surfaced in October, the suit says.
Rogers-O’Brien blamed Microsoft’s vendors for the problem, which contributed to the delays, the suit adds.
Throughout 2018, the complaint says, Microsoft and its vendors “consistently hindered the Project through software errors, failure to supply equipment, loss of personnel, and component malfunctions.”
Rogers-O’Brien documented the ongoing vendor problems and repeatedly shared them with Microsoft, but Microsoft didn’t do anything to address them, the suit says.
“Contractually tasked with managing its own contractors, Microsoft bears the associated costs with the loss in productivity and efficiency,” the action alleges.
Microsoft has refused to acknowledge the delays and any related costs, the suit adds. RogersO’Brien says it hasn’t been paid for its continued work and delay damages, “essentially requiring (it) to fund (Microsoft’s) construction.”
Rogers-O’Brien has sued Microsoft for breach of contract, unjust enrichment and to foreclosure on the mechanic’s lien. It seeks $34.2 million in damages, which includes damages for delays and increased construction costs.
A lawyer for Rogers-O’Brien had no comment on the lawsuit.