Since Stanford University dropped its bid for a tech campus in New York City three days before Mayor Michael Bloomberg announced that Cornell won the competition, the university’s administration has largely kept the reasons for the pullout secret. However, a new profile of Stanford in this week's The New Yorker sheds light on the negotiations between the school and the city that ultimately led to its withdrawal.
Stanford’s initial proposal was ambitious and grand in its scope. The university pledged to spend $1.5 billion to build a facility that would house 200 faculty members and 2,000 graduate students. Stanford President John Hennessey called the campus a “landmark decision” and campaigned to convince skeptical trustees, faculty, alumni and students that the university should expand from its familiar home base of Silicon Valley.
The Palo Alto university, a technological and engineering powerhouse that claims responsibility for helping start some of the biggest names in Silicon Valley, was widely seen as one of the front-runners in the competition, along with Cornell. During a speech at the Massachusetts Institute of Technology on Nov. 29, Bloomberg said the two schools were “desperate” to win, The Sun reported on Dec. 2.
Though the university was initially silent about the reasons for the decision, which city officials said was unexpected, Hennessey told The New Yorker’s Ken Auletta that he felt the city had changed the terms of the deal.
“After seven universities had submitted their bids, [Hennessey] said, the city suddenly wanted Stanford to agree that the campus would be operational, with a full complement of faculty, sooner than Stanford thought was feasible. The city, according to Debra Zumwalt, Stanford’s general counsel and lead negotiator, added ‘many millions of dollars in penalties that were not in the original proposal, including penalizing Stanford for failure to obtain approvals on a certain schedule, even if the delays were the fault of the city and not Stanford.’”
The city’s negotiating process was very different than the one the university was used to using, according to The New Yorker. In Silicon Valley, Stanford was usually the one dictating terms. Cornell, meanwhile, was more familiar with NYC’s process, due to past projects such as the expansion of Weill Cornell Medical College.
“I’ve cut billion-dollar deals in the Valley with a handshake,” Hennessy said. But in New York, the city was “not exactly [acting] like a partner,” he said.
In its proposal request, the city left the deadlines for the campus’ construction, and penalties for reneging on those promises, blank, intending for the bidders to fill them in and discuss them during the negotiations. According to Seth Pinsky, president of the NYC Economic Development Corporation, the more a university pushed up its timetable and upped the amount of money it would invest, the more favorably its proposal was considered by the city.
“In the negotiations, [Pinsky] said, he tried to get each bidder to boost its offer by alerting it of more favorable competing bids. At one point, Stanford asked about an ambiguous clause in the city’s proposal request: would the university have to indemnify the city if it were sued for, say, polluted water on Roosevelt Island? The city responded that the university would. According to Pinsky, city lawyers said that this was ‘not likely to produce significant problems,’ and that other bidders did not object. To Pinsky and the city, these demands … were ‘not uncommon,’ since developers often ‘take liability for public approvals.’ To Stanford, the stipulations made it seem as if the goal posts were not fixed.”
The city’s conduct in the negotiations, Hennessey told The New Yorker, fundamentally shook his confidence in the partnership and his “sense of trust” with city officials. After expending considerable effort to rally his school around the StanfordNYC proposal, Hennessey suddenly withdrew the school’s proposal. At a press conference three days later, Bloomberg stood in front of the New York news media and announced that Cornell had been declared the winner.