Barry LePatner: 'Construction is a very dysfunctional industry'
-- Building Design & Construction, 4/1/2008 12:00:00 AM
Barry B. LePatner,Esq., Hon. AIA, is founder of LePatner & Associates LLP, a New York City law firm that represents owners, institutions, developers, and architects. Clients include Barnard College, Gehry Partners, Goldman Sachs, Millennium Partners, Starwood Lodging and Resorts, and WNET. He is the co-author of Structural and Foundation Failures (1982) and author of Broken Buildings, Busted Budgets (2007). A member of the New York City, New York State, and American Bar Associations, he holds a B.A. degree from Brooklyn College and a J.D. degree from Brooklyn Law School.
BD+C: Your new book centers on what you see as waste and fragmentation in the construction industry. Please explain.
Barry B. LePatner: In construction, there is no generic fixed price. When you buy a coffee at Starbucks, you deal with a fixed price. The construction industry has migrated from that, and it has cost the owner and contractor dearly. It's a very dysfunctional industry.
BD+C: But buildings still get built, don't they?
BLP: Yes, but it's due to the skills of the people in the industry, in an industry that is very flawed.
BD+C: What flaws are you talking about?
BLP: We have a fragmented industry: 7.6 million construction workers, 94% of them in firms of 20 or less. There are no truly national construction firms, operating in all the states. Unless you are able to operate at scale and achieve economies and efficiencies, you can't afford to do R&D and spend money on technology to improve efficiencies. Construction is the lowest spender on technology and R&D of all industries. Unless you spend money on technology, you get huge inefficiencies.
BD+C: What kinds of inefficiencies?
BLP: A meta-survey by the University of Pennsylvania showed that 49.2% of all labor costs on construction projects are wasted due to inefficiencies: laborers waiting for deliveries, going up and down hoists, waiting for other trades to move out of the way.
According to the Bureau of Labor Statistics, from 1964 to 2003, for all nonfarm industries, productivity per worker went up 125%. For the construction industry, the output went down over 20% per worker over that period. If we just achieved a 10% increase in efficiency, we could add $120 billion a year to the economy.
BD+C: What do you recommend?
BLP: There is no General Motors building major projects. Shopping centers, office towers—they're all being done by mom-and-pop companies. There's no efficiency in operations. Everybody is an independent contractor performing just their work and suffering from the vagaries and inefficiencies of others on the project. If one general contractor controlled everybody and was at risk, you'd have incentive to overcome that.
BD+C: What about design-build and other delivery models?
BLP: CM, fast-track, design-build—they're all a prescription for disaster. Take the Giants/Jets stadium going up in the Meadowlands. There was a design-build contract for $800 million in 2005; now it's $1.4 billion.
BD+C: Why do you think this is this happening?
BLP: Nobody takes risk. In the auto industry, Henry Ford took risk to build the River Rouge plant. By taking control of the disparate elements of manufacturing, he was able to make $100 million profit by 1908. The construction world is like what it was before innovation came along. It is impossible to believe that robots cannot do a lot of the work that construction workers do today on interior projects.
Competitive industries rely on good management, efficiencies in the production process, and technology to save money. We do not have any of those three elements in the construction industry.
BD+C: How do rising materials prices figure here?
BLP: When I deal with a contractor, and he says the price of steel is going to go up, I say, Order it right now! We'll store it, and our client isn't going to pay extra.
BD+C: What is the owner's role in all this?
BLP: We're on the back end of the business cycle, and you're going to see a tightening of the market. Businesses are not going to be willing to pay for increasing project costs, so the arguments in my book are going to resonate even more among owners.
BD+C: How about the designers?
BLP: Architects and engineers should only have risk when they don't do their jobs. If you need time to coordinate with the contractors, I'll pay you for it. It's all about the planning. If you don't do the planning up front, the rest of the project is a hodgepodge.
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After reading this article and the posted comments, the comments made make more sense.I have been on and working in construction sites for 25 years. There were some bold statements being made by your author and to say that the errors and responsibility are on the small contractors and the GC's are false.You wont get a real answer from a lawyer or an accountant. try to look into some of these topics.
What is the purpose and design intent that is first layed out for the project.
Complex projects need to be figured out in the front end .
Owners and Architects need to cooperate with the trades to become more effecient.
Low bidder wins mentality isnt always the best course.
This topic is very complex and to make a wide brush stroke and say the task master theory works or else...........is not a wise choice.
Will Smith - 2008-1-5 07:27:00 MDT -
I''ve been out of the construction industry for 20 years directly, and can tell this guy is an cubicle dweller. Lawyer/beancounter mentality. Which is good for some things, I think.
Robots in construction? The nuance and variety of touch time tasks makes this extremely unlikely.
A McDonald''s of construction? If every building was alike, sure. In fact, that''s exactly what exists for national clients like fast food - specialized small buisnesses who know the customers needs.
A decentralized, ''fragmented'' construction industry exists because it is best at allocating resources and responding to customers needs at lowest cost.
Ask this lawyer what he thinks of closing the Mexican border - watch him squirm ''cause he knows what keeps labor costs low, particularly in non-organized (South) markets.
Mike Willard - 2008-30-4 14:59:00 MDT -
judgeing by the sound of this guy i would say he knows nothing of the construction industry and has never been on a construction site... seems to me that this guy is more interested in making money for big corporations then the actual middle (working) class.... sigh another upper class person trying to destroy a midddle class industry (hes probably just mad because he cant figure out a way to send our jobs overseas)
josh detienne - 2008-28-4 05:58:00 MDT
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