Rebuilding the Construction Industry
Barry B. LePatner’s new book, Broken Buildings, Busted Budgets: How to Fix America’s Trillion-Dollar Construction Industry, was featured in an interesting article in Monday’s edition of the Architectural Record. Writer James Murdock contrasts the opinions of Stephen Sandherr, chief executive of the Associated General Contractors of America, with LePatner’s argument that the industry is in urgent need of reform. Murdock writes:
Barry LePatner, a Manhattan-based attorney who counts Frank Gehry and other big-name architects among his clients, sees a problem with the construction industry in the United States—clearly indicated by the title of his book Broken Buildings, Busted Budgets, published today by the University of Chicago Press. “This is the industry that time has forgotten,” he says. “Mom-and-pop shops, composed of 20 people or less, make up 92 percent of the industry. They are hugely inefficient, and they have no money to spend on improving performance and technology.”
The result, LePatner continues, is tremendous waste in a $1.2-trillion-a-year business—nearly half of labor expenses on a project, according to some studies, are squandered due to schedule conflicts and late deliveries.… LePatner also says that the construction industry suffers from “the winner’s curse”: Contractors bid so low that the profit margin erodes and the only way to reclaim it is by filing change orders.
But Sandherr disagrees:
Few contractors abuse change orders to drive profits, he contends, and “to say that the construction industry has not embraced innovation or collaboration is naïtve. Just look at the innovations in the past 20 years: design-build, construction management at-risk, and value engineering. Look at building information modeling (BIM), which embraces new technology and allows for enhanced collaboration between designers, contractors, and suppliers.…”
LePatner welcomes such developments, but believes more systemic changes are needed. He recommends consolidation within the commercial construction industry, creating vertically integrated firms like Toll Brothers, Pulte, and other large residential builders.…
LePatner hopes that the business will redefine itself. “If we save only 10 percent in the construction industry, we put back $120 billion a year into the economy.”