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. Problems arise because, unlike the automobile industry and others in which manufacturers benefit from economies of scale and accurate scheduling, construction managers are forced to coordinate dozens of smaller, unreliable subcontractors. 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. Unsurprisingly, construction leaders are troubled by his claims.