Industry facing wrecking ball: expert warns ofinefficiencies crippling construction sector.

In the construction industry, the more things change, the more they stay the same. And Barry LePatner, founder of LePatner & Associates LLP, says that the archaic way contractors do business is costing the country $120 billion annually.

LePatner brought his criticisms of the construction

"It is truly an industry that time has forgotten," said LePatner, whose firm provides legal and business counsel to the real estate, design and construction industries.

LePatner says the construction industry trails all other sectors in adoption of new technology (less than 33% of firms have a Web site), is experiencing declining productivity, is overly fragmented, can afford little risk, has minimal capital and is a "noncompetitive" environment.

And, he says, these characteristics are problematic because they create a highly inefficient environment, resulting in runaway costs for both municipalities and private developers.

LePatner cited the $12 billion overrun for Boston's Big Dig project and the Meadowlands stadium in New Jersey that has had its cost estimate double to $1.7 billion in just a few years. The examples--some of the largest are mapped at www.brokenbuildings.com/maps/articlelocations.html--are abundant and he contends that close to 50% of labor costs are wasted due to contractor inefficiencies.

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"The market for construction services is broken. It's not a fluid marketplace," LePatner said. "Arid it's not a national industry."

According to LePatner, there are no construction firms that operate in every U.S. state. And while there are 7.6 million people employed in the industry, 92% of them work for construction firms that employ just 20 people or less. Building projects can have up to 80 mom and pop subcontractors collaborating and that fragmentation, he says, spurs delays and inefficiency.

And when LePatner calls the construction industry "noncompetitive," he's referring to its misleading bid process. Firms are forced to bid with impossibly low figures simply to land the job. He said no company can profit off the lowball bids they give prior to construction; they only begin to profit after delays and change orders.

LePatner's law firm helps clients obtain fixed-price contracts, which are increasingly difficult to negotiate because few third parties have the construction expertise to protect developers from guaranteed maximum price contracts. "There aren't enough savvy intermediaries to say to an owner how much sheetrock should cost ... and as a result, we cannot get a fixed priced contract," he added.

LePatner also said that cost overruns are seldom attributed to corruption or labor unions. In fact, he says construction labor unions have a higher level of productivity and efficiency over non-union laborers. The ignorant building owner/developer is one of the biggest enablers of runaway construction costs.

LePatner--who recently released a book on the subject entitled Broken Buildings. Busted Budgets. How to Fix America k Trillion-Dollar Construction Industry--warns that we're becoming even more reliant on the backwards construction industry. The U.S. is projecting a population increase of 70 million by 2030. Worldwide, population migration from now until 2030 is expected to create 23 new cities of populations exceeding 10 million people. And by that time, LePatner also estimates that more than 50% of all buildings will have been erected post 2007.

Construction cost overruns are a global problem and one LePatner doesn't see improving over the next few decades. Aging infrastructure (20-40% of U.S. bridges are deemed functionally obsolete), a shortage of construction labor and materials and an unprecedented population boom may only exacerbate inefficiencies before developers and building owners can truly understand the nature of the industry.