A Better Way to Build: LePatner Project Solutions Takes Aim at Construction Cost Overruns and Delays

New York, NY (November 2013)—Barry LePatner has been influencing the design and construction world for 35 years. As founding partner of his construction law firm, LePatner & Associates LLP, LePatner has a long history of protecting the legal interests of project owners.

          Over the past two decades, LePatner, who was named the “guru of construction reform” by Governing Magazine, has become increasingly aware that his clients needed more than just legal protections. The inherent structure of the construction industry forced owners to take on all the risks of building. Larger and larger cost overruns became the norm. And as the economy spiraled downward in 2008 and money no longer flowed freely, it was clear the old way was no longer feasible.

          In response, LePatner, author of Broken Buildings, Busted Budgets: How to Fix America’s Trillion-Dollar Construction Industry (University of Chicago Press, 2007), which is considered to be the preeminent book on the inefficiencies of the industry, foresaw the need to evolve into a unique organization that could serve its clients more effectively.

          LePatner began to provide new methods for ensuring TruFixedPrice™ contracts that guaranteed projects could be built free of the alarming change orders and delays that added 20-40 percent or more to a project budget. It developed project management methodologies that incorporated a mix of the latest technology with old-fashioned hands-on management to end the inefficiencies that plague most projects.

          Clients like luxury retailer Tiffany & Co. retained the firm to protect their interests and avoid the “claims mindset” that pervades most projects in the nation today. As a result of clients like these seeking more and more integrated project management, guidance, and advisory services, LePatner Project Solutions (LPS) was created.

          LePatner served as Tiffany’s construction counsel and project manager for the design and construction of its new SoHo store that opened in connection with Tiffany’s 175th Anniversary celebration and NYC’s Fashion Week. In addition to a very aggressive budget and schedule and an exacting design, LePatner successfully juggled other challenges too: The store occupied a block-through site in two buildings with two different residential condominium associations above. It was sited within a landmark district and required getting approvals from NYC for the “combined” first floor.

          Working behind the scenes, LePatner’s team was an important element in the successful completion of this project. Construction manager E.W. Howell’s president, Howard Rowland, praised LePatner’s team stating, “The intense effort required for us to achieve Tiffany’s high quality standards on such a tight schedule would not have been remotely possible without the amazing lengths to which LePatner went to keep everything coordinated and on track.”

          Unfortunately, projects that don’t have LePatner’s guidance face soaring costs. Today’s project costs have ballooned to where mid-level construction is in the $30-80 million range, high-end projects routinely cost well over $100 million, and major projects cost in excess of $1 billion. Many project developers and owners admit they have no idea why projects cost what they do.

          Project costs have soared for many reasons, but one is because 40-60 percent of a project’s construction cost is related to materials: the thousands of products specified by the design team, which are routinely marked up as much as 300 percent by a construction manager. Labor costs are rarely delineated from material costs, making it virtually impossible for owners to negotiate the true cost of their projects. Within the construction industry’s current opaque bidding structure, no owner can perform comparable pricing with any degree of certainty.

          “Project owners have long endured cost overruns, unjustified change orders, and seemingly endless delays,” notes LePatner. “It is just the status quo in the construction industry. In recent decades, easy money covered a multitude of sins. Project owners could get the funding they needed to cover these additional costs. We all know that’s no longer true.”

          When LePatner began to see that his clients desperately needed more than just contractual protection from a system stacked against them, his firm expanded its services. It added architects, project managers, and other professionals to its roster so that it could better serve client interests and offer guidance that typical owner representatives couldn’t provide. It has built a reputation as one of the nation’s leading advisors to corporate and institutional clients, real estate owners, and investors.

          One of LePatner’s earliest clients to recognize and benefit from LePatner’s combined legal and project management services was The Core Club, a private lifestyle and cultural club that built its east-side facility under LePatner’s leadership.

          Former Managing Director Mark Briskin praised LePatner’s ability to remain calm and focused under pressure. “Before we brought in LePatner, none of us had any idea what the true cost or schedule was for the project. That, combined with building our facility within a new residential tower that was also under construction, resulted in a lot of sticky situations. LePatner came in, took control, instilled rigor and discipline with the design and construction team, and orchestrated our occupancy well before the base building was complete. Our investors and members couldn’t have been happier—or more relieved—that we opened our doors when we did.”

          An essential function of LePatner Project Solutions is mitigating the risks project owners face during design and construction. Regardless of project size, owners will face certain risks, but LPS can predict, mitigate, or prevent them. In its experience, LePatner finds the most common risks faced by project owners are:

• Design teams that produce incomplete and uncoordinated drawings. These ultimately lead to cost overruns and delays.

• So-called “fast track” projects that seek in vain to find mythical savings by beginning construction months before the design is complete. This approach almost always fails and actually increases the owner’s financial risk because of the greater number of RFIs and change orders that result from the incomplete bidding documents.

• Contracts for design and construction services that fail to insist on securing complete and coordinated design documents. This oversight favors contractors and fails owners, where timely completion within budget is often their primary business goal.

• Construction pricing is bogus. Owners are given so-called “Guaranteed Maximum Price” contracts that few owners understand and that omit major scope items that will become the basis for overcharging and delay claims.

• Contractors who actively take advantage of prici
ng and scheduling information available only to them. This asymmetric balance of information perpetuates lack of transparency and accountability in its dealings with owners.

          Working to combat these risks, LePatner Project Solutions has evolved into a uniquely structured “turnkey” advisory services firm that embraces the role of a true project manager. Its collective expertise not only manages a project from conception to completion but protects the owner’s interests with state-of-the-art contracts that equitably spread risk to each team player and prevent the owner from being the guarantor of all project risks, especially those caused by design and construction team members.

          “The financial crisis changed everything in the construction industry,” notes LePatner. “Lenders became far stricter about loaning money. Owners are required to front more equity to secure these loans. Mezzanine loans to handle back end overruns are almost non-existent now. Because contractor claims deplete bottom-line profitability, owners simply cannot afford for projects to go over budget and then risk losing even more money on missed deadlines. Today, owners need greater levels of protection than they have at any other time in history.”

          LePatner Project Solutions provides services to owners in any stage of a capital project, whether they are relocating, starting a new project, adding to, or converting an existing property. Its architects, project managers, attorneys, and other professionals provide a comprehensive and sophisticated understanding of the design and construction process and know how to mitigate cost overruns and delays.

          For the headquarters of the non-profit American Physical Society, the international publisher of physics research journals, LePatner initially prepared a real estate feasibility study to determine the best solution for its expansion needs.

          Once APS decided that its best alternative was to remain at its existing facility but add a second story and renovate the first floor, LePatner jumped into action. It selected and retained the design and construction team, provided independent cost estimates that informed APS of the true price of the work before going out to bid; managed the design team to provide complete and coordinated documents; prepared and secured a TruFixedPrice™ construction contract where the construction manager assumed the risk of completing on time and on budget; and provided daily project management services throughout the multiple construction phases.

          APS Editor-in-Chief Gene Sprouse lauds the full-service effort of the LePatner team: “During our complex, phased renovation, LePatner has capably and continually represented the best interests of APS, whether in our interactions with the architect, the contractors, or the local authorities.” Rogers Marvel Architects highlighted LePatner’s project management style as a “breath of fresh air” that allowed them to solve problems without the usual finger pointing and delay claim games with the contractor.

          “With LePatner Project Solutions, we’re offering something to owners they haven’t had in decades—control: control over their budgets, control over their schedules, and control over the risks they are prepared to assume,” says LePatner. “The continuum of care provided by LePatner Project Solutions, along with the new technologies we continue to develop, will usher in a better way for owners to plan and build significant capital projects. No longer will they have to suffer the consequences of the many costly risks that arise on large projects. For the first time in hundreds of years, there is a better way to build.”

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Members of the LePatner Project Solutions leadership team have represented such clients as the American Physical Society, Tiffany & Co., UBS, Con Edison, Barnard College, Millennium Partners, Cooper Union, WNET, DaimlerChrysler, Goldman Sachs, JPMorgan Chase, the Government of Spain, Starwood Hotels, Colgate Development, Gehry Partners, and Richard Rogers, among others.

About Barry B. LePatner:

Barry B. LePatner is founder of the New York City-based law firm LePatner & Associates LLP. He is author of Broken Buildings, Busted Budgets: How to Fix America’s Trillion-Dollar Construction Industry (University of Chicago Press, 2007) and Too Big to Fall: America’s Failing Infrastructure and the Way Forward (University Press of New England, 2010).

He recently launched www.SaveOurBridges.com, a site educating the public on the perilous state of the nation’s infrastructure. The site includes an interactive map pinpointing the most dangerous bridges in the U.S.

LePatner has been repeatedly recognized as a Superlawyer and is recognized as one of the nation’s leading advisors to corporate and institutional clients, real estate owners, and design professionals. Mr. LePatner has been featured in the Wall Street Journal, the Boston Globe, the New York Times, Forbes.com, and other prestigious publications. He has appeared on many television and radio broadcasts, including interviews on CNBC, Fox Business Network, and several National Public Radio segments.

A nationally recognized speaker, Mr. LePatner has addressed audiences on topics central to the real estate and construction industries, including events sponsored by the Brookings Institution, Yale University, Syracuse University, and several construction industry associations.