Can We Rebuild an Industry?

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One commonly expressed view about the high and increasing cost of building construction in the U.S. is that if only we would apply the mass production techniques which reduced the cost of the automobile so drastically, the problem would be resolved—a $50,000 house (analogous to a $50,000 hand-wrought auto) would be brought within reach of everyone for $600 down and $50 a month for three years. Or, at any rate, "assembly-line" techniques would bring huge cost reductions.

In fact, techniques ranging from total prefabrication of entire building modules (mobile homes, Habitat, etc.) to integrated combinations of components (heating-lighting-ventilation, roofing-structure-ceilings, roof-deck-power-supply-ventilation, etc.) have so far met with only limited success, in terms of the sought-after economic benefits. Probably the most successful have been the mobile homes, but at an obvious price in quality of life.

Specific undertakings aimed at developing new techniques and effecting major savings (such as the School Construction Systems Development project in California) have had less than a moderate impact on building costs. The scale of such efforts has admittedly enabled some new and better individual products to be created. Some manufacturers who participated have stopped marketing their developments, while others are selling them at a premium independently of the systems with which they were originally integrated.

Major city and federal efforts in mass-produced housing have likewise produced only questionable returns. In Detroit, where 40 or 50 companies were expected to compete for contracts for factory fabrication of homes, three companies actually entered the competition. Some of the designing was, to say the least, peculiar; a house with a second floor furnace room that could be reached only via an outside ladder, and one with but a single door, opening directly into the dining room, with the entryway closet ten feet away around the corner.

This is not to say that mass production techniques, in some form, may not be part of an answer to the question of how to reduce costs. But we must beware of adopting a method that has worked elsewhere without understanding the foundation of its success. If we want to emulate the successful techniques of more progressive industries, we should, more fundamentally, adopt their philosophies—goal-orientation, cost-effectiveness, and systems analysis—and use them with a full understanding of the context of building-industry operations. And we should remain open-minded: for example, it may be that the real benefits to be gained from improved methods are in areas other than costs.

So let us talk not just about building systems, but about building-industry systems. And let us begin with a brief survey of the environment of the building industry: the diversity of its products, the status of fields wholly or partially outside the building industry which affect it, and some of the implications, and validity, of the current desires of the customers.

THE PROBLEM OF VARIETY

It is not just a matter of building homes. As well as housing (low and high density) the industry must provide schools (elementary, secondary, and higher, with facilities for residence, administration, learning, storage, athletics, and fine arts); hospitals (special and general purpose, and research); stores and shops; offices; auditoriums; factories (plus storage and research facilities); and a miscellany of structures that fall into none of these categories.

Within any one use-category there are wide differences in methods of operation—differences relating to staff and service, traffic flow, personnel interrelationships, special equipment systems and the distribution of supplies—these choices being dependent on such considerations as budgets, integration with existing facilities, proclivities of administrators, and recent developments in the user's field. The result is a wide variation in types of facilities which, on the surface, would seem to have very similar needs.

Of course, there may still be enough volume in many of these subgroups to justify some form of standardization. But we see that the problem is quite a bit more involved than to be solvable by the development of a few factory-fabricated building units. If building systems are developed they must be far more numerous in their types and variations than one imagines on cursory inspection.

Either there must be systems for each distinct building category, or there must be subsystems basic enough to be interchangeable between categories. The degree of interchangeability is inversely related to the scale of the prefabricated units. In other words, if we have a building system which consists of four quarters of a school, to be put together on the site to form a whole, we are not likely to be able to use it for a hospital. If our school-building system consists of sections of walls, sections of roof, and other similar major components, we are more likely to be able to use it in building other types of structures, since the sections don't automatically form classrooms. At the other end of the scale, one can build almost anything with nails, lumber, bricks, and mortar.

Even if user requirements were virtually identical from building to building, there would still be substantial divergences from site to site: variations often arbitrary) among local building codes are the most obvious, but also important are variations in climate, in geology, in the availability and economics of utilities (gas, electricity, water, sanitary and storm sewers), in the supply of particular materials and the skills they require, and in accessibility.

These site-to-site variations suggest that there is a limit to how much of a building can be standardized. And a great economy in one part of the job may be only a small economy in the whole. It may be that even the most effective "breakthrough" would yield a final "rental" or "cost of ownership" saving of no more than 5 per cent, and that (except for housing) this gain would not really offset the loss of value associated with a more standardized (or less "customized") product.

It has also been argued that the cost of operating most buildings is so high compared to the cost of the physical structure that it is worthwhile putting up an expensive, individually designed building if it improves operational efficiency. (Amortized over its life, with all costs fairly accounted, physical plant is usually only a few per cent of total annual operating cost-it is highest perhaps in housing.) But the effect of building design on operating costs is generally impossible to evaluate-which is perhaps more an indictment of cost accounting and management than of the building industry.

A limitation on the use of prefabricated parts is that their costs tend to be high if they have to be shipped over any distance. So there may have to be many local plants. There is also the question of whether the market for a building type or a subsystem will be geographically dense enough to call for "factories" of an economic size at economic spacings. The capital investment of setting up prefabrication facilities is, of course, substantial (and generally overlooked by the assembly-line romantic) and there is always the risk that a sleeping giant at the site will awaken. Many a new investment has foundered on the assumption that the competition would stand still.

THE BOUNDARY CONDITIONS

Cost savings, however, are not the only criterion. Savings, in time, greater accuracy, better workmanship, better maintenance, closer integration of work of different rates, simplified buying, interchangeability, demountability, and possibilities for controlling the obsolescence of the product—these are the real benefits promised by better techniques; and well worth going after. But it is clear that only very limited real progress can be made in construction techniques alone without reaching into other fields. It might be that, technically, the building industry is already nearly optimized, and that the only chance of substantial progress is to change the boundary conditions—operational, financial, legal, and political.

In the forefront of these is the bete noir of building: trade unions. A great deal more is involved here than simple recalcitrance toward labor-saving techniques and desire to avoid more demanding standards of craftsmanship.

It has been said that the true cost of building is the cost of labor plus material, plus the cost of labor's control over material. In the simplest kind of "innovation" dispute, a union local in one of the building trades refuses to install a labor-saving item. An example is the now famous "Philadelphia Door" case where the union mechanics refused to install 3,000 prehung doors called for by the architect's plans. An effort was made in the courts to compel the union to make the installation. When the matter was carried to the Supreme Court, it ruled in favor of the union.

As a result legislation has been proposed to prohibit unions from boycotting prefabrication. More recently, the National Labor Relations Board has ruled that such action against prefabricated materials constitutes a secondary boycott and hence is illegal. How the N.L.R.B. and the Supreme Court decisions are reconcilable is not clear, but these rulings in any case do not come completely to grips with the problem.

For one thing, they concern only prefabrication away from the site. There are many new methods that could profitably be introduced right at the job location. For another, there is a whole range of informal, unwritten tactics enabling unions to avoid the legal problems that would be created by a direct refusal to supply manpower.

So—written laws, court precedents, and labor-management contract provisions notwithstanding—the union local usually has the power of life or death over the business of a building contractor with whom it has an agreement. Today construction work is for the most part subcontracted by the general contractor to various specialty firms, each of which depends completely on a limited number of trades. A subcontractor seriously at odds with the union of his trade could find a miscellany of previously overlooked restrictions in his union contract, with an exceptional number of disputes, falling productivity of his work crews, unlooked-for delays, and so on. The result would be that he fails to meet his commitments, that his bids on new work must be too high, and that, undercapitalized as he probably is, he will soon be forced out of business. Beyond this, more than one overly loyal superintendent or employee has inadvertently fallen down an empty elevator shaft or had his skull fractured by a moving two-by-ten. The contractor therefore sees to it that his relationships with the unions are no less cordial than those of his competitors, and that any controversial innovations are fought for industry-wide if at all.

In view of all this, while there is a continuing effort on the part of the contractors to improve productivity, for the most part it takes the form of only minor changes from standard practice. There are enough hurdles for the contractor without embarking on any greater efforts to change the industry.

Should he or an innovative architect really wish to do so—with the cooperation of a courageous manufacturer and owner—he is contronted with the most crucial deterrent of all. He knows the written and the unwritten rules, and he knows that sometimes change will be allowed to occur if properly structured. But he cannot be certain of a specific change until he has gone through all the effort and investment of actually making it. He can get tentative nods before, but a union veto after the fact can bring the whole project to nothing. And there is no telling whether an innovation will be acceptable: the attitude of the union delegates is sphinx-like.

In short, anything more than a minor innovation requires one hell of a risk and possibly one hell of a fight, with costly aftereffects in the contractor's regular business. A motivation for such risk-taking might be generated by sharp competition, but the market is simply too profitable for that just now. And on the other hand, a shortage of work has an effect on the unions the reverse of what might be expected. Instead of increasing productivity to bring prices down and stimulate business, the tendency is to decrease productivity, featherbed, etc.

THE DIVISIONS OF LABOR

Complicating all this further is the division of building labor into many trades. (Ceiling contractors in New York, for example, are obliged to employ no less than nine separate trades to accomplish their no longer exotic work.) Any far-reaching changes in techniques—such as shop fabrication by union men working at field rates in the area of the local—will probably require reaching an agreement with the union locals of several trades.

The existence of these many separate divisions of trades also leads to jurisdictional disputes between them, with the contractor and owner caught in between. As an attempt to avert stoppages from this source, the National Joint Board for Settlement of Jurisdictional Disputes has run into killing fire from contractor associations and unions alike, not all of whom subscribed to it to start with. Its procedures are so slow that the job is finished before the Board reaches a decision (which will usually apply to the disputed job alone). Hence, any union having to avail itself of the Board is essentially out of luck, and the union will prefer to bring all other possible pressures against the contractor making the work assignment.

The main significance of this aspect of the problem is that the idea of cross-utilization of building trades, without over-employment or featherbedding, is crucial to the creative development of techniques which transcend conventional demarcation lines.

One further impediment is the regional diversity of union practices. Since usually only one key man is allowed to be imported from one local to another, there can be no centrally trained, roving crews. Once a new practice is accepted by a local of a given trade, there is a better chance of its being accepted in other areas, but it is still only an improved probability. Even when national union leadership sees the benefit of certain changes over the long run, it is rarely able to advance their cause. The leadership may be enlightened, but the rank and file membership wants short-range results.

It must be clear by now that the problems which the innovator faces have their roots not merely in the building industry but in the entire structure of American labor law and its interpretation. He who attacks the sanctity of labor in the building industry must in some measure take on the entire labor movement in the U.S. Considering the voting strength of organized labor, this is not a hopeful prospect.

On the other hand, to shift work from one trade or union to another is more likely of success, and hence the factory-fabrication approach has certain appeal. At present factory labor is less costly and more pliable. One can only conjecture, however, as to how long any such discrepancy would last.

One essential ingredient of industrialization is the use of relatively unskilled labor rather than skilled craftsmen. But it is an error to conclude that unskilled labor can only be employed in a factory.

In a recent announcement from Detroit, it was indicated that a producer of housing units was completely factory-fabricating houses for shipment to the site, and installing them at a total cost 25 per cent less than the cost of houses completely built on site in the conventional manner. Later on in the announcement it was revealed that his factory labor, recruited from among unskilled Negroes, is costing him $2.50 per hour. (There was also a federal employee training subsidy.) Now, how long will he be able to hire factory labor for $2.50 per hour? And, just as an arithmetical exercise, how much cheaper would a site-fabricated house be with $2.50 labor and the same subsidy?

There is a clue in this, though, which may work for reducing costs of low-income housing—the idea of training the currently unskilled poor in the building trades, so that labor supply and demand in this area would bring labor costs more nearly into line.

In a somewhat different vein there is what Secretary of Housing and Urban Development Romney calls "sweat equity," whereby low-income housing buyers would be obliged to accomplish part of the finishing work themselves.

THE RELUCTANT MANUFACTURER

The idea develops very early in one's business experience that labor and risk are almost synonymous; that the safest item to merchandise is one involving more material and less labor. The larger, more conservative interests are happy to leave the construction field to those more willing to live with higher, short-term risk.

In fact, manufacturers generally have concentrated on rationalizing the raw-material end of their operations, have been decreasingly involved with the actual field situation, and have grown less able to integrate their product developments thoroughly. Most of the manufacturers' information on new product needs comes from their contractor customers via sales representatives. Under straightforward, logical circumstances, there would be no great need for the manufacturer's direct involvement in the use of his products. As it is, his assistance would be welcome; but he is too far removed from the action to be able to contribute much.

The labor situation and remoteness from the field are not the only limits on innovation by manufacturers. They are further restricted by the conventional "compartments" into which building components are grouped. Not only are subcontractors and mechanics grouped in this manner, but building codes, bidding procedures, and a thousand other daily practices are predicated on these divisions.

Certainly, in some undertakings, components have been combined. Roof-decking systems have been integrated with horizontal roof structural members; exterior walls with vertical structural supports; lighting with heating and ceilings. But even these broader divisions require large-volume installations in order to succeed, because members of all building trades involved must participate in the work, in a fixed ratio agreed upon by management and unions.

A further restriction here is that most public agencies are required by law to take separate bids at least on heating, plumbing, electrical, and general contract work. And finally, each building code is administered by a specialist local inspector who is prone to interpret even a uniform national code in his own individual manner, certainly viewing with suspicion any unconventional multitrade component. The design professions, too, are divided into separate specialties, although on a professional level communications are generally a little more open.

Not only is understanding and information inhibited this way, but also the manufacturers' ability to market products requiring special training or experience to install. Although in times past some manufacturers installed their own products (and some still do) a common practice was to distribute them through franchised installers, each of whom had an exclusive territorial right and was obliged to sell an interesting amount of the product or lose the franchise. (Since sales are related to product quality and proper installation, one of the best ways to sell the item is to see that it is properly installed. The franchisee also has a considerable interest in improving techniques or helping the manufacturer develop desirable new products.)

LEGAL BARRIERS

However, in recent years interpretations of antitrust law have placed the exclusive territorial franchise in the "restraint of trade" category. As a result, not only is a major source of new product ideas being cut off, but only new products whose success is not too dependent on installation are created. The case where manufacturers have or acquire their own capability as part of their firm is also under a legal cloud. How these problems will relate to the "consortia" being established as part of the Department of Housing and Urban Development's "Operation Breakthrough" remains to be seen.

Another legal area having an effect on innovation is that of patents and their protection. There are several factors mitigating the value of patents. First, the basic life of a patent is only 17 years. In the construction industry, a new idea has to go through many slow stages before it emerges as a visible installation; by which time there may be less than 10 years of active life remaining to it. Of these, the last 3 years of any really successful building patent are riddled with violations (this being the length of time it takes to get an infringement dispute settled). And in any case (in the language of the legal fraternity) "the courts do not look kindly on patents." Rulings tend to be relatively liberal about what constitutes an interference and conservative about awarding damages.

Besides, the patent system is conceived in the first place to protect devices, whereas much of modern progress is in the area of ideas and system concepts—in software, rather than in hardware. The usual recourse—to cloak the idea or principle in a device and try to write as broad a patent as possible—is necessarily precarious.

Even success, rare as it is, has its penalties. There is at least one case in the building industry where a firm's patent was so successful that it created a virtual monopoly, by being so cheap as to make all competition incapable of competing. The company was forced to license others to manufacture the product.

ECONOMIC FORCES

We can now perhaps understand why investment in really radical changes is not apt to be overexuberant. And we have still not considered the financial forces that influence the choice between innovation and conservatism. A brief inspection will show that some of these influences work one way, some the other.

First, the cost of real estate and of assembling the proper parcels on which it is feasible to build buildings efficiently for the intended use is influenced not only by the density of population and the degree to which property is in demand, but perhaps even more by the zoning regulations pertaining to the property. In this sense, to some degree, property values are made by fiat.

Another important financial area is the cost that can be attributed to the non-usability of the land during the construction period. Real estate taxes continue and short-term construction financing is expensive. The sooner the new building is completed and in use, the better. It is in this area that any techniques for acceleration, whether organizational or technical, produce real financial benefit.

The cost of current purchase procedures for buildings is also a major factor. Organized purchasing for large groups of similar buildings has already shown its strength in terms of improved product, if not in cost reduction.

I have already mentioned another major cost—that of operating and maintaining the finished building. In this area also, improved techniques can make a major contribution by optimizing component life and serviceability.

Perhaps the most obvious single influence—since buildings are seldom paid for in ready cash—is the prime interest rate. Over a 20-year period the cost of aggregate interest payments is one of the same order as that of the building itself. In this light, a 1 per cent drop in the interest rate can produce far greater savings than can realistically be expected from the most radical change in construction methods.

Finally, another obvious influence is that of real estate taxes and assessments. Taxes are not only a direct cost but also have an influence on the age at which a building can most profitably be resold, and hence on how durable its components should be. Repairs are operating expenses and therefore tax deductible and, in varying degrees, preferable to high initial outlay.

Among the significant secondary influences, probably the most important of all, and the most inexorable in its working, is the requirement for balanced development of neighborhoods and cities. Housing accommodates the population which is the fuel for economic development; industrial plants are both support facilities and suppliers of purchasing power. Without a certain proportionateness, housing will be less than desirable, industry will lack high-quality manpower, and the stores will go begging. Our dying downtown centers reflect a dislocation of this balance. The helter-skelter success of suburban sprawl reflects a different kind of dislocation. Owing much to huckstering and to a lack of desirable alternatives, this temporary prosperity by no means insures us against future deterioration into gigantic suburban slums.

In the foregoing observations the subject of law has come up repeatedly—labor, antitrust, patent, tax, and zoning laws, as well as building codes.

There are still other legal areas that affect building, such as legislation for historical preservation, conservation, and fine arts commission or "architectural committee" review—which are well-meaning in their intentions but are often illogical or mean in the application. In New York City for instance, the facade of a legally designated landmark must be preserved, but the remainder of the building may be demolished and replaced. And many a town can boast a review commission strongly influenced by local manufacturing interests or, worse, the unidentified inclination to increase property values by restricting newcomers. As a first glimmering of recognition of the significance of these constraints, a new Bar Association Special National Committee on Housing and Development Law has now been formed. Hopefully, similar attention to some of the other areas outlined above will also follow.

THOSE WHO DWELL THEREIN

Tracing the relationships between building and various facets of the law—which in our democracy is naturally contingent on the active or tacit support of the electorate—eventually leads us to examine our politics, ethics, and aesthetics in the largest sense. It raises the question, can the situation in the end be better than the participants in it?

One noted architect has remarked that if profits are to be derived from poor and ugly buildings, they will be built. But it also seems true that expensive buildings are constructed in preference to cheap ones on similar grounds. Before we build millions of standardized housing units, we should ask what premium the poor would in fact pay for custom housing? (How many of the poor have TV? Does the automobile owner in the low-income group drive the cheapest car on the market?)

The individual wants to make an input into his environment, and that includes his buildings. Will he welcome a single, universally imposed low-cost building breakthrough, however sagacious? In trying to provide for people, we must remember that they act as if there are greater goals to be sought than economy.

If we believe Veblen, we are barking up the wrong tree with cheaper building. The pecuniary canon of taste—conspicuous consumption—dies hard. The well-conceived and highly touted "new town" of Reston, Va. (financially rescued by Gulf Oil, in order to recoup a multimillion-dollar investment), had one major problem: its town houses—efficient, economical, well-designed town houses—were hard to sell. Did the buying public equate these with city row houses? In fact, will the public buy efficient, intelligent, balanced planning?

The market history of developments such as the telephone, television, the automobile, seems to follow a pattern: in the beginning the richest, who are the leaders of popular taste, pay for the expensive novelty; and society follows in imitation, generally getting a modified version. There may be a clue here. If affluence is, in fact, increasing at all levels and destined to continue in its growth as the think-tank seers predict, the key to the future may lie in making high-grade improvements in buildings, and letting the growth of purchasing power do the rest.

Suppose that rational optimization dictates the development of a disposable architecture—short-life "throw away" buildings; would the public still want brick fireplaces, and philanthropists continue to insist on colonnaded porticoes on public buildings? Suppose financial analysis dictates that the greatest housing economy comes from living high-rise in suburbia; will the public still want single-family housing on half-acre plots? Suppose the science of urban planning proves a need for flexible cities, segments of which can be demounted and updated to meet new conditions; will the public demand instead greater permanence?

In short, goal-orientation, cost-effectiveness, and the systems approach are techniques with their roots in rationality, which commend themselves to those disciplined in the application of reason. The rest of the world, and the strata with which the building industry must deal, are certainly willing to hail the results of technology and reason's output. But a very fundamental change is going to be needed before the bulk of the consuming public will actively participate in building-industry systems. Meanwhile, the taste of the buyer remains a massive unknown.

To sum up, there are an almost discouraging number of hurdles to be cleared if we are substantially to improve the utility of the building industry. It can be done, but we must seek the answers where they are apt to be found, not where the spotlight of public relations is brightest or the rhetoric most soothing.

Most disturbing of all, perhaps, is that we—as creative technologists—are faced with a new kind of problem. Most previous technological advances have been developed along with the new industries needed to exploit them. New developments were made by many small firms which grew—in a welter of activity in which successes were copied and failures learned from—into a large industry.

Here, the industry already exists, viscous with established practice and legal or quasi-legal restriction. The building problem cuts deep because we must alter existing methods and institutions, must face up to and painfully correct past errors. We are forced to replace an irrational structure with a rational one.

AUTHOR'S POSTSCRIPT

This article was actually written in 1969 and originally published in MIT's TECHNOLOGY REVIEW in May of 1970. A few things have changed somewhat, but in retrospect, I think the basic position is still sound. It is true that Detroit's first experiences with some rather bizarre proposals by prospective housing systems manufacturers have been superseded by better designs now in evidence; some produced by participants in the Department of Housing and Urban Development's "Operation Breakthrough." Large cost savings, however, are still on the "outskirts of hope." In any case, the matter of improved techniques in building construction is still a much more deeply involved subject than is advertised, and at best, to date, is largely an effort distorted by accepting as given many irrationally founded characteristics of related fields as well as irrational purchasing habits.

One idea that I should have emphasized more strongly is how the restrictive effect of current labor law and practice keeps the unskilled poor from finding their way into the building trades. Under free market conditions these high paying trades would attract many poorer paid workers or unemployed, reducing excessive construction wages by the operation of supply and demand; while at the same time helping to improve lower class and minority income and conditions.

Finally, another thought, which probably should have been expressed in the original article, is my disbelief in the so commonly treasured fantasy that progress in very complicated structures can be created by single magic "breakthroughs" or insights, simply by massive application of cash alone without regard to quality, skill, or soundness of input.

This article is copyright 1970 by the Alumni Association of the Massachusetts Institute of Technology.

J. Karl Justin is a Registered Architect, Licensed Professional Engineer, and Licensed Planner. He received his S.B. degree from the Sloan School's ancestor, M.I.T.'s Course XV, in 1948. He has spent about equal portions of his 20 years of experience in architecture, engineering, planning, building contracting, and building-products manufacturing and is currently Director of Projects Administration with Max O. Urbahn Associates, Inc., Architects and Planners, in New York City.

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