Data available for decades shows that buildings now cost twice what they should. Worse, this data indicates no end in sight to the skyrocketing waste and excessive overhead. The root cause—decades of cost-plus contracting—must be addressed. Learn about a proven, win-win, value-driven solution that applies the same management philosophy that transformed manufacturing.
The Hidden Truth Behind Construction's Cost Crisis
2X Cost Climb
Owners pay double what inflation justifies, with no relief in sight.
See the Data
4.5X OH Bloat
Owners pay 4.5x the waste - mostly overhead-related.
See the Data
Time Warp
Construction's archaic system, unchanged for 80 years, keeps winning over progress.
Uncover the Reality
Cost-Plus Trap
Profit on waste drives costs, not value, crippling the industry.
See Why
Myriads of solutions—like BIM and lean construction—hold great potential but often add to the overhead problem. Today, both the problem and the improvement can be measured. A massive opportunity awaits innovative builders, designers, owner reps, and owners to turn waste into profit and value.
Problem 1 – Owners Now Pay Double for Buildings ×
Published escalation data since 1967 shows that today's buildings cost more than twice what national inflation would justify. Some owners are paying nearly three times what they should. And there's no sign of the trend slowing.
Figure 1 illustrates how construction costs began diverging from national inflation in the 1960s, with major spikes around 1980, 2004, and a sustained rise since 2011. COVID added another layer of volatility, pushing prices even higher.
Figure 1 – Construction Escalation vs. National Inflation
This trend isn't anecdotal—it's backed by transparent, nationally published data. While many builders and designers have ignored or buried these insights, they also stand to benefit most by helping reverse the trend.
Data Sources Anyone Can Verify:
National Inflation – U.S. Consumer Price Index data from the Bureau of Labor Statistics, accessible via US Inflation Calculator.
Construction Cost Escalation – Ed Zarenski's Construction Analytics, which compiles building cost indices from industry sources dating back to 1967.
Figure 2 – Construction Building Cost Indices from edzarenski.com
Even before COVID, costs were already exceeding justifiable levels. As we'll explore further in Problem 4: Cost-Based Compensation, misaligned incentives and risk-averse budgeting have fueled a runaway trend that data—and better delivery models—can now help solve.
Problem 2 - Exponential Growth in Waste×
Since 1967, indirect labor, overhead, and other waste has grown 4.5 times what national inflation justifies. In 1967 overhead and profit was about a quarter of what the owner paid. In 2025 it is well over half. The data shows that the problem is not due to materials or labor—it's systemic waste built into how buildings are designed and contracted for.
Figure 1 – The Systemic Problem Over Time
Let's take an example of a $5M project in 1967. Based on national inflation that building should cost $47.7M today. But, as the Construction Analytics data shows, owners now pay $96.1M—more than double what inflation warrants.
Figure 2 – The Impact on Project Budgets Today
Calculation Summary
1967 total: $5,000,000
2025 inflation-adjusted: $47,681,000
2025 actual: $96,156,000 (2.02× increase)
Materials & labor: 1.14× increase
Overhead & profit: 4.46× increase
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Assumptions and Data Sources
In 1967, the Project Overhead (aka General Conditions (GC's) and Requirements (GR's)) and fees (Office Overhead and Profit) amounted to:
1st tier Builder: 8% of the construction contract.
2nd tier Subcontractor or self-perform operations: 20% of the trade scopes
A total of 26.4% (8% plus 20% of the remaining) of the construction contract (what the owner pays).
The direct field productivity – Although today's direct field productivity should be higher today, we'll assume it to be the same for this analysis.
Building quality (design and execution) has improved consistent with quality improvement in other sectors (manufacturing, retail, etc.) that factor into inflation.
Political, environmental, and social justice regulations and other demands have increased consistent with other sectors as well.
The impact of today's weather on a project is the same as it was in 1967.
This math exercise shows us where, and to what magnitude, the problem has grown. We have a massive, and exponentially growing, problem that creates an equally massive opportunity for builders, architects, owners reps, and owners to embrace
Problem 3 – Fragmented and Archaic Processes ×
Despite decades of technological advancement—BIM, VDC, IPD, VR, and more—construction planning and preconstruction remain fragmented, manual, and disconnected. Unlike manufacturing or retail, where integrated systems drive automation and efficiency, building projects are still driven by spreadsheets, siloed tools, and tribal knowledge.
Nearly every planning and preconstruction process—from business case development to estimating and cost management—requires manual, file-based transactions between owners, designers, and builders. These handoffs are not only inefficient, they are fundamentally incompatible with the needs of complex building programs.
Figure 1 shows the reality:
Thirteen core processes are split across disconnected roles and tools. Owners, owner reps, architects, and builders each operate in isolation, using different and inconsistent information and data standards and structures.
Figure 1 – Planning and Preconstruction Silos
Even within organizations—especially builders—there's little to no integration between departments like business development, estimating, procurement, project management, or accounting. The result is that as new technologies are applied - they only expand the overhead within each silo. This further entrenches the prevention of any form of measurable process or value improvement.
Meanwhile, the data needed to guide decisions simply doesn't exist. Builders claim deep historical knowledge, yet no one in the supply chain—owners, designers, builders, or cost consultants—has captured reliable, contextual data tied to the real causes behind cost outcomes. Estimates are built from surface-level comps or SWAGs (scientific wild-ass guesses), more influenced by what the owner can tolerate than what labor and materials actually cost.
Why has nothing changed? Because there's no shared structure. No standard. No system.
No Standards = No Knowledge
The lack of structured data is the root problem. Without a common standard, even the most advanced software can't connect data across phases, roles, or systems.
Organizations like CSI (Uniformat 2010) and ASTM (E1557 – Uniformat II) have attempted to develop standard cost frameworks. But instead of alignment, they compete—offering inconsistent, incomplete, overlapping, and conflicting definitions.
A survey of 20 preconstruction professionals from 13 ENR Top 100 builders confirmed it:
Uniformat has potential to set consensus data standards to integrate and automate across processes and technologies.
But both CSI and ASTM versions are inconsistent, error-prone, and incomplete
Most issues could be resolved through a consensus-building effort across owners, designers, builders, and data professionals
Yet when asked to collaborate, none of the builders agreed to participate. Why?
Uniformat has potential to set consensus data standards to integrate and automate across processes and technologies.
Because any solution that creates transparency also threatens the estimator's role and builder's profit sources.
That brings us directly to Problem 4 – Cost-Based Compensation, the core driver behind construction's resistance to change.
Problem 4 – Cost-Based Compensation Drives Waste ×
A typical exam room built today in St. Louis costs about $200,000—nearly double what national inflation would justify. This isn't an anomaly—it's the result of a system where the entire supply chain profits from higher costs and more time.
The root cause? Cost-plus and billable-hour compensation structures.
From owner reps and architects to builders and subcontractors, everyone's profit increases when a project costs more and enables more hours to be billed.
This financial model is the common thread behind the other problems:
Many professionals—and their companies—are trapped in a growing conflict between their intrinsic motivation to serve clients and the financial incentives that push them toward short-term profit. The result? Trailer villages of billable workers on-site, generating work for one another in a highly manual process (see Problem 3), while keeping owner reps and facility staff constantly engaged with layers of "customer service."
It's madness: cost-plus and billable-hour compensation reward inefficiency and busyness over value, fiscal responsibility, and meaningful outcomes.
A Broken Promise
Construction Management (CM) emerged in the 1970s to help owners control cost and schedule. More recently, Integrated Project Delivery (IPD) and other negotiated delivery models aimed to improve collaboration. But instead of increasing productivity, they've simply normalized inflated budgets and timelines.
Builders now "solve" cost and schedule issues by inflating the baseline—padding estimates with allowances and contingencies, often shaped more by what an owner can tolerate than by real material and labor costs.
Subcontractors follow suit, especially when brought on early as "trade partners." Architects, too, are financially motivated to overdesign. The result? A cooperative—but costly—project.
Facility managers often accept this because they're treated well. Claims and disputes are easier to manage under bloated budgets. But behind the customer service smiles, waste has become systemic.
Deming Warned Us
"If they remember me at all," Deming once said, "I hope it's as someone who tried to prevent America from committing suicide."
The construction industry is doing just that—burying value under bloated budgets, inflated designs, and misaligned incentives. With national debt surpassing $36 trillion, continuing down this path isn't just irresponsible—it's self-destructive.
But the Solution Is Here
We now have the tools, standards, and systems to flip the model:
From profit-from-waste to profit-from-efficiency
From guesswork to data-driven planning
From hidden cost to transparent value
The only question is:
Who will lead the change?
Owner / Developer
Transformation Starts with Planning
Even while other sectors from retail to manufacturing have transformed their efficiency, boosted their productivity, and embraced the digital age, construction appears to be stuck in a time warp.
McKinsey Global Institute's 2017 report
In just days, you'll experience the difference in the now 88 year time-warped construction process - and one that has been transformed. Today, you can start eliminating layers of waste in time and cost. Here are a few of the many benefits that a value-driven, win-win system provides you:
TRANSFORMED PLANNING Rather than the weeks long cycle time it takes for feasibility studies, scope / program studies, and related budgeting - these cycles can be performed collaboratively and in real time.
TRANSFORMED PROGRAMMINGReplace one-off, Excel spread sheet space programs based on erroneous grossing factors with impartial data-informed and computerized programming models.
TRANSFORMED BUDGETING Replace the "fox in the hen house" budgeting process with impartial, real world, data-informed time and cost models.
VARIATION (RISK and OPPORTUNITY) ANALYSISApply data and the Pareto (critical few) analysis to resolve variation to better manage uncertainty, and make better informed decisions.
STREAMLINING, PROCESS and VALUE IMPROVEMENTApply the Toyota 5S approach experienced in transformed planning, programming, and budgeting throughout the design and construction process.
MEASURABLE WASTE REMOVAL in TIME and COSTReplace unconstrained billable-hour, allowances, contingencies, and other embedded waste with an object, computer-aided, measurement system.
ENJOYMENT and FREEDOMExperience the difference between a value-driven, win-win approach compared to our current tedious, oppressive, abusive, archaic, cost-driven approach.
We provide initial services and supporting technology at no cost. After the project assessment, we offer ongoing service and technology options based primarily on measurable value improvement.
Initial Engagement Steps
Real Project Assessment and Example Process Improvement Map
We will perform a detailed analysis of one of your ground-up projects—whether it's in early planning, schematic design, under construction, or recently completed. In either case, you'll gain insight into how it compares to current market conditions and where hidden variations—risks and opportunities—exist.
Piloting Cost Certainty and Value Improvement Strategies
If Step 1 involves a project in planning or schematic design, we propose recording and analyzing a second "benchmark" project to build confidence in the data. This could come from your historical records, a builder, or a designer. If Step 1 involves a project under construction or recently completed, we recommend piloting the approach on a proposed or preconstruction-stage project.
If both steps demonstrate value—and as the benefits of a value-driven, win-win approach to planning, design, and construction (PDC) become clearer—we'll propose an ongoing engagement supported by a customized contracting and technology framework. The following outlines a sample plan.
Show Process Development and Ongoing Improvement Steps
Continue Piloting Cost Optimization Using the Value-Driven PDC Approach
Based on the first two steps, we'll continue piloting the process improvement features that offer the most value to you and your team. We'll also propose a comprehensive roadmap with alternative options—and the ability to simulate and compare those alternatives.
Innovation Vision Casting & Strategic Plan
Drawing from the specific project experience—and ideally in collaboration with other engaged teams—we'll apply what we learn to help shape the vision for future development. This will support the creation of a strategic plan and a "next-project" implementation roadmap.
Value-Driven PDC Design, Training, and Implementation
We'll support the ongoing design and rollout of the Value-Driven PDC system, providing training and hands-on implementation for your core team.
Continuous Improvement Process
We'll help implement and scale a continuous, measurable improvement process—grounded in the proven principles and methods of Deming.
×
Owner Rep / Consultant
Transformation Requires a System
What we need to do is learn to work in the system, by which I mean that everybody, every team, every platform, every division, every component is there not for individual competitive profit or recognition, but for contribution to the system as a whole on a win-win basis.
W. Edwards Deming
Our goal is to partner with you to provide a win-win alternative where your client benefits from a more certain and much lower cost, and everyone else - including you - can generate a significantly higher return on effort - by working together as a system.
The waste has become so enormous and the solution so ready - that this goal is easily attained. Today, you can start eliminating layers of waste in time and cost. Here are a few of the many benefits that a value-driven, win-win system provides your client:
TRANSFORMED PLANNING Rather than the weeks long cycle time it takes for feasibility studies, scope / program studies, and related budgeting - these cycles can be performed collaboratively and in real time.
TRANSFORMED PROGRAMMINGReplace one-off, Excel spread sheet space programs based on erroneous grossing factors with impartial data-informed and computerized programming models.
TRANSFORMED BUDGETING Replace the "fox in the hen house" budgeting process with impartial, real world, data-informed time and cost models.
VARIATION (RISK and OPPORTUNITY) ANALYSISApply data and the Pareto (critical few) analysis to resolve variation to better manage uncertainty, and make better informed decisions.
STREAMLINING, PROCESS and VALUE IMPROVEMENTApply the Toyota 5S approach experienced in transformed planning, programming, and budgeting throughout the design and construction process.
MEASURABLE WASTE REMOVAL in TIME and COSTReplace unconstrained billable-hour, allowances, contingencies, and other embedded waste with an object, computer-aided, measurement system.
ENJOYMENT and FREEDOMExperience the difference between a value-driven, win-win approach compared to our current tedious, oppressive, abusive, archaic, cost-driven approach.
We provide initial services and supporting technology at no cost. After the project
assessment, we offer ongoing service and technology options based primarily on
measurable value improvement.
Initial Engagement Steps
Real Project Assessment and Example Process Improvement Map
We will perform a detailed analysis of one of your ground-up projects—whether it's in early planning, schematic design, under construction, or recently completed. In either case, you'll gain insight into how it compares to current market conditions and where hidden variations—risks and opportunities—exist.
Piloting Cost Certainty and Value Improvement Strategies
If Step 1 involves a project in planning or schematic design, we propose recording and analyzing a second "benchmark" project to build confidence in the data. This could come from your historical records, a builder, or a designer. If Step 1 involves a project under construction or recently completed, we recommend piloting the approach on a proposed or preconstruction-stage project.
If both steps demonstrate value—and as the benefits of a value-driven, win-win approach to planning, design, and construction (PDC) become clearer—we'll propose an ongoing engagement supported by a customized contracting and technology framework. The following outlines a sample plan.
Show Process Development and Ongoing Improvement Steps
Continue Piloting Cost Optimization Using the Value-Driven PDC Approach
Based on the first two steps, we'll continue piloting the process improvement features that offer the most value to you and your team. We'll also propose a comprehensive roadmap with alternative options—and the ability to simulate and compare those alternatives.
Innovation Vision Casting & Strategic Plan
Drawing from the specific project experience—and ideally in collaboration with other engaged teams—we'll apply what we learn to help shape the vision for future development. This will support the creation of a strategic plan and a "next-project" implementation roadmap.
Value-Driven PDC Design, Training, and Implementation
We'll support the ongoing design and rollout of the Value-Driven PDC system, providing training and hands-on implementation for your core team.
Continuous Improvement Process
We'll help implement and scale a continuous, measurable improvement process—grounded in the proven principles and methods of Deming.
×
Builder
Transformation Requires a Change in Philosophy
A change in philosophy requires unlearning industrial thinking evident in departmentalization, scarcity of knowledge and information competitiveness.
W. Edwards Deming
Our goal is to help you start removing layers of accumulated waste - turning it into lower cost for your customers, and higher profit and return-on-effort for you, This requires a change in management philosophy described throughout this site.
The waste has become so enormous and the solution so ready - that this goal is easily attained. Here are a few of the many benefits that a value-driven, win-win system provides you and your customers:
ALIGNED INTRINSIC and FINANCIAL MOTIVATION By eliminating Cost-plus and billable hour approach to generating profit - your intrinsic motivation towards excellence and producing value is now aligned with the financial motivation to turn waste into profit.
WIN BETTER PROJECTSWhen pursuing conventional RFPs you can be equipped with a powerful knowledge system and contracting alternative to beat your competition by providing measurable value improvement to your customer.
TRANSFORMED COST MANAGEMENT Replace conventional estimating and estimators with professionals motivated and equipped to drive out waste in project and company overhead to steer projects to optimal outcomes.
VARIATION (RISK and OPPORTUNITY) ANALYSISApply data and the Pareto (critical few) analysis to resolve variation to better manage uncertainty, and make better informed decisions.
STREAMLINING, PROCESS and VALUE IMPROVEMENTReplace unconstrained billable-hour, allowances, contingencies, and other embedded waste with an object, computer-aided, measurement system.
MEASURABLE WASTE REMOVAL in TIME and COSTApply the Toyota 5S approach experienced in transformed preconstruction and construction.
REDUCE OVERHEAD AND PEOPLEStart removing layers upon layers of waste in overhead - project and internally. Significantly reduce the need for non-productive, indirect labor on and off-site.
ENJOYMENT and FREEDOMExperience the difference between a value-driven, win-win approach compared to our current tedious, oppressive, abusive, archaic, cost-driven approach.
We provide initial services and supporting technology at no cost. After the project assessment, we offer ongoing service and technology options based primarily on measurable value improvement. One of our goals is to develop and train a new class of customer service and cost professionals to take over the operation of Building CATALYST from the owner or owners rep, through the completion of the project.
Initial Engagement Steps
Seed a Historical Project Database
We'll record one or two of your recent real-world projects in Building Catalyst to seed your historical data system, and gain the confidence that comes from good data and processing systems.
Piloting Cost Certainty and Value Potential Assessment
We'll work together with you in the pursuit of a new project and/or piloting Catalyst on one of your current projects. We'll train you on the use of Catalyst and transition the operation to your cost professionals.
Show Process Development and Ongoing Improvement Steps
Vision, Strategic Plan, and Optimization Pilot
We'll work with you to craft and present a vision using the Value-Driven PDC model.
Piloting Cost Optimization on a Real Project
With owner buy-in, we'll help implement and measure the Win-Win benefits on a live project.
Action Plan, Training, and Rollout
We'll support you in designing and rolling out the system, including continued core team training.
×
Architect
Making the original BIM vision possible
Building Information Modeling (BIM) is a digital representation of physical and functional characteristics of a facility. A BIM is a shared knowledge resource for information about a facility forming a reliable basis for decisions during its life-cycle; defined as existing from earliest conception to demolition.
US National Building Information Modeling Standard
This knowledge oriented BIM vision, together with a dynamically integrated version of today's design oriented BIM is ready to transform the PDC (Planning, Design, and Construction) process. Building CATALYST provides the knowledge oriented BIM and, when combined with a value-driven, win-win suite of contracting forms, will provide many benefits to the architect and engineer, including:
RAPID SCENARIO PLANNING Offer multiple, program/design solutions, in a fraction of the time that it currently takes to produce just one.
MORE OUTSTANDING DESIGN As uncertainty and waste are removed, the opportunity to present and afford more beautiful and elegant designs are enhanced.
STREAMLINE DESIGN DEVELOPMENT End the tedious, seemingly endless, meeting-laden cycle: present, discuss, price, review, re-present, re-discuss, re-price, and then repeat. Cut the monthly cycle times into days.
STREAMLINE DESIGN EXECUTIONStandardize, integrate, and automate within your company and across the project team to eliminate layers upon layers of waste in time and cost.
INCREASE PROFITAs value-driven, win-win design and construction grows, so will your return-on-effort.
In the matter of a few days, you can experience the power of this BIM vision to transform the planning, design, and construction of buildings.
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Educator / Researcher
Transformation Requires a Knowledge System
Lack of knowledge…that is the problem…Information is not knowledge. Let's not confuse the two…The world is drowning in information but is slow in acquisition of knowledge. There is no substitute for knowledge…We are here to learn, to make a difference and to have fun.
W. Edwards Deming
Data discoveries over the past few years call for a broader and deeper research, pursuit of knowledge, application of the scientific method for innovation, and then educating future architects, engineers, and builders.
These questions are posed to leaders among construction science and industry educators and researchers:
DATA RESEARCH :Has the data on this site inspired you toward further data research to test the Genesis/Deming hypotheses?
SCIENTIFIC APPROACH:Is there a credible case that Deming's management philosophy, and scientific approach, can transform facility planning, design, and cost management?
COURSEWORK:Would you be interested in exploring the development of coursework based on the application of Deming's management philosophy with other construction science programs and industry leaders?
APPLIED RESEARCH: Would your campus planning and facilities department be interested in piloting the alternative to cost-plus contracting, and trying out features of a Deming-based, value-driven planning, design, and delivery process?
If any of these questions appeal to you, please reach out. We'd love to start the conversation.
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Thought Leader / Reformer
Transformation Requires a Bold Leadership
The source of innovation is freedom. All we have - new knowledge, invention - comes from freedom. Discoveries and new knowledge come from freedom…Long-term commitment to new learning and new philosophy is required of any management that seeks transformation.…Our prevailing system of management has destroyed our people. People are born with intrinsic motivation, self-respect, dignity, curiosity to learn, joy in learning.
W. Edwards Deming
In 2003/4 the Construction Industry Institute (CII) and the Department of Commerce Bureau of Labor Statistics (BLS) released data studies comparing construction and manufacturing productivity. Then, in 2017 the McKinsey Global Institute (MGI) released a report Reinventing Construction from an exhaustive study, best captured by this quote:
…construction appears to be stuck in a time warp. In the United States since 1945, productivity in manufacturing, retail, and agriculture has grown by as much as 1,500 percent; productivity in construction has barely increased at all.
As shown throughout this site, data discoveries since then show that following each of these studies, construction costs surged to even greater levels. The cost crisis has become far greater than when these troubling studies were published.
If you're engaged in the AEC industry as a thought leader, reformer, or leader among such associations, enterprises, or universities, then these questions are for you:
Do the data discoveries on this site motivate you to challenge or validate the various hypotheses - from construction costs now double what they should - to the primary culprit being cost-plus and billable hour contracting?
Do they inspire or challenge you and your colleagues to initiate further research and/or pilot solutions to the proposed problems?
Would you like to join a community of like-minded thought leaders to advance research and/or Deming's scientific method toward innovation, and measurable process improvement?
If so, please reach out. We'd love to start the conversation.
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A Proven Alternative to the Cost Crisis
Japanese manufacturers like Toyota led the way in forcing American industry to adopt W. Edwards Deming's systems-based management philosophy. The same principles that revolutionized manufacturing can now be applied to facility planning, design, and construction. Scroll through the quotes below to see how.
W. Edwards Deming
Construction's complexity makes it ideal for Deming's system of profound knowledge. By aligning teams with outcome-focused incentives, we cut waste and boost value from planning to delivery, creating win-win outcomes for owners, builders, and communities.
A Value-Driven, Systems Approach to Construction
With costs doubling and waste soaring, Genesis leverages a Deming-based system to transform planning and cost management. Powered by Building Catalyst, a commercially available web-based BIM application, we replace archaic preconstruction methods, eliminating layers of time and cost waste. Catalyst enables a shift from cost-based pricing methods (e.g., cost-plus, billable hours) to value-driven structures, redefining construction by tying profit to value delivered.
Discover how a planning and budgeting process, typically taking weeks with unreliable results, can be completed in days with greater accuracy and confidence. You'll eliminate tedious, repetitive tasks and align your efforts with delivering excellence and value.
Do these challenges sound familiar? Or are you facing another obstacle we can help you overcome?
Owner / Developer
You are struggling with the budget estimates from your cost consultant or builder. You'd like an impartial valuation of the program, design, and/or cost, and options to optimize outcomes.
You question the builder's budget estimate or have a client that's facing a significant budget problem. You'd like either a second opinion, or to propose an alternative design and delivery method.
You are providing a feasibility study with multiple building solution options that need to be considered. You'd like an impartial and credible comparative program and cost analysis for each.
You have studied the data and can see that something must be done about runaway construction costs. Nothing, including lean construction as worked. A Catalyst-enabled, Systems Approach is worth considering.
You recognize that research is essential to validate Deming's principles for construction, addressing a long-standing need for innovation. A new approach to educate designers and builders is required, rooted in the philosophies and scientific methods proven in manufacturing.
You are a thought leader in the AEC realm and would like to join other leaders to help reform the PDC process based on the proven management approaches in other sectors.
The US Inflation Rate data can be accessed here. It provides historical inflation rates with annual figures from 1914 to present. These inflation rates are calculated using the Consumer Price Index, which is published monthly by the Bureau of Labor Statistics (BLS) of the U.S. Department of Labor.
Also shown in figure 1, is the combined building materials escalation and construction industry wage rate growth. The produce price index data is provided here on the Statistica website. Wage rate growth data is provided here on the Federal Reserve Bank website.
Construction Analytics forms the basis of the Owner's Building Cost data and can be accessed here.
