Interoperability problems in the capital facilities industry stem from the highly fragmented nature of the industry, the industry's continued paperbased business practices, a lack of standardization, and inconsistent technology adoption among stakeholders. The objective of this study is to identify and estimate the efficiency losses in the U.S. capital facilities industry resulting from inadequate interoperability. This study includes design, engineering, facilities management and business processes software systems, and redundant paper records management across all facility life-cycle phases. Based on interviews and survey responses, $15.8 billion in annual interoperability costs were quantified for the capital facilities industry in 2002. Of these costs, two-thirds are borne by owners and operators, which incur most of these costs during ongoing facility operation and maintenance (O&M). In addition to the costs quantified, respondents indicated that there are additional significant inefficiency and lost opportunity costs associated with interoperability problems that were beyond the scope of our analysis. Thus, the $15.8 billion cost estimate developed in this study is likely to be a conservative figure.