How information technology enabled a small building contractor to turn government inefficiency into a competitive advantage
We've all heard those infamous stories of the Pentagon's profligate ways: $250 for a hammer, $600 for a toilet seat. Rick Lewandowski, secretary-treasurer of MDP Construction Inc., has a few of his own. Take a stroll with Lewandowski across the Bauhaus-style grid campus of the United States Air Force Academy, in Colorado Springs, Colo., and he'll give you a guided tour of the military's exorbitant taste in building materials: $200,000 worth of Cold Springs granite for the service entrance of Mitchell Hall; $400,000 worth of white Georgia marble for the stairs of the cadets' chapel; $500,000 worth of marble panels to line each stairwell in Fairchild Hall. It's the same old story, perhaps, but what makes this case disarming is that Lewandowski is the last person you'd expect to find grumbling over the extravagance: he's the contractor the government hired to install those costly architectural features.
You might think that having a spendthrift client like the U.S. military would be every small contractor's dream. But to hear Lewandowski tell it, there are plenty of nightmares, too. Even though every penny of MDP's $12 million in revenues comes from the government and the company stands to get a decent slice of the $87 million the Pentagon has earmarked for construction projects at Colorado military installations in 1997, it's a system fraught with such stifling bureaucratic inefficiency that most smaller contractors are at a decided disadvantage. Winning one of those fat government contracts, Lewandowski notes, means having to contend with a thicket of regulations and a mountain of paperwork. Even worse, he says, it means grappling with pointless and infuriating cost overruns and scheduling delays. These result from what Lewandowski regards as the military establishment's spectacular talent for getting its signals crossed--like the time he showed up at a munitions building in Pueblo, Colo., to install a customized $36,000 hoist contracted a year earlier, only to be informed by the building manager that no one in Pueblo had been consulted during the design process and that the site had no real use for it.
Larger contractors usually deal with snafus of this sort by simply throwing more staff and resources into the fray. A smaller construction firm like MDP does not have that luxury. And even when a project goes smoothly, the onslaught of paperwork can be enough to bury a company that has limited personnel. So how does a modestly sized enterprise manage to stay competitive--indeed, to thrive--in an arena that so clearly favors the behemoths?
For Lewandowski, a self-taught computer fanatic since his own days in the military, the answer is automation: harnessing information technology (IT) to achieve efficiency and order in a business that's notorious for waste and chaos.
At MDP, information systems are used to streamline practically every aspect of the business, from long-range planning to routine management. Those systems give Lewandowski the ability to stay on top of grinding workaday details. "I knew from the start that I wanted the business computerized," he says. "Now we couldn't operate without computers."
To appreciate the difference automation has made for Lewandowski's operations, you first have to envision the daunting trail of red tape that comes with a typical government construction contract. Take payroll, for example. On each project, Lewandowski has to file official documents showing that his company complies with the Davis-Bacon Act, which requires government contractors to pay at least the local prevailing union wage. He therefore must submit a weekly certified payroll for each of his subcontractors, which can number as many as 60 per week. The government also requires that the company file monthly equal-opportunity reports, weekly payroll tax reports, biweekly contract-progress reports, and an assortment of other standard forms.
But keeping up with the endless paper shuffle is a snap compared with waiting for the sluggish wheels of government bureaucracy to turn. Because Pentagon officials have little incentive to be efficient, says Lewandowski, turnaround on any job can be torturously slow. It's also the nature of the military beast that decisions must wend their way through the mazes of protocol. Before a government contractor can procure the building materials for a given project, the firm must complete what is known as a submittal register, a form that lists the types and grades of the construction materials that will be used, sometimes right down to the specs for nuts and bolts. Each item on the register--often more than 500 of them--must then be approved by as many as four different government officials. Simply clearing the register can amount to a full-time job. "You constantly have to prod them to make decisions," Lewandowski says. "Papers might sit on someone's desk for days."
Another difference between working for the government and working in the "real world" is the way modifications are handled. Under the military system, if one party wants to change some part of the project, the contractor must begin what is called a serial letter, by outlining the cost and time frame for the modification. "They're supposed to make a decision and get back to us within a reasonable period of time," says Lewandowski. "But that doesn't happen very often." Some letters even fall through the cracks altogether. Last year, for example, the government wound up paying MDP an additional $30,000 to make a midproject modification that involved putting glass walls around the racquetball courts in the McKibben Gym at Fort Carson--all because no one had gotten around to approving the change-order paperwork that Lewandowski had submitted about six months earlier.
As an avowed fiscal conservative, Lewandowski deplores such wasteful mix-ups on principle. But it pains him for purely practical reasons, too, because contrary to what you might suppose, those cost overruns don't always translate into extra revenue for MDP. When projects are delayed because of funding wrangles or interagency squabbles, he points out, it keeps workers idle and ties up company assets that could be usefully committed elsewhere.
Lewandowski once again cites the example of the gymnasium at Fort Carson, one of five military bases in Colorado Springs, where work came to a standstill for months while government agencies sparred over who would cover the cost of making changes to the project. Meanwhile, Lewandowski could only wait and fret over the drain on his firm's time and finances: eight skilled workers and a supervisor on hold; the deployment of MDP-owned, as well as rental, equipment to new sites; plus the frozen bonding money MDP has to front for government jobs. "That supervisor has to average a $3 million workload a year so I can pay for his costs," says Lewandowski. "And those profits should already be through our books and making us more money."
Lewandowski doesn't kid himself that the military is going to get its act together anytime soon. That's why he's gone to such great lengths to exert tighter control over his own internal operations using IT.
When he started his business in 1988, Lewandowski was quick to apply the bootstrapping and programming skills he'd acquired during his tenure in the Army Corps of Engineers. He used a couple of computers that he built himself five years earlier out of 16 KB motherboards.
As the business grew, however, it soon became evident that this seat-of-the-pants approach would take him only so far. In 1991, Lewandowski hired Integrated Business Inc., a networking administration company in Colorado Springs, to install and administer a local area network (LAN) for the company. MDP's current computer system, which formerly consisted of several stand-alone PCs, runs through a Novell server, linking eight workstations through an Ethernet network.
Today, virtually every aspect of Lewandowski's business operation--in and out of the office--has been revamped by IT. Every piece of government-required paperwork, for example, has been scanned into MDP's network so that project supervisors equipped with laptops and modems can download any form from the company's file server. This function comes in handy when MDP has a project under way in a remote area because it enables supervisors to access necessary documents while remaining on-site. Supervisors can also gain instant access to subcontractor insurance and payroll information, serial letters, and submittal registers by logging onto MDP's databases.
Perhaps the biggest benefit MDP reaps from all this automation is the ability to coordinate logistics with improved speed and accuracy. Key to that end is a project-management program called SureTrak Project Manager, which Lewandowski uses to establish and track time lines for the myriad tasks of his construction projects. Manufactured by Primavera Systems Inc. and retailing for about $400 (800-423-0245, email@example.com), SureTrak is what software mavens refer to as a dynamic tool, which means that when the user makes changes in one task, the program automatically rearranges the schedules for all related tasks. Lewandowski finds that particularly helpful in critical path management--that is, identifying the tasks most important to keeping a project moving forward.
Because its graphical display function can process new information immediately, SureTrak allows Lewandowski to generate a precise time line for any job or subcontractor, revise deadlines and cost projections when modifications are requested, and produce daily progress reports.
Lewandowski and his project supervisors used to chart all those steps manually, an arduous effort when you're managing a complex construction project that can easily entail more than a thousand tasks. Now, at any point during the project, SureTrak gives them a snapshot of the big picture, dramatically improving their ability to anticipate obstacles and to compare actual progress with original goals.
Armed with SureTrak, Lewandowski no longer has to speculate about the consequences of delays or last-minute modifications. He can call up bar charts and crunch numbers to demonstrate how those alterations will affect the job overall. When MDP was building a fire station at Peterson Air Force Base in the fall of 1996, the government wanted to make a midproject change in wall color. Using SureTrak, Lewandowski showed how that one "simple" change would add 12 weeks to the schedule. "It's not just waiting for the materials," he says. "It's all the other aspects of the job that the change delays." By clearly illustrating how even so-called minor project adjustments eat up time and money, SureTrak's graphics capabilities can also help Lewandowski collect additional costs caused by delays, although he admits that this doesn't always work. "Often, we just do the work ahead of the dollars," he says, "but that's really dangerous."
Lewandowski says government officials have come to appreciate this streamlined efficiency--even though, at times, it's been cause for chagrin. He recalls a negotiation on one project during which government officials carped at him for not meeting project deadlines. "So I called up my submittal database," he smiles. "They had 120 submittals outstanding and didn't even know it. And they're telling me I'm behind schedule?"
Lewandowski would like to see government officials use technology the way he does to keep on top of deadlines. He thinks that if he can help to provide the government with the tools to make its job easier, such as a way to access MDP's database through the Internet, he can build customer loyalty in the process. As it stands, he says, he often has a better idea of his projects' progress than the government does anyway. "They have to call us to see what's going on," he says. "We're at a point where we can't get more efficient without doing the government's work for them." There's a major stumbling block, however. As high-tech as the military's defense systems may be, its bureaucracy hasn't kept pace. The Air Force Academy only recently supplemented its Wang mainframe computer system with a system of PC-based LANs. "And the Academy is more sophisticated than Peterson Field or Fort Carson," Lewandowski adds.
How to bridge this technological gap? Lewandowski is banking on cyberspace. He's developing a company Web site, which he hopes will be up and running by the end of 1997. Current plans call for storing key MDP project information with an Internet service provider, with all files formatted to run on the Microsoft Office 97 application suite. "We're planning within the next quarter to have a preliminary system in place," says Tom Swaim, the project manager overseeing MDP's Web site development. "We're doing this to improve internal communication but also to improve the process of exchanging information with the government. We want the Web page to facilitate posting shared information: general correspondence, serial letters, submittal registers. Everyone would have access to that data so that they can immediately see the status of a particular submittal."
At present, supervisors in the field can access this data from their laptops with 28.8 Kb modems, but according to Swaim, the flow of information will be much faster once the Web site is fully operational. "We'll have to provide a pathway to the service provider from our file server, which will be the central repository of information. Eventually, we'll probably install some sort of modem pool off the server, and that will greatly increase the speed of response. Immediate access to information will help us make decisions even faster."
Although it remains to be seen just how long it will take the military brass to become truly Web-friendly, Lewandowski says he has already realized significant savings from automating his operations. "For the kind of construction that we do," he says, "we'd normally need maybe eight people in our office just to take care of all the correspondence. We have four." The same is true outside the office. A typical construction company the size of MDP, he says, will have supervisors running each job site, with a project manager overseeing three to five jobs, doing all the scheduling, modifications, billing, and negotiations. With SureTrak, it's possible for MDP's managers to oversee a greater number of projects than they could if the scheduling were done by hand.
Lewandowski's supervisors also save him time and money by using SureTrak to monitor their schedules effectively. "We have definitely achieved labor savings," he says. "I'm aware of at least 30 situations where we demonstrated delays caused by the government, worth about $150,000 in revenue. By tracking their own budgets, the supervisors can manage the project dollars better and make more effective economic decisions."
Lewandowski won't claim that automation is a panacea, and he admits that he has at times hit some bumps along the high-tech road. MDP's supervisors were all former painters and carpenters and were, by and large, not a computer-literate lot. For some, it was a rocky transition. Certain employees couldn't get the hang of updating SureTrak when tasks were finished or revised, which naturally caused havoc because the time lines bore little or no resemblance to the job at hand. Most of his supervisors adjusted eventually, however. "But they had to take the initiative and spend a lot of their own time learning the process," says Lewandowski.
To help ease his staff into working with computers, he gave the supervisors four IBM-compatible 386 desktop PCs for home use. He also provided them with game programs and wrote spreadsheets in Lotus 1-2-3 to help them manage their personal finances. "And I spent a lot of time on the phone coaching them," he says.
Among his efforts to systematize every last detail of his business, Lewandowski has tried a few things that just didn't work. With the multitude of subcontractors he needed to pay every month, he thought he could devise a system that would eliminate time cards. So he set up a worksheet in WordPerfect on the supervisors' laptops and instructed them to submit their workers' hours by modem. But the accounting pay codes made this process more trouble than it was worth, and Lewandowski decided that it made more sense to do the job by hand.
All in all, though, Lewandowski has been pleased with his automation efforts. In fact, he plans to start a consulting business to help other construction companies do what he's done. Although computers aren't exactly unheard of in the construction industry, even in small operations, Lewandowski claims that a surprising number of companies still track everything on paper. "We already have two potential clients," he says.
The final irony: The government's inefficiency has not only made Lewandowski's current business more competitive, it has also given rise to a new business opportunity.
Christopher Caggiano is a staff writer for Inc. magazine.