Thriving on Bureaucracy

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.