THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Wednesday, September 14, 1994 TAG: 9409140467
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY LON WAGNER, STAFF WRITER
LENGTH: Medium: 91 lines
The Navy's recommendation Monday to ban Computer Dynamics Inc. from future government contracts amounts not to a few gentle lessons on flying in the private sector, but to a swift kick out of the defense department's cushy nest.
Computer Dynamics Inc. grew out of a Virginia Beach garage into a multimillion dollar company by feeding on defense department contracts. The company had been working the past few years to transfer its business to the private sector.
CDI's chief executive officer, Robert L. Starer, acknowledged Tuesday that the company's conversion from defense contractor to private-sector competitor is not nearly complete. A third of the company's work comes from the government.
``I certainly didn't want to be out of the government contract business until I had these people deployed in other areas,'' Starer said. ``But one of our attorneys said yesterday, `Bob, you may not like this, but this may be the best thing that ever happened to CDI, because it's going to accelerate the process.' ''
The recommendation by the Navy's Procurement Integrity Office results from a battle CDI founder R. Alan Fuentes has launched to regain control of the computer software, service and training company.
Fuentes and CDI pleaded guilty two years ago to funneling $14,000 through employees to then-U.S. Sen. Paul Trible's re-election campaign. Fuentes and the company were fined, and CDI agreed to the Navy's condition that Fuentes should no longer be employed by CDI.
The Navy on Monday said it found reason to believe that Fuentes had a $250,000-a-year employment contract with CDI even after the 1992 agreement. The Navy's Office of Procurement Integrity recommended that CDI be banned from bidding on government contracts.
Though the results of the Navy's investigation came as a shock to Starer, who also was personally banned from doing business with the Navy, he said the company should survive.
``Most companies that find themselves in this thing have 90, 95, 100 percent of their business with the government,'' Starer said, ``and that's not the case with us.''
Still, CDI's government contracts are significant. According to a database of government contractors, the Virginia Beach company last year won $9.1 million in contracts from the government. Those figures don't include any contracts secured out of CDI's offices in Hawaii. From 1990-1992, CDI did about $14 million a year in government contracts. In 1989, it rang up more than $27 million in defense department work.
CDI gets 35 percent of its business from the government, which means about 150 of the company's 475 employees do government work.
CDI won't have to find other work right away to replace its defense department contracts. The Navy's action does not affect contracts it already has signed with the company.
Though Starer said his company would do what it could to get the Navy to rescind its decision, he said government contracts are not very lucrative these days. With less business coming from the government, contractors are submitting bids ``with almost no profit margins,'' he said.
``We're looking for new areas with more attractive margins,'' he said. ``Anybody who tells you they want to be in the government contracting business these days ought to get a checkup from the neck up.''
Starer said CDI can only be barred from government work for two years, though a Navy spokeswoman said regulations state that such bans ``generally are not to exceed three years.''
Despite assertions that the company can stay profitable without government contracts, Starer said CDI will try to get the action reversed.
``Our first approach is to say, `Whoa, wait a minute, let's get this thing undone,' '' he said. ILLUSTRATION: Color photo
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