THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Thursday, January 11, 1996 TAG: 9601110331
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY JAMES SCHULTZ, STAFF WRITER
DATELINE: HAMPTON LENGTH: Long : 102 lines
The just-concluded, three-week government shutdown is giving heartburn to dozens of Peninsula companies that supply NASA Langley Research Center with everything from computer programs to hazardous waste removal.
Cash-strapped businesses, forced to temporarily furlough their own workers in the wake of the federal budget impasse, have begun to consider easing their dependence on the Hampton aerospace center.
``Nobody welcomes such a situation,'' said chief financial officer Chand Deepak of Science and Technology Corp. in Hampton. ``We are not as affected as some of the smaller companies; we are quite diversified. Obviously, if (another furlough) continues for months, we won't be able to absorb the costs.''
In a Tuesday meeting called by NASA Langley director Paul F. Holloway, contractors were told that research center officials would do everything possible to compensate contractors for the involuntary hiatus.
Lawyers and procurement specialists at the NASA center, traditionally an economic engine on the Peninsula, nevertheless will have to pore over hundreds of pages' worth of contracts to make sure the documents guarantee payments when the government closes - a process that could take weeks. Only then will it be possible to issue checks.
All depends, however, on contract phrasing. Without specific legal protections, firms could go begging for payment.
``We want to do anything we can to pay contractors, if at all possible,'' Holloway said. ``We are a primary customer for some companies. In the case of any future furlough, I assume that means they'll have no income. They may have to shut down.''
The threat of continued budget impasse, and another furlough, is a constant concern for many NASA Langley suppliers.
According to NASA records, roughly 40 Peninsula companies rely on the center for most or some of their income. At stake is some $132 million in government contracts and the livelihoods of 1,760 who work at the aerospace complex. Still more work in administrative or support positions in nearby Hampton and Newport News.
During the shutdown, some Science and Technology Corp. employees and their computers were moved into a conference room, or to desks whose usual occupants were on vacation. But about half the 350 STC workers had nowhere to go but home once NASA Langley closed Dec. 18.
The STC researchers and technicians put on paid administrative leave returned to NASA Langley on Tuesday when the center reopened after the longest government furlough on record.
The shutdown leaves NASA contractors uncertain about their economic future.
``There's a ripple effect,'' said Jan Kennard, senior vice president and chief of staff for Bionetics Corp. in Hampton. ``Contractors are questioning the stability of their jobs. It's difficult to keep employee morale up. It's hard to plan. Procurements have been delayed, for how long we don't know.
``It's a very difficult time.''
Bionetics, based in Hampton, operates in 16 states with 1,200 employees. The firm generates $80 million in yearly revenue and gets as much as 95 percent of its business from the government, Kennard said. About a third, or 400, of the Bionetics work force was put on paid leave while the government was closed.
Shortly, though, the company will convene senior executives to consider Bionetic's traditional pursuit of government work, which also includes contracts at four other NASA centers across the country. While she wouldn't specify what action Bionetics will take, Kennard hinted that her firm may move away from reliance on federal dollars.
``Because government hasn't done this (extended furlough) before, it is having a profound impact,'' she said. ``It shakes confidence, from Wall Street to individual employees and their choice of jobs. If (furloughs) become a cycle, you make the perception of doing business with the government worse.''
There is some preliminary evidence that a minor brain drain has begun. Some skilled scientists and technicians, brooding over their own fates, have decided within the past several weeks to leave jobs with NASA contractors, according to Pat Haney, program manager for Lockheed Martin Engineering & Sciences Co. in Hampton.
``It's difficult to retain people with all this uncertainty,'' he said. ``A lot of people have resigned from all the contractors here.''
Lockheed Martin, which is nearing the end of a temporary, seven-month NASA contract worth $20 million, was forced to put 225 of its 285 employees on forced leave during the government shutdown. Workers had to burn vacation time in order to be paid, Haney explained.
``Everybody is shellshocked,'' he said. ``If we go into another furlough, it's going to be brutal.''
The smaller the outfit, the more harsh the likely effect of any future federal closure. Without healthy cash reserves, small companies can quickly run short of cash and have trouble paying bills.
Also at risk from another furlough is the Peninsula's reputation as a high technology hotbed - and a concentration of highly skilled, highly trained specialists, from physicists to programmers - which is beginning to lure larger, non-aerospace firms such as computer assembler Gateway 2000. Loss of momentum could set back high-tech development on the Peninsula through the early years of the next century.
``Two furloughs now have proven that the government can't be relied on to continue no matter what,'' said Langley director Holloway. ``I think we can look forward to going through this again. I'm afraid instability associated with government work will continue.''
KEYWORDS: FEDERAL CONTRACT FEDERAL EMPLOYEE FURLOUGH by CNB