THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Friday, February 2, 1996 TAG: 9602020406
SECTION: FRONT PAGE: A1 EDITION: FINAL
SOURCE: BY LON WAGNER, STAFF WRITER
LENGTH: Medium: 89 lines
The stalemate over the federal budget is causing headaches for Hampton Roads government contractors who are having difficulty getting paid for work they have already done and are seeing new projects delayed.
Companies that do work for the federal government have continued meeting their payrolls the same way Treasury Secretary Robert Rubin has kept the government from defaulting on its loans: by borrowing money from one account and shifting it to another. But contractors say that they have been plugging holes since November and that a continuation of the problems in Washington may soon mean eliminating jobs in Hampton Roads.
Blueridge General Inc., a Norfolk construction company, is waiting to begin work on a $4.5 million deployment center for the Army Corps of Engineers at Fort Eustis. Blueridge was the low bidder on the project, but the government has not transferred funding for the work to the corps due to the budget impasse.
``It's killing us,'' said Brian Geary, Blueridge's president. ``I don't even understand why they're bidding work . . . if you're going to bid work, you ought to have the authority to go ahead and fund it.''
Another Blueridge job is also at a standstill: a $500,000 renovation to the U.S. Customs House in downtown Norfolk.
The 100 employees at Blueridge General are working on nongovernment projects and other federal jobs that were awarded before the budget problems. Geary said the contractor would like to do more private-sector work, because government work is not as ``rewarding and consistent'' as it used to be.
Federal agencies that pay for the work don't know how much money they will be able to spend this year, or even whether the government will shut down again. Some agencies have money, but without a federal budget, they don't know how long that money must last to fund normal operations, contractors said.
``I don't think people realize it, but it's going to start affecting everybody from auto dealers to construction suppliers to just regular people losing their jobs,'' Geary said.
``I just don't know what construction projects have to do with Medicare or Medicaid,'' he added.
Government contracting in Hampton Roads is not as big a business as it was in the 1980s. But it fueled local businesses to the tune of $1.8 billion in 1994, according to John Whaley, chief of economic services at the Hampton Roads Planning District Commission.
The federal spending gridlock on the region is difficult to measure, Whaley said. But the region's economy is expected to slow this year, and a thinning of federal work won't help.
So far, the federal budget deadlock has not affected bigger contractors, like those building and repairing ships. Newport News Shipbuilding, the state's largest private employer, has not been affected, spokeswoman Jerri Fuller Dickseski said.
Companies that work on smaller projects, though, are being squeezed.
Loral Training and Technical Services in Chesapeake, whose 1,000 workers operate and maintain simulators for the Department of Defense, generally contracts for one year of work with options for additional work on a year-to-year basis.
``This year when the options were exercised they were hedged with a number of provisos,'' said Michael Cain, manager of finance and contracts at Loral. ``They'd say, `Yes, we'd like you to do the work for the year, but we've only got money to pay for it for less than a year.' ''
At Management Systems Applications Inc. in Chesapeake, the government is delaying payments to the computer service contractor for work it has already done, said Guy Royston, vice president of finance.
That hurts, because contractors can borrow 80 to 90 percent of the money they are expected to receive from the government for 90 days. MSA has to pay interest on the money it borrowed in anticipation of being paid by the government, but the government won't pay interest on the delayed payment, he said.
To keep its payroll costs lower, MSA asked some of its employees to take vacation time because it was running out of work for them.
As a result of the budget impasse, the government agencies that contract with MSA have delayed previously contracted work, and in some cases tied up ``a significant amount of money'' in payments.
``I pity the people who are operating on the edge,'' Royston said.
MSA, which brings in about $40 million a year from the government, is one of 17 contractors involved in a $130 million-plus job with the National Institutes of Health. But NIH has spent only $500,000 of that money.
In the case of MSA, that bottleneck chokes its own spending.
``We're not going to invest in new facilities or upgrade facilities or make any other major capital investments or risky moves until the budget is formally approved,'' Royston said. by CNB