DATE: Sunday, November 16, 1997             TAG: 9711140964

SECTION: BUSINESS                PAGE: D1   EDITION: FINAL 

SOURCE: BY MEREDITH COHN, STAFF WRITER 

                                            LENGTH:   88 lines

MILITARY CONTRACTS ARE FEWER, BUT MORE VALUABLE THE GOVERNMENT'S NEW WAYS OF DOING ITS BUSINESS HAVE CAUGHT UP WITH HAMPTON ROADS.

Money for military construction has slowed in recent years and so have the number of projects. The result: hard times for small local contractors who haven't yet adapted.

Some contracts, such as maintenance on military housing, are being grouped rather than offered as smaller, individual projects. That saves time and money, a Navy spokesman said. But builders said the trend also reduces the number of projects available to local contractors and forces some to find new sources of work.

The trend was noticed last year by Robert W. Lyons, executive director of the Builders and Contractors Exchange, a clearinghouse for government and private contracts.

He said August and September are traditionally the busiest months for government contractors because, with the fiscal year beginning Oct. 1, federal agencies try to spend all the dollars left in their budgets. The number of projects began to dip in 1996, but their value started to rise, exchange statistics show.

In August and September 1993, 167 federal contracts were posted at the exchange, worth about $109.4 million, an average of $655,000 apiece. During the same months this year, 51 contracts worth $79.5 million were posted, worth an average of $1.6 million each.

Lyons pointed out that some contracts awarded in the past two years have been worth many millions of dollars.

``That may be good for the few companies that are winning the awards, their subcontractors and suppliers,'' he said. ``But what alarms me is that the government appears to be changing the rules on a lot of companies that depend on those contracts.''

Indeed, the government has changed its ways. John Peters, a spokesman for the Atlantic Division's Naval Facilities Engineering Command, said many government agencies changed the way they did business years ago in an effort to cut red tape and save taxpayer dollars. The Navy, which accounts for most of South Hampton Roads' federal construction contracts, began using the method in the region this year.

Peters said that in recent months the Navy has been allowing three contractors to win what once would have been one large contract. They take turns at a series of maintenance, building or demolition projects.

In June, for example, contractors from Norfolk, Virginia Beach and Hampton won a $15 million demolition contract at the Norfolk Naval Station that could last through September 2000. Each will do some work on the project and share the profits will they share profit or revenue?. Formerly, a contracts would have been signed on a building-by-building basis.

``We are starting to use the method more frequently as a means to improve customer service and reduce costs,'' Peters said.

Some critics charge that the new system may threaten open competition, but Peters said there will still be opportunities for all companies. Large jobs can be split among small contractors, he said, or awarded to one big company.

While Congress is cutting military construction funds, it hasn't eliminated them. Department of Defense military construction funding for fiscal 1998 will be about $9.2 billion. Congress appropriated $9.5 billion in 1997 and $11.4 billion in 1996. According to military records, the Atlantic Division's Naval Facilities Engineering Command expects to spend $126.2 million on 15 construction projects next year in parts of Virginia, West Virginia and North Carolina. The division spent $111.6 million on 14 projects in fiscal 1997.

One local contractor said he noticed stiffer competition for military contracts a few years ago and he's already found alternative sources of work.

Brian Geary, president of Blueridge General Inc., in Norfolk, said his 18-year-old company depended on federal contracts for 90 percent of its business up until three years ago. Today, Blueridge gets only about 10 percent to 15 percent of its work from federal contracts.

``The field wasn't getting any smaller,'' he said. ``There were six, seven, eight bidders years ago and now there are 20 to 22 bidders. And with fewer contracts to bid on, our percentage of success was diminishing. Federal work was always the mainstay of the business, but not anymore.''

He takes it in stride. The government's new methods are probably saving taxpayers money, he said. And his company has made up the work through municipal, state and private contracts.

``We've diversified,'' he said. ``There was a whole new set of players to learn, from inspectors to the competition. . . . But the rules change constantly in business and in life and we have to accept that. You learn or get left back. I'm sure there are some companies getting left back.'' ILLUSTRATION: NUMBER OF PROJECTS DOWN, VALUE UP

GRAPHIC

KEN WRIGHT

The Virginian-Pilot

SOURCE: Hampton Roads Builders and Contractors Exchange

[For a copy of the graphic, see microfilm for this date.]

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