Rendell dismays contractors

Last week, Gov. Ed Rendell asked state contractors-who produce everything from tear-gas grenades to orange safety flags-to shave 5 percent from what they charge the state for services.

Some for-profit contractors are responding with dismay.

"It's just too expensive to cut 5 percent when health insurance premiums are going up 20 percent and all the liability insurance, everything, is up," said Kelly Leydon, owner of Advanced Resources Group in Swatara Township, Dauphin County.

A large company might be able to produce savings under a state contract, she said. But Advanced Resources-a onewoman firm certified by the state as a Disadvantaged Business Enterprise couldn't, she said.

"I'm considered a DBE for a reason," Leydon said. "I'm already at the bottom of the ladder."

The views of Leydon and other business owners show that Rendell could face stiff resistance to the idea that he raised during a Feb. 27 news conference and then again during his budget address on March 4.

Pennsylvania officials hand out millions of dollars in state contracts every year. The business is especially important to Central Pennsylvania, where state government and its thousands of employees are viewed as a source of economic stability, particularly in down economies.

In the current slowdown, both state government and private companies are looking for ways to tamp down spending. Pennsylvania faces a roughly $2.4 billion deficit for the fiscal year starting in July.

In his budget address, Rendell proposed closing the gap by making a 10 percent cut to the administrative budgets of all state agencies. The total proposed budget for the next fiscal year is $21 billion, up about $300 million from this year.

Senate Majority Whip Jeff Piccola of Dauphin County said that Rendell had nothing to lose by asking contractors for more money. He said he saw nothing wrong with it.

"You can always ask for a handout," he said, and then laughed.

His colleague in the Republican leadership reacted differently to the plea.

"I thought that was over the edge," said Senate Majority Leader David Brightbill of Lebanon County.

Rendell's request for a 5 percent cut from state contractors comes as the price of doing business is going up. Both fuel and health care are increasingly expensive, business people said.

"We're all facing economic hard times," said Michael Horgan, president of JPL Productions Inc., an audio-video production company and state contractor in Swatara Township, Dauphin County.

Horgan was unsure how his company would react if the state asked JPL to drop its price 5 percent.

"We don't want to lose a client," Horgan said. "But at the same time, we have to make sure we can afford those kinds of cuts."

Bill Watts is president and owner of Pennsylvania Police Supply Inc., a distributor in Wharton Township, Fayette County.

Many law enforcement products have profit margins below 5 percent, said Watts, whose company sells to the state and local municipalities.

"It's highly competitive," he said.

The York County Blind Center does about 30 percent of its industrial work for the state Department of General Services. The blind center makes orange construction safety flags for the Pennsylvania Department of Transportation and vinyl three-ring binders for various state agencies.

If Rendell asks the blind center to cut contracts by 5 percent, the Spring Garden Township-based center would try harder to contract with businesses to offset the lost revenue, said Carl L. Hosier, the center's director of industrial operations. He understands the state's predicament.

"We all kind of expected this because Gov. Rendell inherited a nasty and tight budget," Hosier said. "You can't have a horrendous deficit without trying to fix it before saying you're raising taxes. It's what any other business would do."

Lobar Associates Inc. does roughly 25 percent of its work for the state. The Dillsburg, York County-based general contractor doesn't expect to be adversely affected by Rendell's call for cuts. When Rendell asked companies to cut their contracts with the state, he was referring to service businesses such as legal consultants and accountants, said Lee E. Eichelberger, president and chief executive officer at Lobar.

"I didn't perceive that (Rendell) is asking our firm or our competitors to reduce our contracts," Eichelberger said.

If asked to help the state reduce its construction costs, Lobar would recommend that the state consider leasing buildings, Eichelberger said. Traditionally, the state has purchased properties, he said.

Lancaster's 1 to 1 Contact Centers Inc. has been providing customer service support to various state agencies for about 12 years.

Tom Dudek, the company's president, said he supports Rendell's proposal because it encourages state contractors to reduce costs.

Dudek said 1 to 1 Contact Centers is always looking for efficiencies. The company's contracts are set up in such a way that any money the company saves goes back to the state, he added.

Frugality helps attract future contracts, Dudek said.

"When you're fiscally responsible, clients look at it very favorably," he said.

Some state contractors would look more favorably on the state if it also demonstrated greater fiscal responsibility.

Leydon of Advanced Resources, for example, pointed out that government workers sometimes rent sport utility vehicles when on official business.

"There's no need for that," Leydon said. "If (Rendell) truly means it, show us first before you make us do it because I think we're footing a lot of the bill now. Why should we cut more off?"