BDM Corp. of McLean is protesting the awarding of a U.S. Army contract it held for nine years to a minority-owned California firm, claiming that the minority company is incapable of handling large, technical, national security contracts.

The conflict is causing a stir in government contracting circles, and some minority business experts say that it could jeopardize the Small Business Administration's pilot program which reserves contracts for socially and economically disadvantaged small businesses selected by the Small Business Administration.

BDM also is alleging that the California firm, Arcata Associates Inc., is engaged in certain improprieties. For example, BDM contends that Buck Wong, president of Arcata, also heads a firm that has had the Stanford University food concession for several years, thereby making it ineligible for the pilot program.

Wong declined to answer questions concerning the case over the telephone. The allegations are being investigated by the SBA's Inspector General's Office, said Edward Norton, SBA general counsel.

The five-year, $40 million weapons-testing contract, once open for competitive bidding, was placed earlier this year in the SBA's pilot program with the Army's approval and was designated to go to Arcata, a $350,000-a-year business.

Norton said that the contract hasn't been awarded finally to Arcata although Arcata was designated as the recipient. The Army is to make the final determination of the firm's ability to handle the contract by next Friday, Norton said.

The contract was scheduled to be placed up for bidding again this fall, and there was no assurance that BDM would have won it, Norton said.

"The contract now involves over 220 employes and $8 million per year," BDM said in documents supporting its protest. "With its wide experience and proven record of performance in the highly complex combat experimentation field, BDM has successfully fulfilled the (Army's) requirement in all respects."

"They have no experience, no capability to do this job," said Earle Williams, president of BDM, which has sales of about $50 million annually. "We said we don't think they can do this. We don't believe the intent of this law was to jeopardize the national interest."

The SBA "doesn't have the right to take an unqualified firm and give them a national defense contract," Williams said.

"I don't understand that this is too technical for a small firm today," Norton said. "I don't understand why big companies are the only ones loyal to the national security."

Norton added that, following usual business practice, many persons already working on the contract would follow it to Arcata, permitting Arcata to use the same technical competence that was used by BDM. "It's not unusual for them to hire the same engineers and technicians," Norton said.

"I don't see why a small firm can't do national security work," he reiterated."I don't see where size has anything to do with loyalty.

"We're concerned about competence, about contract eligibility," Norton continued. "And we are investigating all the allegations." If the Army rejects Aracta's application, the contract probably will be bid on competitively, and Norton said it probably wouldn't be given to another minority firm because "I doubt another (disadvantaged minority) firm could do it." He added that the SBA is trying to interest minority firms in technically oriented contracts.

"Award of the . . . contract to Arcata threatens the proper execution of a high-priority national security project, is contrary to the goals of the SBA's minority small business pilot program and undermines the incentive for firms to aid and cooperate in the development of small and minority businesses," BDM said in documents.

The contract "is not appropriate for award under the pilot program because it comprises highly technical and complex work of the highest importance to the national security -- work which must be done correctly, on time, the first time," BDM said.