BDM Corp. of McLean, one of the area's fastest-growing firms, usually isn't content to just sit around. But that's what Bdm President Earle C. Williams said the company is doing about a contract it held for nine years that was lost last year to a minority-owned firm as part of a Small Business Administration program.

The contract was given to Arcata Associates Inc. of Burlingame, Calf., as part of an SBA program in which government contracts are set aside for socially and economically disadvantaged businesses called 8(a) firms. BDM protested the awarding of a five-year, $40 million U.S. Army contract to Arcata and -- disputing both Arcata's disadvantaged status and it's ability to complete the contract -- subsequently filed a lawsuit against the SBA and the Army last October.

But since then the General Accounting Office, in a report on the dispute, sided with BDM in seven of nine allegations. The Justice Department now is investigating the charges. As a result BDM has dropped its lawsuit and is waiting for the SBA to decide whether Arcata will retain the $8-million-a-year contract or whether it will be put up for competitive bidding, Williams said.

"What a fiasco," Williams said in an interview yesterday. The dispute between the McLean firm and the SBA has resulted in scrutiny of the already-troubled minority-aid program by the SBA's inspector general, the General Accounting Office, a House subcommittee and the Justice Department.

"This has nothing to do with minority business. This is just wrong," Williams said about the contract awarded to Arcata. Williams said he isn't opposed to minority set-aside programs, though he added that some Hispanics and blacks have accused him of being so.

BDM claims that Arcata would have to subcontract most of the professional services work on the contract to a large firm that isn't socially and economically disadvantaged and that Arcata's owner, Buck Wong, isn't economically disadvantaged, either.

BDM also alleges that Arcata isn't competent to perform the Army contract because it lacks manpower and expertise to conduct the sophisticated and technical weapons testing and combat tactics experiments that the contract requires.

SBA officials have said the contract isn't too large for Arcata and that many BDM employes working on the project would follow it to Arcata, permitting the small firm to use the same technical competence that was used by BDM. A major purpose of the program, the SBA said, is to interest minority firms in technically oriented contracts rather than in the traditional retail fields.

The Army said in written testimony to a House Government Operations subcommittee in April that Arcata was required to begin performing the contract last November and be fully staffed by Dec. 15. That requirement was satisfied, Robert J. Stohlman, assistant deputy for missiles and communications-electronics, said in the testimony.

However, the GAO in a recent report criticized the award to Arcata because the minority firm:

Will provide a service unrelated to its capabilities and experience of its principle or professionals.

Was not evaluated for technical capability to perform as required by SBA procedures.

Has not maintained its status as a small business because of the number of government set-aside awards it has received.

Last year received support reserved for disadvantaged firms nearly four times the approved amount under SBA procedures.

Has not maintained a reasonable balance between government set-aside sales and sales received in the open market.

In addition, SBA Inspector General Raymond F. Randolph told a Governmental Operations subcommittee that the inquiries about Arcata by BDM have raised areas of concern about administration of the 8(a) program. Randolph said procedures to verify certain financial information were not used by the SBA until recently in the Arcata case.

"We have determined that while agency standard operating procedures require the regular submission of financial statements by principals of 8(a) firms generally, they are not routinely verified except in cases involving patent discrepancies," Randolph said. "Even random sampling techniques are not utilized."

Randolph also said criteria for determining "economic disadvantage" haven't been established.

Meanwhile, the SBA is sticking to its guns and has no intention of taking the contract from Arcata, a spokeswoman said. "We awarded it, and they've been performing it."

But she added that when the contract comes up for renewal in the fall, "that's a different story."