Cerberonics Inc., which was primarily a defense contractor until two years ago, continued its diversification last week by buying Capitol Copy Products Inc. of Beltsville for $3.5 million.

Capitol Copy, which was privately owned by Arvin P. Gamble, sells copiers and facsimile-transmission machines in the Washington area.

Cerberonics, which had revenue of $12.2 million last year, was founded in 1969. The Pentagon soon became the main market for its engineering, analytical and technical support services. But in 1985 its defense business began to falter, and company executives developed a diversification strategy.

"Our defense base was deteriorating," said Robert W. Erikson, the president of Cerberonics. "Defense was a golden business a few years ago, and now it is going to be 25 percent of what we do," he said.

Cerberonics' gold mine shut down in 1985 when its bids to continue managing the spare parts inventory for C9 military aircraft and to provide support services for TC4C aircraft were turned down. The two contracts accounted for $35.4 million in revenue during their last year, and their loss forced the company to scale down operations and look for more lucrative fields.

In March 1985, Cerberonics bought a controlling interest in Instituform East Inc., which has a patented process to repair underground pipes by creating new pipes within damaged structures without costly excavation.

Robert Erikson and his brother -- George Erikson, Cerberonics' chairman -- said they have no current plans to acquire other companies. "We are not trying to open a candy store," said George Erikson. "We bought Capitol Copy because it is one of those businesses in which sales makes a difference."

Capitol Copy sells and leases Konica and Canon office copy machines through dealerships in the Washington area. It had $8 million in sales last year, the Eriksons said.

"We wouldn't have bought Capitol Copy without the right person to run the place," said George Erikson. That "right person," they said, is Armen A. Manoogian -- a former executive with Xerox Corp. and MBI Business Centers Inc. who has been named president of Capitol Copy. Manoogian will have a one-third interest in Capitol Copy.

The Eriksons plan to reorganize Cerberonics into one holding company with three subsidiaries -- Cerberonics, the defense services firm, Capitol Copy and Instituform -- at its stockholders meeting in January.

Vitro Corp. in Silver Spring has been awarded a $35.6 million contract from the Naval Sea Systems Command, continuing work that Vitro has been performing for the Navy's New Threat Upgrade program for the past 25 years.

Under the contract, Vitro will design computer programs for the Weapons Direction System, will integrate computer systems, and will install them into Tartar fleet units.

MNC Financial Inc. is making its name known in Brazil, Hong Kong, Britain and Mexico through the establishment of a merchant banking subsidiary called MNC International Bank.

The international bank, headquartered in Baltimore, is part of the World Banking Group, which oversees MNC's international operations.

"The formation of MNC International is a strategic decision to expand into fee-related, value-added services," said James Ortega, head of the World Banking Group and executive managing director of the new subsidiary. "There are noncredit opportunities that exist in certain troubled countries."

These fee services include asset sales, debt swaps, debt-equity swaps and tax transactions for international clients.

Maryland National Bank and American Security Bank, the two principal subsidiaries of MNC Financial, have been offering merchant banking services through their international divisions since 1983, and through a Luxembourg subsidiary purchased in 1985.

MNC International, legally a subsidiary of Maryland National Bank, will perform merchant banking services for both banks through the parent corporation.

USTravel Systems Inc., which owns the largest travel agency in the Northwest, has made its first move to the East Coast by merging with International Travel Advisors (ITA) in Washington and acquiring BT Travel in Rockville.

USTravel Systems hopes to build a nationwide travel agency network "through intensive regional coverage of selected markets," said Peter M. Sontag, chairman and chief executive. "We believe this targeted approach is the fastest yet most cautious way to position ourselves so that the considerable economies of scale can be passed on to our customers."

ITA specializes in commercial travel and BT Travel focuses on group and convention travel business.

Revenues of the combined agencies is expected to exceed $40 million. Both will continue to operate as a separate entity and market under their own names.

Vanguard Technologies International Inc. in Fairfax was awarded a $4.3 million contract with the U.S. Geological Survey.

Vanguard has been working for the USGS since 1984. Under the contract, Vanguard will continue to provide the mangement and personnel to perform computer services.

Vanguard employes will be located at USGS sites in Reston, the District, Flagstaff, Ariz., and Denver.

Bowthorpe Holdings PLC has acquired Optim Electronics Corp. in Germantown for an undisclosed sum.

Optim manufactures data acquisition systems that test for product safety and endurance. Most of the systems are sold to industrial, research and scientific firms.

Optim "requires more resources than are readily available. Bowthorpe presented the most attractive alternative," said Roger Moore, president of Optim.

Bowthorpe is a British trading company with worldwide holdings in the electrical component, cabling and instrumentation industries.

The Agency for International Development's African branch awarded Dynamac Corp. in Rockville a $1.8 million contract to test pesticides in sub-Sahara Africa.

The 15-month contract involves testing the effectiveness of eight pesticides in killing four species of locusts and the Senegalese grasshopper. Locusts and grasshoppers have long been a problem in Africa; AID estimates that a single swarm of locusts can eat up to 80,000 tons of grain a day.

Under the contract, Dynamac is also studying the potential ecological impact of the pesticides on humans, plant and animal life, soils and the atmosphere.

An investment group headed by Richard D. Kaufmann has acquired majority interest in Kitchen Bazaar, a chain of gourmet retail stores in the Washington-Baltimore-Annapolis area.

Kaufmann is becoming chairman and chief executive. The company's founder, Sherman E. Shipero, is stepping down as president but will continue with the company as a consultant. Alan M. Shefter, current treasurer of Kitchen Bazaar is taking over as president and chief operating officer.

Kitchen Bazaar has 150 employes in six locations.

IGENE Biotechnology Inc. is building a manufacturing plant in the Curtis Bay section of Baltimore.

The plant will make the company's ClandoSan line of natural chitin pesticides and organic fertilizers. ClandoSan is based on chitin, a natural polysaccharide found in the shells of crabs and other shellfish. It acts as a fertilizer and promotes the growth of normal soil organisms that kill roundworms, which destroy crops.

"Start-up capacity is slated at 50 tons per day, but allowing for expansion on this same site, we can handle up to 150 tons per day," said Robert Austin Milch, chairman and president of IGENE.

"A targeted-marketing effort aimed at high-cash-value crops such as tomatoes, celery, strawberries and tobacco, as well as commercial markets for lawn and turf products, will begin in earnest as soon as we have EPA approval," said Milch.

The Gillette Co. completed the sale of its Rockville laboratory/office facility to a subsidiary of Maxwell Communications Corp. for $16.4 million.

Gillette's 105,000 square feet of biomedical space will become the headquarters of Maxwell Communications' newly formed research arm, called MC-270 Inc.

The facility is located off I-270, close to the National Institutes of Health. "You simply cannot find a medical laboratory with that much acreage that close to NIH," said Joel Cannon, who headed the Leggat McCall team that researched and negotiated the transaction.

The facility will continue to house Gillette's Medical Evaluation Laboratories and Gillette Research Institute under a short-term lease.

Technology Applications Inc. in Alexandria has won a $13.8 million contract to provide services to the Naval Ships Systems Engineering Station in Philadelphia.

Under the contract, which was let under the Small Business Administration's 8a program, TAI's engineering and industrial support division will make improvements on selected shipboard elevator systems.

NAVSSES inspections on aircraft carriers and other ships revealed that more than 7,000 alterations are needed to upgrade elevators and bring ships in line with new safety standards. NAVSSES wil furnish alteration materials, plans and specifications. TAI will supply the installation personnel and will prefabricate, assemble and send equipment to the ships.

Lightnet, a fiber optic telecommunications firm in Rockville, received a $3 million contract to provide private data communications service to Dow Jones & Co. Inc.

Under the terms of the contract, Lightnet will provide high-speed service between the Dow Jones Financial Center in New York City and its printing plant in Chicopee, Mass., beginning in January 1988.

Lightnet is owned by subsidiaries of CSX Corp. and Southern New England Telecommunications.