DURING THE past year at the Source Theatre CompaD ny, I produced 28 shows involving more than 120 actors in more than 500 performances, a six-part mime series, a month-long theater festival, several touring productions, monthly free performances at the Martin Luther King Library, a week of live radio theater on WPFW-FM, taught acting and playwriting workshops, sponsored a playwriting contest, and nearly drove myself and a few associates crazy in the process.

All of this was done on a budget of roughly $100,000. For example, the 60-role play "Julius Caesar" was produced a year ago with a cast of 15 for $35. The Folger Theatre is presently agonizing over its million-dollar budget for four productions. Granted, the Source Theatre Company does not have to concern itself with Equity minimum salaries, but we do have a paid staff, we do have the same utility bills, and we are not subsidized by Amherst College.

Theater can work -- and by that I mean entertain, affect, move, enlighten and educate the audience -- anywhere and at any cost. Neither large budgets nor poor surroundings are a guarantee of sincerity. Both the large and the small theaters face the basic problem of making a show work each night in front of a new audience. The big difference is that the larger theaters can make their shows more "comfortable" and present them in "safe" environments. In a city like Washington, these two adjectives are the real drawing cards.

In the past two years there has been a proliferation here of small theater companies that don't hold these drawing cards. The Source Theatre Company itself has spawned seven of these companies, including Spheres and Dragon. One criticism aimed at this increased activity is that all of us involved in the local theater movement are "spreading ourselves too thin" and "sacrificing quality for quantity." I have to disagree. There are many reasons why Washington needs even more local theater than it has now:

* If Washington is ever going to establish a theatrical and/or cultural identity of its own, it is only going to be done through the continued aggressive activity of its local theaters. The larger theaters too often are just booking houses for touring shows out of New York and London.

* There are financial reasons for doing more shows -- it increases your box office revenue at a time when all theaters are going to rely less and less on government and foundation support.

* It increases media exposure for the local theater movement and thereby public recognition.

* It provides more opportunities for local actors and directors to work on first-rate material and perfect their craft.

* It is only through doing a great deal of material that a theater can afford taking more than an occasional risk, thus finding the good unknown playwright or original theatrical form.

If one thinks "quality" suffers because of all this increased activity, I need only point out that doing a few shows a year is no guarantee they will be "good."

I have seen many small theaters disappear in this town (among them Asta and the Washington Theatre Laboratory), and one major reason was that they did not produce enough to remain in the public eye. They were always starting from scratch with each production.

Critical acclaim is not enough for small theaters, although it is nice to have. The public has to get into the habit of going to them. This is only going to happen for us by repeatedly doing interesting shows and letting the public know that it has the option five or six nights of every week to go to a variety of theaters, some of which will not involve a serious financial setback.

The small theaters have one enormous advantage over our larger brethren. The audience is closer. The experience is more intimate, immediate, involving, visceral. We will never match the technical razzle-dazzle or visual splendor of the larger theaters, but that should not be our mission.

There are bound to be more enterprising producers out there who are going to establish themselves in Washington. It is a city for the present and the future, and its theater activity will reflect that. The larger theaters that have enjoyed an economic and public monopoly are going to be challenged for both. The competition would be good for all of us.