Virginia state Sen. John H. Chichester, the Republican nominee for lieutenant governor, has sponsored three bills, two with another legislator and fellow insurance agent, that effectively would have limited competition for state and local government contracts.

The bills were introduced in 1983 and 1984 when Chichester, who owns a Fredericksburg insurance firm, and Hanover County Republican Del. Frank D. Hargrove were losing thousands of dollars in local and state government contracts.

One of the bills would have prevented government agencies from negotiating terms of a contract with bidders until after a bid was awarded, a measure that was amended after officials complained it would restrict their ability to negotiate for lower prices. The second bill, which was killed, would have barred state or local agencies from negotatiating directly with insurance companies on contracts.

The third bill, which Chichester proposed at the the request of a school board association, originally would have allowed local school boards to write their own rules for contracting -- whether competitive or not.

"This bill contains a potential adverse impact on the competitive negotiation process," according to a financial impact statement issued on the third bill during the 1985 legislative session by the state Office of Planning and Budget. "In certain cases, for example, when a public body is contracting for insurance, it is necessary for the public body to contact the insurance company directly (instead of contacting the agent) for clarification of the proposal."

The two bills the legislators cosponsored in 1984, including one requested by the Independent Insurance Agents of Virginia Inc., were introduced just three months after Hargrove officially and bitterly complained about his own agency losing a state aviation insurance contract worth about $139,000. He could not be reached for comment.

Chichester said none of the actions constituted a conflict-of-interest between his private business and duties as a legislator because none of his legislation was introduced to benefit his own insurance firm. "I don't have a conflict-of-interest bone in my body," Chichester said in an interview.

Chichester, who is running against Democratic state Sen. L. Douglas Wilder of Richmond, previously has denied wrongdoing on another insurance bill he introduced in 1984 after his firm was fined $250 for allowing an employe to write a policy for a firm for which she was not licensed. That bill, which became law, effectively restricts the ability of state insurance officials to issue fines in similar cases.

Chichester has not disputed that his firm had violated that state law but said he introduced the legislation because the law was "silly" and should have been struck from the state insurance code.

The 1984 bill that was sought by the insurance association -- of which Chichester and Hargrove are members -- would have made key changes in state contract bidding and was prompted by complaints, from Hargrove and other insurance agents, about the Office of Risk Management, the state's central insurance office.

The association wanted to overturn portions of a state procurement law that allows competing bidders to review each others bids for errors or favoritism before any state contract is awarded. Chichester said in an interview that his legislation was designed to correct abuses some insurance agents said they had encountered in seeking state business and to make certain that state officials awarded contracts to "the low bidder."

Chichester said some agencies were opening insurance bids and then negotiating contracts that were "just unfair" to the bidding agents.

Hargrove in October 1983 had lost the state aviation contract before the state's Office of Risk Management and complained about it to the agency in a letter dated Oct. 12. The office wrote back a strongly worded letter Oct. 14 in which it dismissed his complaints "without merit" and said the contract had been awarded in a "fair and impartial manner without any impropriety or appearance of impropriety."

Chichester said that he saw no inconsistency in his effort to change procedures in the Office of Risk Management in 1984 and his position in 1980 when he abstained on a bill creating the insurance office, saying such a vote would place him in a conflict of interest. Chichester noted that his bill with Hargrove would have affected all contracts for state agencies, not just those involving insurance.

A second Chichester-Hargrove bill, also introduced in 1984, would have barred state or local agencies from negotiatiog directly with insurance companies rather than local agents.

The effect of that measure, which also failed to pass the legislature, would have limited competitive negotiations between state and local agencies and insurers, state officials said.

Chichester's campaign contended that lawyers routinely rewrite the state's laws that potentially affect their practices. He has pointed to a bill, introduced by Wilder in 1984, requiring state agencies that invite specific companies to bid to include some firms from a list of minority companies compiled by the state. Wilder's Richmond law offices, as well as those of other state legislators, are among the hundreds of firms on that list.

"If I've got one a conflict , then he's got one, too," said Chichester.

Wilder's campaign responded that the bill was requested by Gov. Charles S. Robb and that Wilder has not done business with the state.

Until recent years, Chichester held numerous insurance contracts with government agencies in his home, Stafford County, where the Chichester family is prominent in business and politics, as well as adjoining Spotsylvania County and Fredericksburg.

Chichester said he volunteered to introduce the measure affecting school board purchases at the request of the Virginia School Board Association. Patrick Lacy, a prominent Richmond lawyer and Democrat who represents the school boards, said the bill was intended to give school boards the same right as counties, cities and towns to establish their own contracting procedures, but, as introduced, it mistakenly left out a requirement that the school board procedures must be competitive.

In 1981, for example, Chichester completed a three-year policy with Stafford County government that paid his insurance agency about $140,000, according to Robert Warsing, the county's chief purchasing agent.

When the contracts were rebid in 1982, Chichester's firm lost all six of the bids it offered. In 1985, Chichester did not submit any bids and said he has quit bidding on government contracts because of the "hassle" of lengthy forms now required by most local agencies