D.C. Mayor Anthony A. Williams (D) signed legislation yesterday to make a larger share of $735 million in government contracts available to small businesses in the city, slowing the flow of millions of dollars to firms outside the District.

"This legislation allows us to cut through the red tape," he said. "We will be able to pre-approve 850 [District-based] businesses who we know will provide our government with high-quality services at a low, competitive price."

Now, he said, "we're sending millions across the border."

Under the new law, the city will maintain a file of suppliers who have been approved to offer goods and services on a recurring basis. It is estimated that in 2000, at least $600 million, or 80 percent, of the money for these contracts will be set aside for small and disadvantaged businesses in the District.

Last year, $233 million--33 percent of the District's procurement money--went to businesses outside the city. The figure is expected to drop to 20 percent next year.

The mayor made the announcement outside the Big Chair on Martin Luther King Jr. Avenue at the gateway of Anacostia in Southeast Washington, linking it to his campaign promise to help small businesses.

He was joined by D.C. Council members Charlene Drew Jarvis (D-Ward 4), chairman of the economic development committee, Vincent B. Orange Sr. (D-Ward 5) and Sharon Ambrose (D), who represents Ward 6, which includes a portion of Anacostia.

"It's a win, win, win for all of us," Jarvis said. "It's a win for government. It's a win for small businesses, and it's a win for employees."

Williams stressed that businesses wanting to participate in the set-aside program must have their headquarters in the District and pay city taxes. He and other officials said the new procedures will not raise the cost of buying goods and services, in part because more D.C. firms will join the supplier pool.

Malcolm Carpenter, a partner in a certified public accounting firm, said his firm has never bid for a city contract, mainly because of the District's reputation for taking a long time to pay vendors. But Carpenter said he was impressed by the city's effort to involve District-based businesses, and he said the new program is prompting him to reconsider whether to do business with the city.

Malcolm Beech, president of the Minority Business Coalition, praised Williams for making changes in the city's procurement process one of his priorities.

"Business begins at home," he said. "We at the Minority Business Coalition feel we finally have an ally."