State government could save nearly $1.3 billion by operating more like a private business, mostly by abolishing outmoded agencies and modernizing the way it buys goods and services, a special commission studying the Virginia bureaucracy said today.

In a final report arriving just in time for the 2003 General Assembly session, the bipartisan commission chaired by former governor L. Douglas Wilder (D) sharply criticized state government for widespread inefficiencies that the panel said undermine Virginia's national reputation as a well-managed state.

"There is substantial room for improvement," the report said. The Wilder Commission singled out the procurement process -- the state's purchases of everything from paper clips to buildings and roads -- as "either not working optimally or simply broken" in many cases.

The voluminous report now goes to Gov. Mark R. Warner, a Democrat who is crusading on the issue of streamlining government, and copies will be sent to the Republican-controlled assembly, which is also looking for ways to reduce the cost of Virginia's $25 billion-a-year bureaucracy.

Warner said in a statement that the commission's suggestions were "bold and meaningful" and "will form the core of . . . government reform efforts" he will ask the legislature to approve when it convenes early next month.

State Senate Republican leader Walter A. Stosch of suburban Richmond, a Wilder Commission member, predicted that his GOP legislative colleagues will give the panel's recommendations "an open-minded reception."

"There will be some objections, but mostly I believe we will adopt and endorse" the bulk of the commission's ideas, Stosch said.

The commission, which included some well-known Virginia business leaders, spent most of this year studying the nuts and bolts of state government operations, concluding that the "extraordinarily large" sum of $750 million could be saved on an annual basis, $500 million of that in procurement -- with no reduction in services to taxpayers.

Since its creation in the late 1920s, Virginia's modern-day government has mushroomed in size and complexity, to the point where the Wilder Commission found there are about 50,000 vendors selling goods to state agencies that employ a total of about 100,000 people. Merely centralizing purchases would save tens of millions of dollars, the panel said.

Other recommendations include: privatizing state-run liquor stores as part of a move to save $500 million over several years through streamlining and eliminating certain agencies: abolishing the Herndon-based Center for Innovative Technology in its current form; reducing inventories at large agencies; and negotiating better contracts for services and goods.

"Vendors themselves told the commission that the commonwealth often does not obtain the best discounts," the panel said in its report.

Commission members from Wilder on down agreed that their findings were no magic bullet to reduce government waste and duplication. Several said the report is only as valuable as Warner and the legislature make it.

"Government moves very slowly," said Wilder, who nonetheless added that the panel's report could nudge state leaders into "a change in the way government does business."

"For God's sake, do it more efficiently!" said Wilder, who as governor slashed state spending in the 1990-91 recession, much as Warner has in the current economic slump. "We're spread out everywhere. . . . It has to change. If it changes four or five years from now, some might consider that very, very swift."

Commission member Kathleen K. Seefeldt (D), who spent 24 years in Prince William County government, most recently as Board of County Supervisors chairman, said: "Hard financial times like we're in now open the doors to positive change -- more accountability, better management. Hopefully, the governor and the legislature will seize the opportunity."