In late 1975 and early 1976, Virgil Ostrander, an official in the General Services Administration, often flew from Washington to Los Angeles to resolve major problems in a $727,000 contract with a private consulting firm.

On one of those trips, Ostrander slept with a $500-a-night prostitute paid for by the consulting firm with which he was negotiating.

Barbara Jennings, the prostitute who slept with Ostrander, said the head of the consulting firm assigned her to "keep Ostrander happy." Recalled Jennings: "He said they were right in the middle of negotiations that were very, very important."

Ostrander acknowledged the sexual relationship, but said he did not know at the time that the prostitute was in the pay of the consulting firm. "I guess I was probably set up," he said.

The arrangement with Ostrander and Jennings is not unique in the dealings between federal officials and private contractors. Sex, the promise of future "consulting" payments, high-style housing, food and drink -- all of these favors are routine in the world of government contracting.

Favors of this sort, along with the "revolving door" pattern detailed in yesterday's article, are symptoms of a federal contracting system that has spun out of control -- a system in which the government spends $1 million an hour on outside contracts and awards more than two-thirds of them without competitive bidding.

Interviews with more than 600 government officials and contractors during an eight-month investigation by The Washington Post showed that personal closeness between those who give the money and those who get the money is commonplace. For example:

Yosef Patel, a high-ranking Department of Commerce official on the West Coast, has routinely dated female employes of consulting firms he monitored in Phoenix, Los Angeles and San Francisco. One woman in a San Francisco firm, Lisa Jacques, said she had a sexual relationship with Patel last summer. At the time, the Commerce Department was preparing to award a $600,000 project to the firm.

Louis Moret, formerly a high-ranking Commerce Department official and now an official in the Energy Department, acknowledges having had a sexual relationship with an employe of a consulting firm that had received a Commerce Department contract. Moret's sexual encounter was with Jean Ellen Gutierrez, a "hospitality suite hostess" with a Las Vegas consulting firm. It occurred during a November 1977 conference held at Caesar's Palace in Las Vegas.

Gerrold Mukai, an official in the Community Services Administration, shared a fashionable Georgetown house in 1977 with Robert Mariscal, owner of a consulting firm that has received $2.4 million in noncompetitive CSA contracts. Mukai is head of the office that supervised those contracts. Last summer, when Mariscal opened a $20 million casino in Las Vegas, Mukai flew to Nevada for the opening ceremonies.

Many government contractors have marketing divisions with personnel devoted solely to establishing and maintaining close relationships with the federal officials upon whom they rely for work and profits. The marketing personnel work full time to telephone and visit, wine and dine and entertain government officials -- to plant the seeds for what will become noncompetitive contract awards.

One large firm, Computer Sciences Corporation, rents a $16,000 Sky Suite at the Capital Centre, where the company says it frequently entertains its customers, including government officials. The same firm maintained a special "entertainment account" from which marketing personnel funds other activities.

Many in the contracting business say that the real competition for contracts is to be found here, in the marketing arena. It is competition to develop an inside track.

Rick Lockett, a former CSC marketing official, spoke of the use of sex for government officials to win contracts.

"It happens in every company," Lockett said. "If you can pull something off, why not? It gets down to the consenting adult thing . . . It's never a company policy. If you think it's worth getting a contract, you do it. It's left to the discretion oe each marketing guy. There isn't a marketing guy on the street that I know who wouldn't consider that [providing sex] if he thought it would help get a contract."

Lockett concluded: "The requirement of the profession is that you have to be fast and loose."

Computer Sciences Corporation officials denied that their company has provided sexual favors for anyone.

In this, the final article of a five-part series on government contracting, contracts awarded or monitored on the basis of favors, friendships, or contracts will be examined. The Setup

The General Services Administration was having difficulty in 1975 with a $727,000 contract it had awarded to Mariscal and Co., a private consulting firm.

"There were some very serious problems with the contract," explained Virgil Ostrander, who at the time was the GSA program officer for the Mariscal contract. "There were real questions about defining their work scope and figuring out what they should be paid each month . . . and there were technical problems."

It was in trying to work out those problems that Ostrander came to sleep with two prostitutes he met through the Mariscal company, one of the largest minority-owned consulting firms in the country.

"I'm more or less embarrassed about walking into this sort of thing," the 45-year-old Ostrander, now a deputy assistant commissioner at GSA, said in a recent interview. "Maybe it was naivete . . . My eyes have since been opened . . . I don't even share a cup of coffee with a contractor anymore."

The purpose of the Mariscal contract was to develop a model to help the government determine the most economical way to finance buildings -- whether they should be purchased, leased or rented.

But the contract, Ostrander said, was very vague in its wording, and for several months it was not clear what the consulting firm was doing for the money. The problems became so serious that by September 1975, Ostrander issued a "stop work" order, and the GSA discussed terminating the contract.

That did not happen, however, and so, in November, 1976, Ostrander flew to Los Angeles to decide the future of the contract. "That November meeting was pretty crucial," he said.

On the night of the meeting, Ostrander dined with a Mariscal official at a restaurant in the Marina del Rey section of Los Angeles. A young, blond-haired blue-eyed woman with an attractive figure walked to the table. Her name was Barbara Jennings.

"She appeared to casually walk by," Ostrander recalled. "It appeared to be a chance meeting."

The Mariscal official introduced Jennings to Ostrander, saying she was a friend. She sat at the table.

"She said she was lonely," Ostrander said later. "I liked her and took her phone number and said I would call her."

The next day, Ostrander said, he called Jennings. They went to dinner at a Chinese restaurant, Madame Woo's, and then went to Jennings' small house in Santa Monica.

"I was at her house," Ostrander recalls. "I thought she was a nice working girl."

"I slept with him only [that] once," Jennings said in an interview. "After that, I set him up with a friend of mine."

Indeed, when Ostrander was in town a short time later he called Jennings. She said she was busy, but gave him the name and phone number of a friend. He called the "friend," met her for dinner, and took her up to his hotel room. There, he said, they slept together.

"After that," Ostrander said, "I never called them again. I suspected I may have been set up."

According to Jennings, he was. She said that the encounters were arranged by Robert Mariscal, who had told her that Ostrander is "very important to me . . . Make sure it's a good girl and make sure he's happy."

(In an interview two days ago, Ostrander changed his story regarding the second prostitute. He said he paid her $125 -- and that he did not know whether the Mariscal firm also paid for the encounter.)

Jennings said that in her business she only serviced executives or government officials. Her rate, she said, was $500 a night. Jennings said she took a 40 percent share when she hired another woman to work for her.

In the Ostrander case, she said, she was paid by Rene Diaz, a controller for Mariscal and Co. Diaz was also a neighbor of Jennings. "He would bring home an envelope from the office, Jennings said. "Usually it would be cash. Sometimes, it was a check. If I did a good job, there'd be a small bonus."

In an interview, Diaz said that he made payments to Jennings. He also acknowledged that he has jokingly referred to himself as "the bagman" for Mariscal. "I made the payments, but I did not make any arrangements," Diaz said. "I don't know who made the arrangements."

Mariscal denied that he set up or paid for the sexual affairs. "I know Barbara socially," Mariscal said. "And I may have been together with Barbara and Virgil [Ostrander] socially. But I have never paid for companionship for any government official."

In fact, Mariscal said, he did not know that Jennings was a prostitute. "I have never known Barbara to be a hooker," he said. "Was she 'kept' by men? Yes . . . Let me say this: 'I know Barbara's been around?'"

He said that he did give money to Diaz to pay jennings. But the money, he said, was not to pay for Ostrander.

"Frankly, I used to see Barbara personally," Mariscal said. "Any kind of financial transactions between me and Barbara had to do with my personal life."

Despite the encounters with the women, Ostrander insists that his professional judgment as the project officer was not swayed. "If Mariscal was doing it to impress me, it was only counter-impressive," said Ostrander. "If it had an influence it would have been negative."

He added: "I'd have to say I really got duped. But they didn't get anything out of it."

He said he was satisfied with the final product of the $727,000 consulting contract, but he felt it was too expensive. "I'd say we overpaid by 15 to 25 percent," Ostrander said. "The contract (amount) was too high to begin with." 'Very Fond of Yosef'

From 1973 until last fall, Yosef Patel served as the supervisory project officer of the Department of Commerce minority business program in the western region of the U.S. Last August, Patel was transferred to serve as the department's regional officer in Honolulu.

In his six-year tenure on the West Coast, Patel frequently sat on the committees that decided who would win Commerce Department contracts. He also supervised all project officers overseeing million of dollars worth of contracts in the region.

"Yosef had a lot of power," explained Louis Moret, one of Patel's superiors at the Department of Commerce in Washington. "He was the senior project officer. He ran the place pretty much."

Contractors throughout the region were aware of Patel's importance to their winning and keeping contracts.When he went to Phoenix, San Francisco, and Los Angeles to monitor contracts, the firms he would monitor sent secretaries or other employes to meet him at the airport, according to interviews with secretaries. He routinely went to lunch and dinner and evening entertainment in bars and discos with executives and employes from the consulting firms he monitored, according to interviews with the employes and Patel.

He also routinely dated women working for each of the firms.

In san Francisco, Lisa Jacques, a receptionist for the San Francisco Business Development Center, a Commerce Department-funded firm, said she had a sexual relationship with Patel last summer. At the time, Commerce was determining whether to award a $600,000 grant to the firm. The company won the grant on Sept. 28.

"I don't think I had anything to do with it [the grant award]," said Jacques, who referred to Patel affectionately as "Yo."

Both she and Patel said in interviews they were friends before she joined the firm.

The executive director of the San Francisco Business Development Center, Louis Barnett, said he was unaware that Patel and Jacques had been dating.

In Los Angeles, Jerri Watts, a secretary for the consulting firm of Mariscal Co., said she dated Patel, but had not slept with him.

In Phoenix, Candy Walters, a former employe of the Phoenix Business Development Center, described her relationship with Patel:

"I'm very fond of Yosef," she said. "And I'm very affectionate. Whenever I see him, I hug him . . . I kiss him . . . I feel very warm with him . . . I'd say I'm his closest friend in Phoenix." Walters said she had not had a sexual relationship with Patel.

In an interview, Patel acknowledged that he has close relationships with women who work at consulting firms he has monitored. But he said his personal relationship do not influence his professional judgment.

I don't have much authority," Patel said. "But whatever authority I had, I didn't abuse."

Patel denied having a sexual relationship with Jacques in San Francisco. "Oh, yes, she's a friend a mine," Patel said. "We're buddies, we're friends . . ."

At first, Patel refused to discuss whether he had a sexual relationship with Jacques. "I can't answer that. I think I have certain rights," he said.

Finally, Patel said: "No, I did not have a sexual relationship with her.

Especially not during the period of contract-negotiations last summer."

Executives of the firms in the three cities said in interviews that they are aware of the personal relationship between Patel and female employes at their firms. They said they saw no conflicts in those affairs.

"Candy's friendship with Patel did not affect our business with the government one way or the other," said James Salmon, executive director of the Phoenix Business Development Center.

While Patel and the firms with Commerce Department contracts insisted that Patel's objectivity as a project officer was never compromised, Commerce auditors and field officers had a different view.

Patel said that in his supervisory role he was unaware of any problems with contractors in Phoenix or Los Angeles. Other Commerce officials were aware of problems, many of them serious.

In Phoenix, after the Business Development Center won a $300,000 contract to assist minority businesses, there were numerous allegations that the firm was falsifying its performance records to receive increased funding.

Donnita Holley, a former bookkeeper for the firm, told The Post that she regularly falsified performance records, padding the number of minority firms actually receiving assistance from the Phoenix BDC by as much as 60 percent.

PBDC officials denied that there was any falsification of records. But complaints of falsified records continued to go to the Department of Commerce's Phoenix field auditor, Joseph Sotello.

"We got so many complaints," explained Louis Moret, the deputy director of the national program in Washington, "that we got sick and tired of hearing about the PBDC. The complaints kept coming all the way up here -- right to Washington."

Finally, Moret said, he sent a team to Phoenix to investigate the charges.

The team consisted of Patel, Sotello, and a Commerce Department auditor from San Francisco.

"Yeah, if Yosef had a woman friend at the PBDC it could cause me problems," Moret said. "But, even if he were swaying in favor of the firm, you had Sotello -- who was against the firm -- balancing it out."

In the end, the special audit concluded the PBDC was not falsifying its numbers. Sotello disagreed with that finding. He was overruled by Patel.

Patel later said of the Los Angeles Mariscal contract: "I never had any problems with that one." Yet on Dec. 29, 1977, the audit office of the Department of Commerce in San Francisco released a 21-page audit report challenging $163,000 of the $510,000 that was billed by Mariscal to the Commerce Department in past years.

Among the items questioned by the audit were a $262.50 credit card bill for merchandise purchased at Gucci's in Washington; $14,837 in first-class air travel for friends, relatives, and company guests; a $313.46 meal at Georgetown's Orchid 7 restaurant with a $52 tip, and a $31,600 cash payment to the "board chairman" to be used for "marketing" -- winning new government contracts.

The Commerce auditors wrote: "There is no basis or precedent which would permit any contractor to be fully reimbursed under government contracts for costs incurred for the sole purpose influencing the award of additional government contracts."

During the entire period covered by the audit, Patel was the supervisory project offer on the Mariscal contracts. Of the audit findings, he said: "I never got involved in that sort of thing."

Following the audit report, Mariscal agreed to repay the government much of the questioned costs. Two months ago, after Patel was transferred to Hawaii, the Department of Commerce terminated its contract with Mariscal. 'Everybody Wants Something'

While Patel was the supervisory project officer in the Western region, Louis Moret was the deputy director of the Commerce Department's $60 million-a-year national minority business program in Washington.

In an interview, Moret, now an official at the Department of Energy, said he did not think it was a good idea for government officials to have personal relations with employes of consulting firms.

"I would rather not see my staff do that sort of thing," he said. "I'd rather not see commingling."

In his Commerce Department post, Moret traveled across the country, making speeches and conducting spot checks of numerous consulting firms. On one such visit to Las Vegas in November 1977, Moret ended up in bed in Caesar's Palace with Jean Ellen Gutierrez, a secretery from a Las Vegas firm with a Commerce Department contract.

"This was that one rare instance in three years that something like this happened to me," Moret said in an interview. "You hit it off with somebody . . . I liked her . . . I liked her as a person, not as an employe."

Moret said he did not think his relationship with Gutierrez influenced any of his decisions regarding the Commerce department's contract with the Nevada Economic Development Corporation (NEDCO), the firm for which Gutierrez was a secretary.

"In this business, what I've learned is that everybody wants something . . . but I think it depends on the individual. Just 'cause you get laid, does that make you beholding?" Moret said.

The 1977 visit to Las Vegas, Moret said was not on his original itinerary. He was in Denver on Nov. 29, 1977, to deliver a speech at a minority business conference and was readying himself for a trip to Los Angeles when he got a telephone call from William (Bob) Bailey, the director of NEDCO in Las Vegas.

As part of its Commerce Department contract, NEDCO was hosting a three-day conference for businessmen and federal officials at Caesar's Palace. One of the key speakers canceled at the last moment, Bailey said, and he felt Moret would be a good substitute.

"I said okay," Moret recalled. Later that day, he met Gutierrez. She was typing in a NEDCO-rented office a the hotel.

"If I was set up, Moret said, "it certainly turned into a better friendship than they conceived."

In an interview, Gutierrez said: "I was in awe of him, an important guy from Washington . . . I don't think it was a set up."

She did say, though, that an official at NEDCO would frequently ask her about Moret. "I guess they (her bosses) felt this was a good situation for them," Guiterrez said.

Bailey said that while he is aware that sexual favors are used in winning contracts, "I never got involved in anything like that.

"There's enough goodies in this town," he said of Las Vegas, "that if anybody wants them, they can get them."

He said he knew nothing of Moret's relationship with Gutierrez. "One thing I can say," said Bailey. "She's a fine, fine lady. And if they did get together, Moret's a lucky fellow."

Moret said his relationship with Gutierrez did not influence his treatment of the Nevada firm. He acknowledged, however, that his friendship with a director of a firm in Phoenix did contribute to a noncompetitive contract award to that firm.

The firm is called Chicanos Por La Causa (CPLC) -- an organization with $8 million in federal contracts. His friend was Tommy Espinosa, the firm's director.

Late in 1977, CPLC failed to win a Commerce Department contract in competitive bidding with other local firms. The contract was to assist business development.

Moret said he was disappointed that CPLC lost, so he went to the commerce Department's regional office, and suggested that it consider awarding a noncompetitive contract to CPLC.

"I thought they were a good organization," Moret said. He said he suggested that the regional office use its discretionary fund for a CPLC contract. Moret said he felt such a contract would benefit both CPLC and the Commerce Department.

In 1978, the Commerce Department awarded Chicanos Por La Causa a noncompetitive, $50,000 contract to conduct a study of the impact of the construction of the airport in Phoenix on the surrounding Chicano community.

Espinosa said he knew his firm won the contract because of Moret's intervention. He described Moret as a "very good, old friend."

Moret said, "If you do everything by the book and you don't help your friends, what's it all about? Networking is part of life."

On Sept. 29, 1977, CPLC held a cocktail reception in a Phoenix restaurant in honor of Moret.

"There are a lot of Chicanos here who are proud of Lou," Espinosa said. "We just wanted to give them a chance to meet him in person."

The reception came at the same time proposals were being written for the competitive contract CPLC would not win.

"Obviously the company's friendship with Lou didn't unfairly influence the procurement process," said Robert Martinez, a former economist and proposal writer for CPLC. "After all, we didn't win the contract." The Georgetown House

On June 20, 1977, Gerrold Mukai began his job as the associate director for the Office of Economic Development for the Community Service Administration. In that job, he has been responsible for overseeing the award or continuation of $2 million in five noncompetitive contracts with Mariscal and Co.

On the date he started his job, Mukai was living in a Georgetown house leased by Robert Mariscal. When Mariscal came to Washington, he lived in that house, in separate quarters from Mukai.

"I've known Gerry for several years," Mariscal said in an interview. "I knew him before he went to work for the government. We're very, very close friends."

He said Mukai lived in the Georgetown house for about six weeks. Mariscal paid $500-a-month rent for the house. He said Mukai paid him "a few hundred dollars" rent per month.

Mukai, who earns $50,000 a year, said in an interview that he developed a friendship with Mariscal, but insisted that his personal relationship has had no effect on his professional judgment.

"Whenever there is any personal relationship, I have a tendency to be more than critical," he said.

Muskai said that after he moved from Mariscal's house in Georgetown, Mariscal visited him in his Reston home for dinner with his family last year.

"We did not talk about CSA," Mukai said.

He also said that he was invited to the grand opening of Mariscal's Las Vegas casino, The Nevada Palace. Mariscal is the principal owner of the $20 million casino.

Muskai said he went to the event last summer, but he said that he paid his own travel and hotel costs. He said he accepted the complimentary drinks at the casino.

Muskai said he thought at the time he went to Las Vegas that Mariscal no longer had financial interest in the consulting company. In fact, Mariscal was still the company's owner at the time, according to corporate records.

While Mukai said he showed no favoritism toward Mariscal, he also said he never saw any problems in Mariscal contracts in his dealings with people at the firm.

However, a not-yet released special audit by the Office of the Inspector General at the CSA has found that about $194,000 collected by Mariscal and Co. resulted from false billings and unauthorized personal and travel expenses by Mariscal executives and employes.