A decision by the General Services Administration to close eight supply centers has spilled into the nonprofit sector and put more than 1,000 blind workers at risk of being laid off, according to nonprofit group officials.

GSA officials said they did not intend to throw blind workers out of jobs but acknowledged it was possible that nonprofit organizations have lost sales as GSA warehouses reduce their stocks in anticipation of closing.

"We are going to look at that hard and make sure we didn't do anything inadvertent," GSA Administrator David J. Barram said yesterday.

For decades, GSA has stocked pencils, pads, janitorial products and even mattresses made by blind workers at its warehouses under a federal law designed to create job opportunities for the disabled.

But financial pressures growing out of increased competition from private sector supply stores, the trend toward "electronic commerce" via the Internet and fundamental changes to the government's procurement system in recent years have forced GSA to rethink its role as the government's chief supply clerk and housekeeper.

Federal agencies no longer are required to purchase supplies from GSA, and increasing numbers of federal workers use government-issued credit cards to make small purchases at commercial stores. Commercial vendors also are offering a growing number of products at competitive prices to government offices through electronic lists on the GSA Web site.

With the Internet becoming an increasing force in commerce, top GSA officials viewed their warehouses as marketplace laggards, sometimes setting prices for products too high. In July, GSA announced the shutdown of four depots and four smaller "supply points," but without advance warning to the nonprofits.

Within weeks, the GSA warehouses quit buying from the nonprofits to shrink their stock of supplies as they prepare to close next year. With no new orders coming in, the nonprofits struggled to keep their work forces intact. They scrambled to create distribution channels on the Internet and through alliances with private sector companies that sell to government agencies.

The GAO decision set off a "domino effect," said Jim Gibbons, president of the National Industries for the Blind, which has sold $135 million to $160 million worth of products every year through GSA.

"We have already experienced layoffs [and] work reductions and across the country, [nonprofit] agencies are evaluating how they are going to keep businesses running and people employed," Gibbons said.

Bob Plunkett, president of the San Antonio Lighthouse, said, "This is the worst situation we've faced that I can remember."

The San Antonio Lighthouse, which employs about 120 blind workers, makes mechanical pencils, paper clips, sweat pants for the Army and oil analysis kits used by the Air Force to determine engine maintenance needs. The workers, on average, make about $6 an hour.

"Last week I had to announce for the first time that we would go to a three-day mandatory week and we eliminated 23 part-time jobs held by people who are blind and have other severe disabilities," Plunkett said. "We had to eliminate the part-timers to keep the others going.

"If the situation does not improve soon, all of these employees are at risk of a major reduction in force. You can only go so long before you have to shut down," Plunkett said.

Barram said GSA would work to help nonprofits employing the blind keep their share of the government's business and would remind agencies that a 1938 law favors the purchase of products made by the blind.

"Our whole supply system has been changing pretty fast," Barram said. "A third of our work force is working on 10 percent of our business. That's the underlying and overlying reason for this whole thing. We've tried very hard to put together a program for customers, vendors and suppliers."

In its July announcement, GSA said the agency would create a "virtual platform" so that government agencies could do the bulk of their supply shopping online at the GSA Web site, instead of calling in orders to the supply centers.

But the plan to close the supply centers has prompted union opposition--up to 2,000 federal employees could lose their jobs. Union officials also complained that Barram has not provided them with an estimate of cost savings.

The American Federation of Government Employees Council 236 filed a grievance to overturn Barram's plan and won an arbitration decision earlier this month. Arbitrator Jerome H. Ross ordered GSA to cancel its plans to close the supply centers and to bargain with the union.

But Barram rejected the arbitration decision and plans to appeal to the Federal Labor Relations Authority. "I would rather have us in closer agreement with our unions than we are now," he acknowledged. "We are trying to get there."

CAPTION: GSA chief David J. Barram said the agency will try to help nonprofit groups employing the blind keep their share of government business.