D.C. Has Alexandria Envy

P> If Mayor Marion Barry is serious about creating a more business-friendly Washington, D.C., he should take a look over the Potomac River at Alexandria, Va., whose city government has presided over a business boom in the city of 116,000.

It's no coincidence that Alexandria has the second largest concentration of information technology jobs in Northern Virginia, which itself is second only to Silicon Valley in California. The city does not impose a gross receipts tax on research and development operations -- regardless of whether such work is performed for private companies or the government. Alexandria has also established a ceiling for small companies to pay on their gross receipts tax.

While the district keeps its elected officials behind closed doors, Alexandria has implemented an open door policy, making elected officials and top city workers accessible, as well as accountable. "It's easier for us to do this because our city's only 15 square miles," noted Flaherty.

Meanwhile, only one company in Washington Technology's 1995 listing of the 50 fastest growing high-tech enterprises in the Washington area is located in the nation's capital. And that company plans to move, citing high real estate and tax costs.

Perhaps even worse, many vendors overlook the District of Columbia government as an information technology customer because of the city's poor financial condition and procurement system. With a mandate to award at least 35 percent of all contracts to "disadvantaged" businesses and a reputation for awarding many sole-source contracts, the D.C. government's buying of products and services has been viewed skeptically by many suburban companies.

But one high-tech company based in Sterling, Va., has built a solid business with the D.C. government. STMS Inc., a $12 million reseller, has worked for the District government for more than a year, according to Neil Condon, director of sales. Last year, the company did more than $100,000 in business with the D.C. government. And the best thing -- STMS gets paid.

The company resells file server and networking products, and performs related engineering services. Condon said his company has picked up more work from other integrators and resellers who are rumored to have lost the work due to non-performance.

"We provide a crucial service," said Condon. "When [the D.C. government] has a problem they call us, and we help them." The fact that STMS works with agencies involved in accounting, financial controls and receivership also helps the company get paid.

"Sometimes, [the district] tells us they can't pay us for 60 days. That's fine, as long as you're honest ahead of time," Condon said.

But for every STMS, there appear to be many hard-luck stories. "Do we have business with the D.C. government? Yes. Do we get paid for this work? No. And that's the problem," lamented Sam Zarafshar, president of $50 million Arlington, Va.-based reseller Advanced Computer Concepts Inc., Arlington, Va.

While Washington holds two strong assets by virtue of its status as the nation's capital -- the federal government and a strong tourism industry -- it has failed to build a business-friendly government. The city has difficulty paying its bills, regardless of whether it's to utility companies, toilet paper vendors or information technology companies.

But Mayor Barry wants to restructure his government to become "smaller, better-trained, more citizen-friendly, more business-friendly, more competitive" and revitalize a city that suffers from a declining population and tax base.

Barry has not released specific figures or plans about how he intends to turn over major pieces of the city government to the private sector by Oct. 1, 2000. On Feb. 14, following months of debate with his top advisers and a consulting firm's report, Barry announced a scheme to eliminate 10,000 city jobs and up to 22 offices and agencies.

In some respects, D.C.'s government may be its own worst enemy. Neither Barry nor city administrator Michael C. Rogers would agree to an interview.

While the district struggles to find its way, Alexandria appears to be blazing a trail.