Turning a Losing Battle into a Winning One : Romanian Emigre Overcomes Red Tape to Win Contracts

For a man who threw away everything he had to escape the unbridled power of a totalitarian state, Romanian emigre Andre Hancu seems almost unnaturally eager to work for the U.S. government.

Six years ago, while on tour as a chess master representing Romania, Hancu staged an escape that is the stuff of Cold War spy novels, standing on top of a toilet in a men’s room stall in Vienna to ditch the government informer who accompanied him.

Three years later he was in the United States, had founded his Rancho Bernardo-based electronics company, Automatic Integrated Systems (AIS), and was performing small development projects for NASA and acting as a subcontractor for larger defense firms.

Hancu had come to America to stoke the armament furnace of the free world. To all appearances, it was a Reagan-era installment in the unending saga of the American dream.

Then, in the spring of 1985, Hancu decided to get ambitious, buying out an electronics firm that had gone belly up and submitting his own bids on government contracts. With a 4,500-square-foot plant, his own equipment and office, four full-time employees and a light-blue pasteboard sign with the word “President” tacked to his door, he was ready to grab what defense contracts he could.

In the ensuing year, however, AIS received only a few stray drops of Defense Department funds, and Hancu received a frustrating tour of the interlocking and overlaid agencies that determine who gets a cut of the greatest defense binge in history.

In that one year, Hancu lost more than $130,000 on revenue of less than $60,000, spent countless hours preparing bids that he claims were never carefully examined and saw everything that he owned put in jeopardy. After a year of countless projections, flow charts, reports, letters and vendor bids, he had received only one $16,000 contract for a printed circuit board that “a child could put together.”

The odyssey began last July, when Hancu learned that he had been the second-lowest bidder on a contract for an Army radio worth $3 million.

Hancu was in the midst of moving into a new facility in Rancho Bernardo when a pre-award monitor, F.E. Tully, showed up for an inspection tour. Tully was an official of Defense Contract Administration Services (DCAS) in San Diego, which determines whether low bidders are capable of fulfilling government contracts.

After surveying the three lowest bidders, DCAS recommends what bid should be accepted. Standing among the unpacked crates, Hancu said he begged Tully for an extension so that he could take an inventory of the plant. Extension denied.

Tully, according to Hancu, then demanded that Hancu complete the complex forms covering all aspects of his financial, production and quality-control standards.

“Of course, I had to leave most of them blank,” Hancu said. “I had just moved in, hadn’t even checked the equipment myself.”

Finally, Tully agreed to give Hancu a three-day extension. Hancu said he worked feverishly but was still one day late in completing the forms. Tully refused to consider any of the information, Hancu said.

“It was not so much the fact that I was rejected, but rather the way that he rejected me,” Hancu said. “He denied that I had a facility, that I had equipment, that I had staff--he denied practically everything, after he had seen it with his own eyes.”

According to Hancu, DCAS ignored the same data for four other surveys that it conducted later that summer. “It could only be for malicious reasons,” he said.

Tully, when contacted, said that he was prohibited from speaking to the media.

A spokesman for DCAS said that the agency would not discuss specific allegations by contractors.

After being rejected by DCAS for the radio contract, Hancu approached the Small Business Administration (SBA) for a certificate of competency (COC). The SBA represents the interests of the smaller contractors in the government procurement process and a COC is a golden ticket to the federal banquet table, capable of overturning a DCAS ruling.

But the SBA rejected Hancu’s bid for a competency certificate on technical grounds. Hancu claims that the SBA “practically ignored” subcontracting arrangements that he had made with other electronics firms--Keystone General and E-Systems--who had a proven record in those areas in which AIS’ expertise was shaky.

By the end of December, Hancu had bid on and been surveyed for five Defense Department contracts. Each time his proposals had grown more detailed as he sought to cover all previous objections and each time, he claims, the surveys became more and more irrational, the errors and omissions more obvious.

Also in December, the Army’s judge advocate general in Washington suspended AIS from all further work on federal contracts because it was an “affiliate” of San Diego-based Dove Electronics, whose president, Aldwyth Roach, was later indicted by a federal grand jury for making false statements to the Defense Department.

Hancu insisted that AIS had never collaborated with Dove and that there were no organizational ties between the two firms--except that each company had hired the same consultant, Pat O. Bracken, when they started business.

Bracken had drafted almost identical “business plans” for both firms--to be used informally to solicit investors but not in contract bids. Both plans tentatively listed Bracken as “contracts specialist.”

The suspension, said Hancu, was the result of a monstrous paper snowball that grew increasingly exaggerated and distorted as it passed through each level of the bureaucratic hierarchy.

Less than a month later, Hancu was taken off suspension when the Army determined that there had been no connection between Dove and AIS. But despite the fact that the letter dated Jan. 17 stated that “the suspension is terminated effective the day of this letter,” it was not until the end of March that the name of his firm was removed from the lists held by contracting agencies.

During that time, Hancu was disqualified on bids for one contract and was forced to put his operations on hold with other prime contractors for several months. “What they’re saying, practically, is that someone like Tully can make a false statement about you and put your firm out of business and that’s perfectly OK,” Hancu said.

The Army, on the other hand, says that such suspensions are standard procedure. “Whenever we decide to suspend one firm we always suspend all its divisions and affiliates as well, to make sure that they don’t continue bidding on government contracts under another name,” said Army spokeswoman Elaine Henrion of Washington.

According to Henrion, the Army is not required to verify the information it is given before making a suspension. Asked whether the Army’s judge advocate general was given false information by Tully and DCAS, Henrion said that the evidence wasn’t inaccurate, it simply “appeared” to indicate something that wasn’t true.

Hancu said his ultimate frustration occurred when he was surveyed for a $36,000 Army contract for audio amplifiers. Last February, he was turned down by DCAS on the grounds that his technical and production capabilities were inadequate.

DCAS said that AIS lacked the equipment for “wave solder method” of assembly, even though the Army’s own specifications acknowledged that the wave solder could be replaced by hand solder--which AIS’ production plan specified--at the contractor’s discretion.

The SBA competency certificate report in April stated that, while DCAS had underestimated AIS’ technical and production capabilities, and that “the contractor (AIS) has the facilities and open capacity to perform the contract,” that the firm’s accounting and financial capabilities, which DCAS had approved, were inadequate.

Although the SBA confirmed that AIS had $79,000 in cash on hand (more than twice the value of the contract the company was bidding on), the SBA called other parts of their financial statement “confusing.”

“Here I have one agency telling me that I don’t have the technical capability but I’m fine on financing, and anther agency tells me that I’m all right technically, but I don’t have the financing,” Hancu said.

According to SBA San Diego District Industrial Specialist Robert Burnside, however, such seemingly contradictory judgments are not uncommon. “When we consider a firm for a COC we look at a lot of information that DCAS never sees, so its quite understandable that we should reach different conclusions than they reach,” said Burnside.

While Hancu claims that companies are normally required to show only 10% of the value of the contract in liquid assets when progress payments are involved, Burnside said that there “is no set percentage of money in the bank that a company must show.” However, Burnside admitted that he could not think of any case in which more than 200% of the contract value might be required.

By mid-June, the string of rejections and the 12 months of red ink were beginning to take their emotional and financial toll on Hancu, whose voice was laced with desperation and who had begun to think that the discrimination he perceived had a personal origin.

“I believe that I have been giving more information on my bids than any other contractor,” he said. “Perhaps they say to themselves, ‘Here this guy comes from a communist country; he didn’t speak English five years ago. He deceived his own government, maybe he’s trying to trick us.’ ”

A self-described Reaganite, Hancu found himself in the uncomfortable position of criticizing a government that he chose of his own free will. “I’m the one that ends up looking like a troublemaker, and all I wanted to do was build things for the Army.”

With all the frustrations that he has experienced, why would a man who left his house, his job and, for a year, his wife behind to come to the United States persist in seeking employment in the one sector of the U.S. economy in which the imperatives of the free market are largely unknown?

“I thought there would be a stable market there, and I believed in the fairness of the U.S. government, that they weren’t like the Romanian government,” Hancu said last month. “Don’t ask me what I believe now.”

The story appears to have a happy ending.

In late June, Hancu was told by a DCAS monitor that he would soon receive a $1-million contract for radio antennas and that he was the low bidder for two other contracts worth about $1.5 million.

“Now, I have a chance, at least. If I don’t succeed, I will get no more business, but I will succeed,” Hancu said.