The kid on the playground tagged with the reputation for being a tattletale always misses out on the best gossip.

Hercules Aerospace Inc. and the entire state of Utah undeservedly have been pegged with the reputation of a possible information conduit to foreign competitors, according to Republican Sen. Orrin Hatch, because of the presence of the residential Soviet inspectors. And rather than gossip, the senator thinks the state's defense contractors could be missing out on big projects because of the perception of a security problem.Hercules hasn't lost any business yet, but in one case a private contractor has expressed concern about losing trade secrets and the proximity of the Soviets, said Hatch aide Bob Lockwood said.

"There is no espionage going on," Lockwood said. "What we're concerned about, and it's peculiar to our society, is perception."

Hatch, who is a member of the Senate Intelligence Committee, toured the Soviet inspection site just last week. He later met with U.S. Defense Secretary Dick Cheney to discuss the perception problem. The senator also invited Richard Burt, who is expected to be appointed as the chief negotiator for the next round of strategic arms talks, to tour the Hercules inspection site.

"It's a concern we've expressed from Day 1," said Jack DeMann, spokesman for Hercules. "Since we were being good team members and basically accepting these folks without any public posturing or statements, we would hope there would be some type of guarantee that we wouldn't be discriminated against for having these guys on our property."

The Defense Department earlier promised that it would not withhold business from Hercules or other Utah companies because of the presence of the Soviets, without due compensation. But Hatch is pushing for the interim agreement to be extended to private defense subcontractors as well.

"Orrin isn't convinced that the policy-makers in the administration are fully cognizant of the problems that defense industries face from the presence of residential Soviet inspectors," Lockwood said. "The senator is still not satisfied that Hercules' interests are being protected."

Soviet inspectors have been stationed in Utah since July 2, 1988, while American inspectors have been working in Votkinsk, Soviet Union, under the provisions of the Intermediate-range Nuclear Forces Treaty.

According to Lockwood, the Hercules tour convinced Hatch that while on-site inspectors are a foreign policy breakthrough, residential inspectors aren't necessary. "It's really rather questionable when you look at the rather simple tasks that the Soviets are doing," Lockwood said. "Their equipment is beguilingly simple. There is no sophistication there. It's first-generation solid state."

Lockwood said the same inspections could be conducted through remote control coupled with periodic visits, without causing the prohibitive fear of losing industry secrets to foreign competition. "If we need them to make arms control agreements work, then let's do it," Lockwood said. "But if they are there for ceremonial purposes, or if their tasks don't justify full-time residential inspectors, let's not do it that way."