The Pennsylvania Avenue Development Corp. faces its first public controversy this week when it selects a developer to rebuild the block now occupied by two of Washington's most prestigious private institutions, the National Theatre and The National Press Club.

Redevelopment of the block - bounded by 13th and 14th, E and F Streets, NW - is supposed to be the first step in PADC's efforts to turn Pennsylvania Avenue between the White House and the Capitol into America's most impressive street. The project will cost $100 million or more.

For more than two years the press club has been promoting its plan to put up a new office building and hotel on the block in partnership with John Portman, the Atlanta architect-developer.

But two other local developers also have submitted proposals for the block to PADC's board, which has scheduled a two-day meeting Wednesday and Thursday to make its choice.

Marriott Corp., in cooperation with Quadrangle Development Corp., and the John Akridge Co. submitted the competing bids, both offering a fundamental difference from the Portman-press club plan.

The difference is the National Theatre. Quadrangle and Akridge want to keep the theater on the block, either in its present building or in a new theater to be built by the developer.

There is no theater in the Portman-press club plan, but that group has offered to help the theater raise the estimated $10 million it would cost to build a new theater elsewhere.

Even before the three developers submitted their formal proposals to the PADC, the National Theatre's board endorsed the Akridge and Quadrangle plans but urged rejection of the Portman-press club plan.

After several more meetings between press club and theater officials, the theater's board last Friday reiterated its stand.

"The theater board's position is to preserve the existing facility on its historic site," said Roy Harris, a former board member and now counsel to the theater board. "At this stage, we are encouraging the PADC to make a decision that will allow us to remain."

Predicting how PADC's board will resolve the controversy is impossible. The board has never before picked a developer for a major project, let alone tried to balance the conflicting claims of institutions like the theater and press club.

Chaired by Gen. Elwood Quesada, the federally financed corporation's 15-member voting board includes representatives of five cabinet offices, plus two city officials and eight public members.

Until the dispute over the theater came up, the Portman plan for the block was considered to have little competition. Promotion of the plan by media-wise press club officials didn't even mention the possibility of other developers.

The plan is pure Portman, with not one but two of the giant atriums that are his trademark.The building would cover all but the southeast corner of the block, where another new building is going up. The National Press Building would remain until the rest of the block was built up, then would be torn down and the new building completed.

The huge building would include a hotel with 1,100 rooms, 644,500 square feet of offices, 100,000 square feet of retail stores and 919 underground parking spaces.

Because it is a partner in the Portman proposal, the press club has not worked with the other two developers. There is speculation that if Portman is not chosen, the club might work with the successful developer. Quadrangle and Akridge offer alternatives with and without the press building site.

The Quadrangle plan calls for an 830-room Marriott Hotel that would be expanded to about 1,300 rooms if the press building were included. The project would have 650,000 square feet of offices, 200,000 square feet of stores and 1,100 parking spaces. The National Theatre would remain in its present building.

The John Akridge Co. wants to build a smaller hotel, with 324 rooms but with as much as 1.1 million square feet of offices, 214,000 square feet of stores, and almost 1,200 parking spaces.

Akridge would build a new 1,500-seat theater in the middle of the block, then tear down the present theater to gain valuable frontage on Pennsylvania Avenue.

The National Theatre would have to contribute part of the cost of the new building, planned by Akridge, Harris said. All three developers have told the theater board it is economically impossible for the rest of the project to absorb the cost of a new theater.

The theater gets no federal funds and has no significant endowment, Harris noted, and its board is reluctant to try raising millions for a new home when the present theater has just undergone a $300,000 renovation.