An article about C&P Telephone Co. in yesterday's Business and Finance section quoted Sen. Max Baucus (D-Mont.) incorrectly because a word was dropped. The sentence should have read: "I sensed the thing was not worth $300 million . . ."

The General Services Administration has cancelled plans to give the Chesapeake & Potomac Telephone Co. a $300 million sole source contract to put the more than 200,000 federal phones in the Washington area on the same system.

Rowland G. Freeman, head of the government procurement agency, said in a phone interview yesterday that he decided to kill the project after a lengthy review because he wasn't convinced there was a real need for the system or that its technol- ogy or cost effectiveness had been proven.

C&P presented GSA with the unsolicited proposal 18 months ago, saying it would eventually savemoney to link all the federal agencies in the area with the most modern equipment.

Clyde A. Heintzelman, manager of C & P's federal government marketing operations, said yesterday that he hadn't been told of the GSA turnabout. "But if that's the case, it's a very serious mistake. The government is the loser."

"What do you expect the phone company to say?" countered Freeman, the former Navy admiral who took over GSA last year. "We'll decide what the federal government needs in the way of phone systems."

He said his telecommunications staff will prepare a plan on how to approach the various federal agencies about their telephone system needs. "I just didn't think we'd examined all the alternatives in detail," Freeman added.

Sen. Max Baucus (D-Mont.), whose Senate Judiciary subcommittee examined the so-called Metrex phone system last fall, mentioned Freeman's decision to kill the project at a Judiciary Committee hearing yesterday.

He said later: "I sensed the thing was worth $300 million. . . I think the phone system we have works pretty well."

Competitors of the Bell system complained when the proposals was first publicized last summer that the interim plan would give C & P an unwarranted advantage on controlling the federal market in Washington forever.

Frank J. Carr, the GSA's commissionere for automated data and telecommunications service, had argued for the change, saying the Bell system was the only company that could handle the project. He could not be reached for comment yesterday.

Under the Metrex plan, government phone numbers wouldn't change, but multi-line phones would have been converted to single lines that could accommodate a variety of modern conveniences, such as signals for waiting calls and automatic trasferring of calls to message centers.