An Alexandria travel agency has filed a $988,680 claim against the General Services Administration, charging that it was illegally fired last year from a contract to make travel arrangements for government travelers under a pilot program designed to show the cost-effectiveness of using commercial firms rather than government secretaries to book travel.

The firm, Davis Agency Inc., was the first commercial travel-management agency hired by GSA to book airline, hotel and auto reservations for federal government travelers under the program. GSA now has 11 contractors operating in 10 cities.

The discounts the travel agents get exceed the commissions the government pays, and have saved federal taxpayers $6.4 million since the program began, according to GSA spokesman Dale J. Bruce.

The contract called for Davis Agency to make travel arrangements for federal agencies in Washington and in Research Triangle Park, N.C. Under the terms of what GSA said was a $16.4 million contract, Davis Agency was due 10 percent in commissions on the bookings it made.

The travel agency was fired by the government last September when some airlines stopped honoring tickets written by Davis, stranding some federal travelers. But Davis Agency attorney Mark Pestronk says payments to the airlines were late because federal agencies had fallen more than 90 days behind on paying their bills to the firm, totalling more than $1.5 million.

Davis Agency officials charge that the GSA did not give the company a required 10-day notice to improve performance before breaking off the contract.

"GSA did what they thought was right and I sympathize with their need to get a contractor in a hurry last year," Pestronk said. "To have a contractor scrambling around for ticket stock was unacceptable in a critical pilot program. But that doesn't mean GSA could legally break the contract without expecting a claim to be filed."

Charles W. Sutherland, Davis' president, said in a prepared statement that if the firm had been given 10 days, as required, "we would have cured our problems in short order and we would still be performing the contract today." Sutherland said the firm should be "recompensed for GSA's abrupt and capricious termination."

Carolyn A. Harris, GSA's protest counsel, said that Davis Agency is reading the wrong federal regulations and that GSA is allowed to terminate a contractor immediately if default interferes with the continuity of service. The matter will go before GSA's Board of Contract Appeals.

Pestronk said other government travel contractors that he represents claim that federal agencies are now paying their bills in from seven to 14 days. The payments are on time now because of the Prompt Payment Act, which requries the federal government to pay within 45 days or be charged an interest penalty.