Two investment companies joined yesterday in a proposal to purchase the federal government's share of Consolidated Rail Corp. (Conrail) for $1.65 billion, which they would raise by selling stock in a new entity.

The offer, made in a letter to Transportation Secretary Elizabeth Hanford Dole, technically offers more than the $1.2 billion proposed by both players presently competing for Conrail -- Norfolk Southern Corp. and an investor group organized by Morgan Stanley & Co.

However, the new proposal from Allen & Co. Inc. and The First Boston Corp. does not return some of the tax credits to the federal government that the other proposals do and also does not include some of the service-preservation covenants Dole has insisted must be part of any Conrail transaction she supports.

Dole said, "On the face of it, the proposal presented by Allen & Co. appears flawed in numerous respects, and we do not think it is attractive to taxpayers or those who depend upon Conrail for rail service or employment."

Thomas A. Saunders, managing partner at Morgan Stanley, said he welcomed the proposal because "it is confirmation in terms of what we've been saying about the value" of Conrail. However, he said the proposal "is not firm. It has many ifs and would leave the government taking the basic risk."

Magda Ratajski, spokesman for Norfolk Southern, said, "We have just heard about the offer and will review it carefully when we get the details."

Allen and First Boston have organized Conrail Acquisition Corp. Inc. According to the letter to Dole, the company plans to raise the funds to finance the acquisition "through an underwritten public offering of 85 million shares of the company's common stock."

The federal government owns 85 percent of Conrail, with the remainder held in trust for its employes. Allen and First Boston would have Conrail offer to buy the employes' shares and, failing that, would seek to modify the trust arrangement so that eventually the employe stock would be converted to Conrail common.

Allen and First Boston said that the plan "will create a Conrail with the broadest possible equity ownership base, preserve effective rail freight competition in the Northeast and Midwest, provide attractive financial terms for Conrail employes, avoid the job losses inevitably associated with an acquisition of Conrail by another railroad and provide increased value to the government."

There has been some criticism on Capitol Hill that the government is not getting enough for Conrail, although Dole has said several times that the service-preservation requirements and other convenants in her chosen transaction cost money. Saunders has said the same thing.

There also has been some sentiment on Capitol Hill for a public offering rather than a negotiated sale to another railroad, and this proposal may strengthen that argument.