One of the federal contracting world's more protracted disputes appeared to be settled yesterday, as rivals AT&T and C&P Telephone announced they would join hands on a $90 million Treasury Department telephone job rather than brawl over it.

"It's over," said Ken Pitt, a spokesman for regional phone company Bell Atlantic Corp., Chesapeake & Potomac Telephone Cos.'s parent company.

American Telephone & Telegraph Co. will be prime contractor to provide local phone service and data transmission on 26,000 lines at Washington area Treasury offices. C&P will have a "major role" as subcontractor, servicing advanced switching equipment that AT&T will install.

The two companies had fought contentiously over the contract for more than three years in a confrontation symptomatic of the vigorous contests being waged for contracts between the so-called Baby Bells -- the regional phone companies -- and their former parent. Twice before, the Treasury Department gave the contract to AT&T, only to see the decision overturned by the General Services Administration's Board of Contract Appeals on the basis of protests from C&P.

The dispute reached a high point in April, when the Treasury Department banned Bell Atlantic and C&P, which provides phone service in the District, from signing new contracts with any federal agency, charging that they had deliberately misled the department about the availability of equipment. Bell Atlantic quickly noted that the board had made the same finding against AT&T.

Bell Atlantic later said that one of its suppliers was responsible for out-of-date information being submitted to the Treasury. In May, the ban was lifted, with Bell Atlantic agreeing to reiterate to its employees the importance of submitting correct information with government contract bids.

Late Friday, Treasury officials gave the job to AT&T again. But this time, a deal was in place to assure that no new protest would follow: C&P had agreed to become a subcontractor if AT&T won the job.

Pitt said his side had initiated the talks with AT&T about being a subcontractor. But he said that during the discussions there was no explicit deal struck that in return for being taken on, C&P would end its protests.

AT&T had friendly words yesterday for its former competitor: "This is going to be a happy conclusion to this long saga," said AT&T spokesman Jim McGann. "C&P is going to be a prime subcontractor on this contract and we're happy to have them on our team."