The Shakespeare Summer Festival, a tradition on the Mall for 18 years, has lost its government funds for this year.

Unless enough money is raised privately for a scaled-down production, Shakespeare will not be produced in the Sylvan Theatre this year. And there appears to be no chance for the festival's usual tour of other parks in the area before its Sylvan Theatre engagement.

"Lunacy" is how Ellie Chamberlain, who has directed the festival since its inception, describes the situation.

Chamberlain and two other producders submitted proposals to stage Shakespeare in the Sylvan this year, the second time competing proposals have been sought. But on May 3 an Interior Department attorney, Thomas A. Darner, ruled that the National Park Service's initial request for the proposals "contains major defects and needs a complete rewrite in order to meet minimum legal requirements."

Darner said the request document was insufficiently detailed, incomplete and "incorrect in some instances," with misleading instructions and inadequately described evaluation criteria.

Upon hearing from Darner, Park Service officials decided it was too late to write a new request for proposals. Eugene Kassman, performing arts coordinator of the National Capitol Region of the Park Service, wrote the chief of the Region's contracting divisions that "because of prior commitments for necessary equipment, the availability of the Sylvan Theatre, and the problems encountered in rescheduling the park sites for performances, it will bot be possible to proceed with a production this summer."

Approximately $100,000 had been allotted for the festival this year. Park Service officials will meet tomorrow to discuss what to do with the money.

Chamberlain, the Folger Theathre Group and Workshops for Careers in the Arts had submitted applications to stage Shakespeare at Sylvan this year. Chamberlain hoped to present "The Taming of the Shrew," the Folger planned to move its current production of "As You Like It" outdoors, and Workshops offered "Muntu Magic," and adaptions of "A Midsummer Night's Drean."

Originally the proposals were due by the end of February, but an extension was granted because the Capitol Region had not informed the applicants of the Labor Department's prescribed wage rates. This information was given to the applicants April 9, and all three proposals had been submitted by the new due date, April 16.

Ralph Ross, contracts chief for the Capitol Region, says the Labor Department was delinquent in providing the wage rates to the Park service. According to Ross, he asked for the information Jan. 3 and received it from Labor around April 1. "It delayed the total procurement severely," he added.

Ross was asked why the Interior Department lawyer who invalidated the request for proposals had not received the request much earlier. "We just didn't happen to get this one over there, "replied Ross.

Funds for next year's Shakespeare festival are already in doubt. The office of Management and Budget cut the money for the festival, along with that for several other performing arts activites, in the 1980 budget. The House Interior Subcommittee could restore the funds, however, when it marks up the 1980 budget next week.

Meanwhile, Chamberlain is trying to raise money and hold auditions for "The Taming of the Shrew" despite everything that has happened. At the moment, she reports her Shakespeare festival has $12.59 in the bank. She's aiming to raise, through private donations $20,000 to $25,000.