An ingenious design for Lincoln Square, the largest private development along Pennsylvania Avenue and a key part of the plan to rejuvenate the great street, may be in serious trouble. The basic problem is the overabundance of office space now available or under construction in the Washington area.

"It is only prudent business," said Robert Dolan, head of the Washington office of Cadillac Fairview Corp., explaining his company's decision to build the oft-delayed, 1 million-square-foot project in two stages instead of all at once, as originally proposed.

Nonetheless, the decision has caused consternation and confusion among other participants in the development, partially because it was unexpected and came so late. Demolition already has begun to make way for Lincoln Square, a huge building designed to cover the entire block bounded by Pennsylvania Avenue, 11th, 10th and E streets NW.

At issue are the plans of several government agencies to make this stretch of the avenue a lively focus of retail, restaurant and entertainment activity as well as of office use, and the integrity of the imaginative Lincoln Square design created by the architectural firm of Hartman/Cox of Washington.

Happily, new proposals that would severely compromise the design have so far been thwarted by the vigilant staff of the Pennsylvania Avenue Development Corp. But serious issues remain.

As designed by Hartman/Cox, Lincoln Square is a behemoth building whose true size has been disguised with some success through an inventive series of setbacks that incorporates and mimics the rhythm of seven older buildings on the block. The design is more complicated than conventional office building projects because its success as a whole depends entirely upon the the interdependence of its many separate parts.

In the best of circumstances, building such a structure in stages presents formidable questions of where and how to draw the line between the phases of construction. In an uncertain economic climate these problems are magnified no end. One of the large what-ifs on everybody's mind concerning Lincoln Square is the fear that the second stage might be long delayed or, much worse, abandoned altogether.

It is hard to overstate the degree of architectural calamity that would result from this worst-case scenario. As the dividing line is cut in the most recent Cadillac Fairview proposal, the Pennsylvania Avenue fac,ade would be constructed first, stretching back on an irregular course roughly to the middle of the block. To build first on the avenue obviously is the right decision; nevertheless, the most attractive parts of the Lincoln Square design are concentrated in the rear of the block, at E Street and along 10th and 11th streets.

If the initial phase were then to stand alone, Washington would have one of the oddest looking buildings in a history not lacking in giant architectural faux pas (witness the oddity of the FBI building, right next door to Lincoln Square). Thus the economic decision to phase construction of Lincoln Square carries considerable esthetic risk. If the risk seems too great, the project clearly should be redesigned in separate units. As architect George Hartman, of Hartman/Cox, says, "I don't know if it would be quite as good a design, but it could be."

There are two additional, and sizable, problems with the revised Lincoln Square plan. The first is one of those technical, financial, legal and personal problems that make life interesting in the development game: Cadillac Fairview, the big Canandian real estate firm that bought controlling interest in the property last year, has proposed to omit the U.S. Storage Building from its intitial construction phase.

This is understandable: The building, whose fac,ade is protected by a historic preservation easement, is the only piece of the plot that Cadillac Fairview does not control outright. The flaw is that the U.S. Storage Building, located at 418 10th St. NW, sits precisely in the middle of the project and its inclusion has been guaranteed in a complicated joint development agreement negotiated between the PADC, the developer and Arthur Morrissette, the building's owner.

For better or for worse, Morrissette is right when he says, "They cannot do what the PADC wants done without my property." Frayed business relationships aside, this is an issue that must be settled before anything at all decent can be done with Lincoln Square, which brings us to the final, sticky point: The latest proposal by the developer foresees a significant reduction in the amount and kind of interior open space in Lincoln Square.

Again, it is hard to overstate the seriousness of the issue. As designed by Hartman/Cox, the through-block connections and spacious interior atrium might well live up to the original intentions, agreed to by PADC and the developer, to make Lincoln Square a center of "continuous activity not only during the day, but during evenings and weekends as well" and a "textbook example of the way in which a contemporary building can respond to an unusually complicated physical and historical context." As redesigned on the inside,it is a paltry gesture that makes these words sound empty, indeed.

It is a point worth making that even in its original, PADC-approved design Lincoln Square is too big to be lovable. In granting so much bulk to Lincoln Square PADC was perhaps simply keeping up with the Joneses in surrounding jurisdictions, which again exposes the insidious underside of the fierce regional competition for development dollars. Ironically, this process, with its teriffic "bonuses" and "incentives" for developers, has contributed substantially to the office glut that caused the current crisis at Lincoln Square.

Without its so-called amenities-- actually more like necessities--Lincoln Square it is bound to be a dud, something that ought to be clear to the enlightened self-interest of the developer. Since that does not seem to be the case we are fortunate to have the PADC in the middle of this particular conflic between economics and esthetics.

"We have no problems with phasing as such," commented Thomas J. Regan Jr., executive director of the PADC, "but we don't want to risk losing the identity of that design." It is just possible that this admirable intention will win the day.