Throughout the nine months that her idea for an exhibition on American achievement at the Smithsonian Institution had been debated, Catherine B. Reynolds was frustrated with the process.

She was angry that her idea of honoring prominent individuals had become a lightning rod for criticism. She was annoyed that some historians thought the Catherine B. Reynolds Foundation's promised $38 million gift to the National Museum of American History didn't mean she could help decide how the exhibit would be presented. She was befuddled by the slow and consensus-oriented process of putting together a museum show.

Reynolds finally decided that the different perspectives could not be reconciled after she read the second draft of a document seeking bids to design the "Spirit of America" exhibit. At that point, Reynolds switched from philanthropist to business executive and decided her money wasn't going to be well spent, according to three people familiar with the project.

The document, prepared in December by an 11-member team from the museum, asked for bids from companies interested in managing everything about the exhibit, from lighting to labels, much of it through subcontractors. Reynolds thought many of those functions could be handled in-house by the Smithsonian. "She questioned why would you do it this way, why pay an extra fee, how does this help," said a source familiar with the project.

On Monday afternoon Reynolds stunned those at the Smithsonian who had been working with her by announcing she had changed her mind about her promised donation. The first installment, $1.5 million, had already been transferred to the museum and will not be returned, officials said.

"There wasn't one breaking point," said Sheila Tate, a spokeswoman for Reynolds. "It was symptomatic of a system that wasn't receptive to getting anything done. This decision was strictly philosophical."

In a letter to Smithsonian Secretary Lawrence M. Small, Reynolds said she wanted to emphasize stirring biographies -- "the power of the individual to make a difference" -- while the museum's staff held the view that "only movements and institutions make a difference, not individuals." When the gift was announced last May, Reynolds suggested that the proposed 10,000-square-foot exhibit could feature the stories of Nobel laureates and Medal of Honor winners as well as people who made lasting achievements in the areas of sports, business and civil rights.

Small responded to Reynolds yesterday in a letter obtained by The Post. "Conceptualizing and, ultimately, executing first-class museum exhibits is always extremely challenging. It requires lots of effort and willingness to engage in a great deal of give and take. I'm sure that for some the process is wearing," he wrote. "From the beginning, I felt your intentions were admirable, and I still do. It is unfortunate for all that the project will be halted."

Marc Pachter, acting director of the American History Museum, thought a compromise could have been worked out. "I was caught off guard. I thought they were in it for the long haul and we would get it right. Call me an optimist," he said. "I am disappointed that we couldn't work it all out. In the end these exhibitions are Smithsonian exhibitions and the Smithsonian is responsible for them. But yet I thought some of the things they were hoping for would happen."

Pachter agreed that Reynolds and the museum staff had sharply different perspectives. "She was bewildered. She never in my presence berated anybody. She was just bewildered," he said. "In the end I think what she wanted to do was find something that moved the young particularly. I don't think she understood all the ways that would be just as direct."

Even the critics of Reynolds's proposal didn't expect the whole idea to collapse. "Everyone was surprised," said Helena Wright, the vice chairwoman of the Smithsonian's Congress of Scholars. That group had said Small was giving private donors too much influence over the museums and failing to safeguard their scholarly integrity.

Now Wright says there are lessons to be learned. "There is a great public interest in the Smithsonian as it is. This is not to say we are opposed to change. The secretary is always talking about money and modernization but he has left out museum practice. We are interested in modernization and we want to work effectively to bring in more money. Yet we want to be part of the conversation. We have something to add."

A commission has been examining the future of the history museum, and one of its members said the withdrawal of the Reynolds gift provides an opportunity to reexamine the museum's approach to fundraising. "It is always disappointing to see a gift withdrawn. It does have an impact on the future planning of the museum," said Neil Harris, a history professor at the University of Chicago who sits on the panel. "This kind of event will produce rethinking of the nature of public-private relationships with the Smithsonian."

The effect of Reynolds's decision on other fundraising efforts was also being debated at the museum yesterday. "We are going to remind people that we have had a lot of successful donor relationships. We think it would be very useful for them to know the process," Pachter said.

Philanthropist and businesswoman Catherine B. Reynolds with Ray Charles at last year's National Symphony Orchestra Ball, which she chaired.