The Maryland Board of Public Works was told today that if it insists on using state employees to oversee construction of the Baltimore subway, it must hire a corps of elite experts who demand high salaries, require unlimited expense accounts, and generally behave as if they were still working for a private employer.

Acting Gov. Blair Lee III appeared undaunted by the complications of setting up an in-house management team, however, saying he found "no insurmountable problem, no hurdle we cannot get over, on the legal side," in a 20-page report submitted to the works aboard today by officials of the state Department of Transportation.

The question of whether the work will be done by the state or by a private consultant will be decided next Friday, Lee said, when Transportation Secretary-designate Hermann K. Intemann will give the board his recommendation.

The decision was made necessary by the board's refusal to approve a contractor - the Ralph M. Parsons Company - selected by transportation officials using their established selection procedure. That refusal prompted the resignation two weeks ago of Transportation Secretary Harry R. Hughes, who charged that the selection process had been "tainted" and "tampered with" by a Parsons competitor, Victor Frenkil. Frenkil is a friend and supporter of Gov. Martin Mandel and Comptroller Louis L. Goldstein, who were on the board that rejected the Parsons proposal.

Lee named Intemann to the position Thursday.

Lee said his appointment of Intemann, the first major one of his temporary administration, was in "no way" tied to a requirement that Intemann recommend doing the work within the department. Such a stipulation would "nullify the idea" of naming the retired corporate executive, who is a key Maryland Republican, to the cabinet post. "I don't know right now how he feels," Lee said.

Intemann added that he has "absolutely" no predisposed idea what he will recommend. "I haven't seen any of the proposals." Within the next seven days he said he will examine "the tremendous amount of material as if it were a balance sheet, weighing the proposals."

Then, at next week's works board meeting, "I'll speak what I think. There are no chains on me," Intemann said.

Lee said the 2 1/2-hour meeting between the works board and transportation officials was "the first good meeting on this subject in the last five or six months. We're all on the same wave length."

The acting gov ernment acknowledged there was "one exception" to the harmony, voiced by Acting Transportation Secretary James J. O'Donnell. Lee said O'Donnell's covering letter to the report said the in-house plan was "full of hazards and dangers and should not go this way."

O'Donnell, was Hughes' top aide and will serve as the department's chief executive until Intermann officially takes over next month, is "entitled to his opinion," Lee said.

Asked why the works board meeting was closed to the public, Lee said the board "discussed delicate questtions of personnel and government contracts." There was a "a superior result achieved by not having you guys (reporters) around taking notes, to put it bluntly," Lee said.

O'Donnell said that although "any approach is possible . . . I cannot in good conscience endorse or recommend this course of action!"

He predicted that it would take six to nine months to "recruit, organize and develop a sophisticated construction management team," during which time the state would incur, because of construction delays, inflationary costs of $2.5 million a month.

In addition to the extra $15 million to $22.5 million in inflationary costs, all of which would be borne by the state, the report estimated the five-year cost of hiring up to 170 employees and operating the in-house teams at $21.2 million.

Even if the state decides that it can "bend the rules" and hire the high-priced experts, it may need to employ a professional recruiting firm to find them, the report said.

Lee's selection of Intemann to succeed Hughes had what one source called political "fringe benefits." Intemann is a key Republican strategist in Maryland and close adviser to Anne Arundel County Executive Robert Pascal, a likely Republican opponent for Democrat Lee in the 1978 gubernatorial race.

The appointment probably removed Intemann from that campaign. It also allowed Lee to demonstrate that he is his "own man" as acting governor.

It further gave his administration a bipartisan cast, which will be useful especially if allegations of impropriety in the subway contract matter continue to be raised under Intemann's administration.