The District of Columbia government and Pride Environmental Services Inc. agreed yesterday to let die a controversial 15-year franchise giving PES exclusive rights to place 10,000 trash cans on city streets. The informal agreement ends the franchise seven years ahead of schedule and 7,000 trash cans short of the original goal in what one City Council member called a "comedy of errors."

The two sides agreed to scrap the arrangement after PES director Mary Treadwell made an unscheduled appearance before a council committee holding hearings on the termination of the franchise. She told the committee PES has been defunct for over a year now.

Treadwell said that PES, one of several enterprises connected with the Youth Pride Inc. black self-help organization, had "fallen victim to the familiar fate of minority small businesses that experience a lack of adequate cash flow." Treadwell said that she agreed the franchise agreement should die, but "this termination should not be used by the District of Columbia as an excuse not to aid in the development of minority businesses."

William B. Johnson, director of the D.C. Department of Environmental Servies, which monitors the project, and Treadwell, who cofounded Youth Pride Inc. 13 years ago, blamed each other for the collapse of the once lofty venture. But in the end they agreed that the project -- designed in 1972 to place 10,000 trash cans on Washington sidewalks and net the city up to $100,000 a year in franchise fees -- was a failure that should have been terminated years ago.

"This whole episode has been a comedy of errors," said council member Jerry A. Moore Jr. (R-At-Large), whose transportation and environmental affairs committee held the hearings that brought the two sides together. "This is a good intention gone astray."

Under the franchise, PES was given the exclusive right to place the blue litter containers around the city and sell the advertising space on the sides of the cans. PES was responsible for maintenance and repairs of the containers and promised 200 jobs for city residents.

PES ended up placing only 3,000 cans by 1975 (about 2,000 remain on the streets now). Johnson told the committee yesterday that 600 of those cans were a safety hazard and needed to be removed immediately while many of the rest were in need of painting, cleaning and repair.

Johnson said that the Department of Environmental Services no longer considered PES the owner of the containers, since the organization defaulted on $500,000 in government-backed loans -- $400,000 of which was granted by the federal Small Business Administration, which is in the process of taking possession of the cans to settle the outstanding debt.

The numerous enterprises in the Pride network, including PES, have been the subject of an ongoing federal grand jury probe since the publication last year of a series of articles in The Washington Post detailing the theft, misappropriation and diversion of at least $600,000 by Treadwell and her associates from a federally financed housing project. She has denied any wrongdoing.

D.C. Mayor Marion Barry, Treadwell's former husband and a cofounder of Youth Pride, has not been involved in any of the allegations.