A U.S. District Court judge ruled yesterday that the Metro board acted properly last week in awarding the right to sell advertising space on Metrobus exteriors to an advertising firm without competitive bidding.

However, Judge June L. Green did find that the board acted improperly when it also agreed to extend its already existing advertising contract with the firm, National Transit Advertising Inc. of Washington, for two more years without competitive bidding.

Green's ruling came after she heard arguments yesterday in a suit filed by another advertising agency, Greene, Gladmon & Associates, challenging the validity of Metro's unilateral expansion of its contract with National Transit.

The dispute centered on Metro's decision to award for the first time the lucrative rights to sell ads on the sides of Metrobuses to National Transit, which is already under contract to sell ads for the interior and rear of Metrobuses, without giving other advertising agencies the opportunity to bid.

A D.C. law that took effect last month allowed Metro to display ads on the sides of buses for the first time.

Richard Huber, attorney for Greene, Gladmon, argued that the board's decision to sell ads on the side of buses -- which are viewed as more desirable locations than the rear and interior spaces -- was a significant change that would more than double the value of the contract from $400,000 to at least $800,000.

Huber said that Metro's procurement rules require competitive bids to be solicited in such cases.

Robert L. Polk, a Metro attorney, said that, while Metro has a "very strong commitment" to award contracts on the basis of competitive bidding, there were "good, cogent reasons" not to seek bids. He also said that, since it was a revenue-producing contract in which the advertising agency divides the proceeds from the ad sales with Metro, it was not covered by Metro's competitive bidding regulations.

Judge Green, who said during the hearing that it was not feasible to have two agencies selling bus ads, ruled that it was proper to include the rights to sell ads on the bus sides in the existing contract. But she also ruled that competitive bidding must take place before any extension to the existing contract, which expires in 1984.

"There was no basis at this time for extending the entire contract," Judge Green said.

Following Judge Green's ruling, Carl H. Greene, president of Greene, Gladmon, questioned the propriety of National Transit hiring as its lawyer Jerry A. Moore III, the son of D.C. Council member Jerry A. Moore Jr. (R-At Large). Council member Moore is both chairman of the council's transportation committee and vice chairman of the Metro board.

An aide to the council member said yesterday that there was no conflict of interest. The aide said Moore removed himself from the board's deliberations on the National Transit contract last Thursday and did not vote because he was concerned that there might appear to be a conflict.

The senior Moore also sponsored the bill passed by the City Council that permitted Metro to have ads on the sides of buses.

The younger Moore, who represented National Transit during the hearing yesterday, said the company hired the firm he works for, Linowes & Blocher, about two weeks ago and that the hiring has nothing to do with his father's position. He was assigned the case by his superiors because he does federal litigation for the firm. He said he had had no contact with Metro board members on the contract dispute.