A federal investigative office has concluded that Metro, through poor management, wasted federal grants in connection with construction of a temporary marina in the Washington Channel that Metro built at a cost of $1.8 million in 1976 and sold for $12,200 in 1981.

A report by the inspector general of the U.S. Department of Transportation said Metro's failure to secure all necessary permits before starting work on the marina, used by the Capital Yacht Club while its permanent marina site was occupied by subway contractors, caused the cost of the construction to rise from an original estimate of $600,000 to $1.8 million.

Metro disputes the report's conclusions and says that the higher-than-expected cost of the marina, a floating structure with spaces for about 75 boats, was due in large part to the transit agency's policy of trying to start construction quickly to hold down the effects of inflation on construction bills.

A replacement marina was needed before major work could begin on a $39 million contract to construct Yellow Line tunnels under the channel. Metro says that holding up the larger job while permits for the marina were obtained could have resulted in much bigger cost increases due to inflation. One Metro estimate said a year's delay could cost up to $2.4 million.

"We were in the double-digit inflation period," said Metro deputy general counsel John Robertie. " . . . It was in the public interest to proceed."

Metro's position has been supported by the Urban Mass Transportation Administration, which disburses federal transit aid. It declined a request from DOT Inspector General Joseph P. Welsch to look into recovering federal funds used on the facility, now part of the Gangplank marina at 600 Water St. SW.

The investigation, begun after a hot line call from an anonymous tipster, is now considered closed. It found no evidence of fraud or criminal activity.

In his report, the inspector general said Metro's management of the project incurred excessive costs that could have been avoided. By proceeding in advance of formal agreements, he said, Metro surrendered much of its bargaining power with the other parties involved in the project: the city, which owned the property on which the original marina was located, the yacht club, and the Washington Channel Limited Partnership, a group that held the lease on the water on which the new marina would be located.

"They were in a very advantageous position and could lay on demands which in fact Metro didn't have much basis for declining," Welsch said.

William Frogale, a former commodore of the club and its chief negotiator with Metro, says his side felt that Metro's original design "was not suitable for the purpose for which it was intended, which was to provide a temporary berth for the yacht club." The club insisted that pilings be sturdier, he said, and that the marina have a fire protection system.

In reaching final agreement on the project, Metro accepted a series of design changes that pushed the cost of the marina to $1.8 million.

Metro had originally proposed that, once the yacht club could return to its original site, the partnership would be required to buy the temporary marina at its "fair market value," to be determined by an appraiser. Metro hoped this move would recover much of the construction cost. But in negotiating sessions after construction had begun, Metro agreed that the partnership would merely hold an option to buy at this price, and would not have to do so. The final agreement also gave the group $81,000 rent for its water.

In 1979, the partnership told Metro it would not exercise the option. That made Metro responsible for selling or removing the marina once construction of the tunnel was completed.

Thomas Rowan, principal partner in the group, said that even with the numerous design changes, the marina was poorly built and he feared that, based on construction costs, an appraiser would place an enormous price on it, which the partnership would be obliged to pay.

But the partnership was among three groups making offers after Metro put the marina up for public bid in August 1981.

Robertie says Metro did not expect bids to be high. The marina had deteriorated badly, could not be easily moved for use elsewhere and only one party, the partnership, was in a position to use it in place, because it held the lease on the water.

One company offered to buy the floating docks for $1,150; another offered to buy the docks and a utility building for $28,200. Both would have left Metro the job of removing the piles, estimated to cost at least $30,000.

The best offer, Metro concluded, was the partnership's, to buy everything for $12,200, because Metro would incur no expense removing the piles. The sale was concluded. The Yacht Club, meanwhile, moved back to a new, permanent marina that Metro built it on the old site also at a cost of about $1.8 million. CAPTION: Picture, The temporary marina that Metro constructed for $1.8 million in 1976 has become part of the Gangplank marina, shown, at 600 Water St., SW. By Gerald Martineau -- The Washington Post