Mayor Marion Barry's administration reacted coolly yesterday to legislation before the City Council that would require the city to pay interest on bills it pays late and another measure that would set aside some city contracts for local small businesses.

Alphonse G. Hill, deputy mayor for finance, said the city makes more than 300,000 payments worth a total of about $1 billion to private vendors of goods and services each year and that only a small portion of those payments cause significant problems.

At a public hearing on the legislation, Hill acknowledged that some city agencies are often late in submitting bills to the city's central computer for payment. But, he said, "we pay some companies and they are still trying to collect" because of their own poor accounting procedures. "All is not wrong with the D.C. government's operations," Hill said.

He estimated that the legislation, which would require the city to pay the prevailing prime rate of interest on any bill unpaid after 30 days, could cost the District an additional $4.5 million yearly.

Hill said that the city has improved since a recent General Accounting Office review of the District's procurement process for fiscal year 1981 showed that the city paid only 28 percent of its bills within 30 days, the normal billing period.

Several groups representing a wide variety of large and small businesses, including many minority firms, testified that the city's late payments are causing some businesses to fail because of severe cash-flow problems.

"No D.C. agency or agency head is penalized when payments run months overdue," said Kenton Pattie, director of the Coalition for State Prompt Pay, a national group seeking similar legislation across the country.

The coalition presented a list of about 20 cases in which some bills were as much as 200 days overdue.

Hill said a new system to identify the city's vendors should be ready this fall. The system will identify smaller companies and pay them more quickly than larger firms, Hill said.

Council member Charlene Drew Jarvis (D-Ward 4) suggested that a penalty could be imposed on city agencies that are late submitting vouchers.

"I've imposed a penalty in my office," Hill responded. "People are removed if they're not doing the job. I think that penalty should be imposed on the agencies."

The prompt-payment bill, which failed to pass last year, was introduced by Nadine P. Winter (D-Ward 6).

The bill to set aside some city contracts for small local businesses was introduced by Wilhelmina J. Rolark (D-Ward 8) and cosponsored by 10 of the 12 other council members.

However, William Jameson, director of the Minority Business Opportunity Commission, said the mayor would soon propose a less restrictive measure.

Rolark indicated the mayor's bill would not specifically set aside projects for local firms, but would allow city agencies to give preference to such firms. "The intent is that local people get more [contracts]," said Rolark. "If their draft bill will [accomplish that], I won't have any problem."