A D.C. Superior Court judge yesterday dismissed a suit brought by officials of a local company that contended that a lucrative city contract for bus shelter advertising was improperly awarded to another firm.

In dismissing the claim filed by Pedestrian Bus Stop Shelters Ltd., Judge John F. Doyle said the firm had failed to show that city Transportation Director John E. Touchstone's decision to give the contract to another company "lacked a rational basis."

Touchstone last week awarded the contract, valued at more than $10 million, to a firm co-owned by William B. Fitzgerald, president of Independence Federal Savings and Loan Association, and a New York-based bus shelter firm, Convenience and Safety Corp. of New York.

Attorneys for Pedestrian contended that a transportation committee set up to review offers for the contract had found Pedestrian's proposal superior to that of Convenience and Safety Corp. of Washington, and that Touchstone's award therefore was improper.

Evidence introduced in court yesterday showed that the committee had given Pedestrian's proposal a higher score based on such criteria as experience, knowledge of public transit systems, design and appearance of the shelters and participation by minorities in the venture.

But attorneys for the city argued that Touchstone was within his authority to decide otherwise, and that his decision was not "arbitrary or capricious," as Pedestrian contended.

Convenience and Safety is expected to soon begin erecting pre-fabricated bus shelters across the city on which they will sell space for display advertising. The city is to collect an annual franchise fee of $300 for each shelter, or 10 percent of the advertising revenue, whichever is greater.

The selection committee had recommended Pedestrian, Convenience and Safety and another firm for Touchstone's consideration. Touchstone said yesterday that the committee had fulfilled its purpose by making its recommendation.

"The decision of the committee was to recommend the top three," Touchstone said in an interview yesterday. "That's what they did and I made my decision. . . .I'm not going to go into the merits of it."

Superior Court Judge George H. Goodrich had issued a temporary order last week barring the city from proceeding with the contract. Attorneys for Pedestrian had sought a temporary injunction yesterday barring further action on the contract until the matter could be settled at trial.

Barring action from a higher court, Doyle's decision means Pedestrian's suit will not go to trial.