The District of Columbia government and firms seeking city contracts looked far and wide for a place to dispose of sewage sludge, from Bucks County, Pa., to Haiti and Antigua. But everywhere the story was the same: no vacancy.

Now, as a last resort, the city is looking closer to home, in Prince George's County. If the County Council says no in the next week or two, the city plans to begin large-scale dumping of chemically treated sludge within its own boundaries.

William Johnson, director of the D.C. Department of Environmental Services (DES), recently confirmed that the city is examining at least three potential city disposal sites, including city-owned land near the Fort Lincoln "new town" development in Northeast which was used briefly this summer to get rid of about 12,000 tons of claylike processed sludge called "Chemfix."

"The counties don't want to take District sludge unless the District is willing to take some of its own sludge," Johnson said in describing the city's new policy of using Chemfix for District land-reclamation projects. "We're very anxious to see what the people in P.G. County are willing to do . . . We're hopeful that they'll help us."

Last August, the city negotiated an unusual noncompetitive one-year, $10 million contract with the joint venture of Jones & Artis Construction Co./National Environmental Controls Inc. to treat and dispose of 600 tons of District sludge generated daily at the regional Blue Plains wastewater treatment plant in Southwest. The politically active firm replaced Dano Resource Recovery Inc., which defaulted on a previous contract to dispose of the city's sludge.

But Jones & Artis hasn't had any better luck than Dano in getting rid of the sludge material, which is fast piling up at Blue Plains. This spring the company lost a permit to dump at the Brown Station Road Landfill in Prince George's County and hasn't secured an alternative site.

Over the summer, the District allowed the contractor to temporarily dump Chemfix at three sites in the District, including Fort Lincoln, the grounds of St. Elizabeths Hospital and an empty lot in Southeast Washington, until a more suitable site could be found. Last week, however, the Prince George's council deferred action on the contractor's request for a permit to haul Chemfix to the privately owned Crosstrails Rubble Fill after nearby residents complained.

About 49,000 tons of Chemfix is being stored at Blue Plains and plant operators say they will run out of space within two weeks. While city officials have been guarded in discussing what might happen if Jones & Artis can't find a suburban outlet for the sludge material, under the terms of the contract the District likely would have to serve as the dumping ground of last resort.

The Chemfix material, a mixture of chemically treated sludge and cement, gives off a strong odor when left uncovered by soil. A city official acknowledged in a memo that pollution control at the Fort Lincoln site "may present a long-term maintenance problem."

Until now, the District has insisted that contractors find suitable disposal sites outside Washington, because the city lacks the land mass necessary for large-scale dumping. But that changed this summer when city officials decreed, without giving public notice, that the Chemfix material could be used as part of a new program of intensive land-reclamation throughout the District.

"The District is aware of only one sludge treatment process which produces an end product fully compatible with the land reclamation needs of the District . . . and this firm is Jones & Artis/National Environmental Controls," a D.C. review panel said in justifying the award of a new contract without competitive bidding.

In a memorandum to Mayor Marion Barry dated Aug. 4, City Administrator Thomas Downs said that the Fort Lincoln site, southeast of New York and South Dakota avenues NE, would be used as a Chemfix disposal site. The site could hold at least 220,000 cubic yards of the material, according to Downs.

The following week, Barry signed the new contract, which specifies that "The District will make available to the contractor as appropriate a District-owned site(s) in the District of Columbia for placement of the stabilized material by the contractor . . . "

The contractor, with DES approval, began dumping at Fort Lincoln in early August. The dumping was abruptly halted Aug. 17 by order of a D.C. Department of Consumer and Regulatory Affairs inspector, John R. Redmond, who questioned whether there were adequate safeguards against possible pollution of nearby water. Theodore R. Hagans, developer of the Fort Lincoln new town, also complained to the city that the dumping was far more extensive than he had been told it would be.

Johnson, noting that sludge disposal is a highly emotional subject, said city officials would be careful to confer with Hagans and area residents before deciding whether to resume Chemfix landfill operations near Fort Lincoln.

Downs said Chemfix is safe to use in the District and that he saw no need to seek approval from D.C. residents or the City Council before beginning a new and potentially controversial disposal policy.

"I don't think it is a policy that we have ever tried to hide," Downs said. "We have a responsibility like other jurisdictions of trying to get some end-product use from the sludge . . . . It's a safe product. This is no Love Canal."

The District has been struggling since the mid-1970s to find a long-term solution to its sludge disposal problem.

Under a federal court order, the city has been given responsibility for disposing of nearly half the sludge generated by the regional plant. The city sought to incinerate the material, as the easiest method of disposal. But that was vetoed in 1975 by the U.S. Environmental Protection Agency, which expressed concern about conserving energy at the height of the oil embargo.

Shortly after taking office in 1979, Mayor Barry signed what proved to be the first of three ill-fated contracts with the Dano company to dispose of the bulk of the District's sludge by converting it into compost that could be sold or given away. The company repeatedly had problems living up to the terms of its contracts and the city finally terminated its dealings with Dano last May.

Meanwhile, another firm that was seeking the disposal contract, Steuart Environmental Systems Inc., was trying to develop plans for treating the sludge and exporting it to Haiti, Antigua or Colombia. Johnson said several times that the city was ready to go with the Steuart firm, but the arrangements always fell through.

Another firm, Fuel Recovery Corp., proposed trucking the sludge to Bucks County, Pa., just north of Philadelphia.

The city first retained Jones & Artis/National Environmental Controls in late 1981 on an experimental basis, to determine whether the joint venture could convert sludge to a material that could be readily used as landfill or grass fertilizer. Since then, the city has steadily increased its business with the joint venture by renegotiating the contract.

Daniel N. Silverman Jr., chairman of Chemfix Technologies Inc. in Kenner, La., and a key member of the joint venture, has been active in fund-raising for the Democratic National Committee. Silverman and his companies directly contributed about $4,400 to Barry's reelection campaign last year and Silverman helped raise additional funds.

Carl D. Jones, a principal officer of Jones & Artis Construction Co., and several Jones & Artis corporate entities, contributed a total of $5,500 to Barry's campaign.

In an interview last week, Downs argued that the city was justified in shunning competitive bidding, considering the intense pressure it was under to find a replacement for Dano, and one that could immediately begin hauling the sludge from Blue Plains.

The Chemfix operation already was on site, Downs noted, "and to get a system in operation any other way . . . would have taken four or five months."

A D.C. government source familiar with the Blue Plains operation contends that top city officials decided against competitive bidding only after it appeared that the Chemfix joint venture would have difficulty vying with other firms that had more ready access to disposal sites. Downs denies the charge.

On June 10, shortly after canceling the contract with Dano, the city issued an invitation to firms to bid on one or possibly two five-year contracts to haul and dispose of up to 800 tons of Blue Plains sludge daily. Companies were given until June 30 to submit bids.

Five days later, Jones & Artis was faced with a crisis when it unexpectedly lost a permit to dispose of sludge material in a landfill operated by Prince George's County. Without that permit, the joint venture couldn't compete with other firms that had access to disposal sites.

On June 23, the city issued a notice that the deadline for bid submissions had been extended several months, to Oct. 1. Three weeks later, on Aug. 13, the city signed a one-year negotiated contract with Jones & Artis, unbeknownst to the other bidders. Then on Sept. 16, the city withdrew its bid invitation altogether.

Downs said that the decision to withdraw the invitation for bids had nothing to do with helping Jones & Artis. Rather, he said, the city was persuaded by other jurisdictions to delay action on a new long-term contract until members of the Metropolitan Washington Council of Governments could determine whether sludge-disposal contracts can be handled on an area-wide basis.

Other firms were surprised at the city's cancellation of bidding for the contract. "We spent thousands of dollars preparing for the bid and we got a letter yesterday saying they were canceling the bid," Donald Calus, district manager of Waste Management of Virginia, said last week. "We were upset."

Officials of the other firms called the city's terms with Jones & Artis generous. For instance, the city's original request for bids specified that the winning contractor was on its own to secure a disposal site. Also, the winning bidder was to be granted only limited storage space at Blue Plains.

But the Jones & Artis contract specifies that the city will provide one or more disposal sites and the joint venture is using about three-fifths of the storage space at Blue Plains.

Frank Bevard, general manager of Bio-Gro/Bevard, an Annapolis-based firm that does sludge recycling at Blue Plains for the Washington Suburban Sanitary Commission, said he was "absolutely floored" when he learned that the city had provided Jones & Artis with a disposal site within the District.

"They've never advertised in any RFP request for proposals or invitations to bid that they would provide a site," he said.

The bid invitation also specified that the contractor was to pay all utility costs related to the sludge treatment, but the new contract states that the District will pay those costs.

The District government, moreover, has been lenient in its enforcement of the new contract. According to its terms, the contract should have been terminated Sept. 15 because the firm did not have all necessary permits by then.

Johnson said the city is trying to be flexible in hopes that Jones & Artis can obtain a Prince George's hauling permit this month.

"We've got to manage this thing under all the emotionalism until we can be on safer ground," he said.