The District government and a Virginia contractor have agreed to pay $1.3 million to the family of a 5-year-old Landover boy who suffered severe brain damage in a 2 1/2-story fall at a city-owned housing project last year.

The youth, Rynaldo Byrd, fell from a landing at the Park Morton housing complex in Northwest and struck his head on the concrete sidewalk. He underwent surgery at Children's Hospital within hours of the incident for removal of portions of his brain.

Under terms of the settlement, approved Tuesday by U.S. District Court Judge John Garrett Penn, the District agreed to pay $540,000. The contractor, Davenport Insulation Inc., which was performing weatherization at the project when the incident occurred, will pay $810,000.

Penn ordered that the money be paid in a lump sum into a trust for Rynaldo Byrd's care and use. Howard M. Rensin, the attorney for the family, said medical expenses currently total $170,000. Rensin will receive $460,833 in legal fees, according to court papers.

Last July, doctors at Children's operated on Rynaldo again, this time to transplant bone from three of the boy's ribs to his skull, which was broken in the fall, lawyers involved in the case said yesterday.

Rensin said the boy has recovered physically, except for partially impaired vision, but suffers a permanent learning disability. His IQ is about 55, Rensin said.

"His intellectual-educational level is about half of that of his chronological [age] level," Rensin said, "a gap that will widen as he grows older."

A lawyer for Davenport Insulation, Donald C. Allen, said the company denied it was at fault in the case but agreed to the settlement because, "Obviously, we thought it was reasonable. Our primary concern was for the welfare of the child."

"It was a horrible injury and he's recovered unbelievably well," Allen said. He said the surgeon who operated on Rynaldo, Dr. Dennis Johnson of Children's Hospital, was "flabbergasted himself at how well the boy has done."

A lawyer in the D.C. Corporation Counsel's office who participated in the case was unavailable for comment.

Rensin said Rynaldo, who wore a helmut to protect his head for about a year, is now enrolled at the Glenn Dale Special Center, a facility for handicapped children operated by Prince George's County.

Rensin said the boy was in a coma for several weeks after the fall and was hospitalized for 78 days last year. Rynaldo, who will soon be 6 years old, is unable to write his name and cannot identify colors, Rensin said.

According to Rensin, Rynaldo was accompanying his father on a visit to his paternal grandmother at the complex at 106 Morton St. NW when he tripped and fell through an opening on the landing between the building's second and third stories.

Rensin said a metal safety barrier had been missing from the landing for two or three years. Rensin alleged in court papers that a second, Plexiglas barrier also had been removed by workers for Davenport, who were preparing to enclose the landing to shut out the weather.

Removal of the guard rail and barrier, according to the complaint, left "an entire wall open without safety restrictions.