After months of controversy, the District government has awarded a $1.2 million contract to install a phone system in the new municipal building at 14th and U streets NW to Tel Plus Communications Inc.

The young, Florida-based company beat out three other competitors for the job by offering what District officials called a "state-of-the-art" telecommunications system.

Tel Plus may also have gained an edge in the competition for a much larger contract to provide new phones in all city offices, according to some communications specialists.

The contract became a public issue last March after Jose Gutierrez, then one of Mayor Marion Barry's top aides, claimed the mayor was attempting to steer the city's telephone contracts to Chesapeake and Potomac Telephone Co.

Gutierrez alleged that City Administrator Thomas Downs pressured him to award the contract to C&P, despite the fact that other firms could install more modern systems for less money. A communications specialist working under Gutierrez and a top union official with the Communication Workers of America also claimed the contract was not being handled fairly.

Barry, who first transferred and then fired Gutierrez, responded to the allegations by appointing an evaluation team of city employes with technical, contracting and financial expertise to develop the job specifications and evaluate proposals.

In a press release yesterday, Barry praised the team for its professionalism and attacked Guiterrez for making "unfounded" charges and handling the contract poorly.

"The Department of Administrative Services is to be commended for handling a very complicated matter in a systematic and methodical way, as opposed to the flawed manner in which it was handled by the former director Jose Gutierrez when [requests for proposals] had a short response time, contained technical inaccuracies and over-restrictive terms favoring certain vendors . . . ," Barry said.

While Barry said he was concerned about the financial viability of C&P because the firm is among the District's largest employers and because residential phone rates depend on the company's health, he said "it was never my desire to steer contracts or violate the contracting procedure although Mr. Gutierrez attempted to make it appear that it was so . . . ."

According to the mayor's statement, the city sent out requests for proposals to 96 contractors, subcontractors and suppliers. Besides Tel Plus, three firms bid for the work: C&P Telephone, through AT&T Information Systems; Bell Atlanticom Systems Inc., and DAVID Systems Inc.

The statement said that Tel Plus, a 13-year-old company with about 2,700 employes, was the choice of both the city's evaluation team and a telecommunications consulting firm that reviewed the proposals for the District.

Industry officials viewed the contract for the municipal building as a substantial plum for the winner, partly because they believe it may lead to a much larger contract to replace the main phone system used throughout city government.

Barry has said that job could cost the city as much as $20 million.