The District government is expected to award a major $17 million fuel supply contract today, replacing the old contract that drew criticism during the summer and touched off efforts on Capitol Hill to force the city to make greater use of competitive bidding.

The District last awarded the fuel contract in 1982 to Tri-Continental Industries Inc., a minority firm, after receiving competitive bids. Disclosures that the city extended Tri-Continental's contract for two years without seeking bids from other minority firms spurred the House to pass an amendment requiring competitive bidding for all city contracts.

Mindful of that controversy, city officials have moved cautiously in awarding the new contract to protect themselves from charges of favoritism, according to sources.

"It's a big contract -- it's sensitive," said a city official familiar with the contract. "Just the size of the contract makes it an issue."

The District has received bids from three minority fuel suppliers for the bulk of the new one-year contract.

Yet even before the award has been announced, one of the bidders, Atlantic Petroleum Corp., which said it submitted the lowest bid, complained this week that the District stacked the bidding process against it. The controversy largely revolves around whether Atlantic is a District-based firm.

"I don't know that I've seen any more unreasonable treatment than the way they are treating Atlantic Petroleum," said Marc F. Efron, the firm's attorney.

Under D.C. regulations, 5 percent is subtracted from the bid prices of District-based firms on contracts set aside or "sheltered" for certified minority businesses. Without the benefit of that 5 percent differential, Atlantic Petroleum apparently loses its status as low bidder to Tri-Continental Industries, even though Atlantic's bid of $12.5 million is $441,000 lower than Tri-Continental's.

The D.C. Minority Business Opportunity Commission decided last week that Atlantic Petroleum does not qualify as a D.C.-based firm. The commission held that the principal activities of the firm are carried out at a Kensington office, not at the firm's office in the city.

In a letter to Atlantic Petroleum, William Jameson, executive director of the commission, cited several factors defending the decision, including the fact that the firm listed its Maryland address on three federal forms, the firm's fuel trucks have Maryland license tags and knocks on the door at the D.C. office went unanswered.

Jameson said in an interview that staff members visited the firm's D.C. office three times but never gained access.

"We have bent over backwards in this particular case," Jameson said. "It's just that we have to carry out the law."

Roslyn Hill, president of Atlantic Petroleum, insisted that the firm's District office is the principal office. She said fuel trucks are kept there, all the firm's employes work out of that office and receive the bulk of their mail there, the firm is incorporated in the District, the majority of the firm's taxes are paid to the District and she spends 75 percent of her time there.

Hill said the location of her company's trucks, not the license tags, is the more important factor and said the site visits were unsuccessful because of scheduling mixups with commission staffers.

Atlantic Petroleum filed a protest with the city government yesterday, claiming the firm has not been given sufficient time to produce certain bid information.