The U.S. attorney's office here has begun an investigation into allegations of possible mismanagement in contracts awarded by the D.C. agency that runs the city's institutions for juveniles, according to sources familiar with the probe.

The investigation, which was requested by Rep. Stewart B. McKinney (R-Conn.) of the House District Committee, is focusing on whether proper competitive bidding practices were followed by D.C.'s Youth Services Administration when it awarded $500,000 in contracts to Educational Support Systems. ESS, whose offices are at 2621 P St. NW, provides educational services to delinquents in juvenile institutions or youths recently released from the facilities.

ESS Director Nancy Opalack confirmed yesterday that she has received a grand jury subpoena, and then referred a reporter to her attorney. Sources said the subpoena was to produce records.

Neither McKinney nor U.S. Attorney Joseph diGenova would comment yesterday.

F. Joseph Warin, an attorney for ESS, said yesterday that the firm followed proper procedures in seeking the city contracts.

"All of our work for the District of Columbia has been documented to the District of Columbia and has been available . . . for review and inspection," Warin said. "ESS conducts its business in a professional, honest manner and will continue to provide services in such a way to District of Columbia citizens."

Patricia Quann, director of the Youth Services Administration, also said proper procedures were followed in awarding the contracts.

Quann and Warin said in separate interviews that the largest ESS contract, for $167,000, was bid competitively and that ESS received a $60,000 sole-source contract because the firm was uniquely suited to provide the necessary services. The original $167,000 contract has been renewed for about $200,000 for the fiscal year that began Tuesday. Other ESS contracts were amendments to the existing contracts and for related services, Quann and Warin said.

Federal investigators also are looking into allegations that certain employes of the juvenile institutions may have engaged in a scheme to receive excessive overtime payments from the city, sources said.

Allegations concerning the ESS contracts surfaced during a continuing General Accounting Office investigation of special education programs at the juvenile institutions that McKinney had requested. McKinney has ordered the city to turn over to his office the complete activity logs of the juvenile institutions. ESS has contracted with the city to provide educational support services to Harambee house, a project for female delinquents; the Receiving Home a facility where D.C. youths await trial; and the community services program that works with youths released from the city juvenile institutions, Oak Hill and Cedar Knoll.