A Metro plan to purchase millions of dollars worth of fare collection equipment is embroiling the transit authority in yet another controversy over its trouble-plagued Farecard system, amid charges that the agency has sought to bar competition by manufacturers.

The dispute, which has caused concern among federal officials and members of Congress, was triggered by a preliminary move last month by Metro's policy-setting board. In a closed session, the board voted to buy the equipment from the firm that produced Metro's current machines, without competitive bids.

In the face of mounting protests from a rival company and from government officials, the transit authority later backed away from its original plan. Officials said last week that the agency plans to reconsider the issue.

"The whole thing is being reviewed," said John S. Egbert, Metro's deputy general manager. "Our general desire is to promote competition."

At issue is a proposal to spend an estimated $20 million, largely in federal funds, for fare collection machines during the next few years. The machines are needed to equip subway stations scheduled to open in the late 1980s and early 1990s, officials said.

Metro has spent more than $70 million to install the controversial machines in its existing stations. The equipment, manufactured by Cubic Western Data, a subsidiary of the San Diego-based Cubic Corp., has drawn widespread criticism because of high costs and chronic malfunctions.

Cubic recently produced a modified version of its Farecard equipment that is designed to be more dependable than the older machines. According to Metro officials, the new machines are an improvement but still break down too often.

Meanwhile, Alta Technology Inc., an American subsidiary of a French firm, has sought to lure Metro away from Cubic. Alta, based in Stamford, Conn., has contended that it can manufacture more reliable Farecard machines than Cubic's, save Metro millions of dollars and provide "healthy competition."

The firm, a subsidiary of the French Compagnie Generale d'Automatisme, has waged an intensive lobbying campaign spearheaded by Lanny J. Davis, a Washington lawyer, Democratic national committeeman from Maryland and former chairman of the Washington Suburban Transit Commission.

Alta, which wants to compete for the proposed contract, has obtained support from House and Senate members from Connecticut, and from some Maryland members of Congress.

"With two competitors, the Metro system would obtain a better bargain for its limited funds," said Rep. Stewart B. McKinney (R-Conn.).

Joseph A. LaSala Jr., chief counsel for the Urban Mass Transportation Administration, a federal agency that oversees Metro's grants, also has expressed concern over the issue and urged the transit authority to map plans to "promote competition to the maximum extent feasible."

The dispute focuses on several complex legal and engineering issues. According to Metro officials, the proposal to negotiate a contract with Cubic without competitive bids was designed to minimize the risks of increased malfunctions by Farecard machines, higher maintenance costs and legal disputes.

They contended that newly designed equipment, such as Alta's, is likely to contain flaws and break down, at least at the outset. They argued that maintenance costs could rise if Metro has to deal with two companies' equipment. They cited the risk of inadvertently infringing on Cubic's rights to protect trade secrets.

Metro officials conceded that Cubic's machines have not met their goals. According to recent Metro data, 26 newly installed Farecard machines have broken down more than five times as often as allowed under Metro's standards. On the average, each machine breaks down once in two days.

Alta officials have disputed Metro's arguments, contending that the authority has no justification for prohibiting competition. The company claims to have spent $400,000 to develop a "prototype" of a Farecard machine. Alta officials charged that Metro has refused to test the machine to see if it functions reliably.

"Alta has been stonewalled at every turn," said Davis.

Cubic officials argued that their new equipment soon will reach Metro's standards.

"We are going to guarantee that," said a Cubic spokesman. The firm has said Metro may be barred from installing another firm's machines unless Cubic is paid millions of dollars for its rights to secret data.

Because of the conflict, Metro officials said, a lawsuit is probable. If Alta is barred from competing, officials said, the company is expected to accuse Metro of violating laws requiring competition. If Alta is allowed to compete, they added, Cubic is likely to allege that its proprietary rights have been violated.

"Whatever we do, we're going to have some sort of litigation," predicted Sara E. Lister, Metro's general counsel.