Hill Taylor & Co., a firm implicated in a federal grand jury investigation into payments to former D.C. deputy mayor Alphonse G. Hill, lost a bid this week to continue monitoring the District's daily lottery drawings.

The Chicago-based accounting firm had held the lottery contract since 1983. On Wednesday, the D.C. Lottery Board awarded a new two-year, $185,000 monitoring contract to Mitchell, Titus & Co., a local firm that competed with Hill Taylor and five other District firms for the contract.

The contract bids ranged from $87,780 to $209,101. Hill Taylor submitted a bid of $111,810. Douglass W. Gordon, executive director for the lottery board, said the board's policy is to award contracts to firms that submit both the lowest and most technically competent bid.

Gordon said although Mitchell, Titus' bid was higher than others, the company was selected because it received high scores for experience in monitoring the New Jersey lottery operation.

The District's lottery operation recorded $111 million in sales and provided $35 million in revenues to the city in fiscal 1985.

Hill Taylor has received hundreds of thousands of dollars in city auditing contracts. The firm is headed by James Hill, a longtime friend of Alphonse Hill, who resigned his position as deputy mayor in March after a disclosure that he accepted $3,000 in payments from Hill Taylor.

An attorney for James Hill said the payments were fees in exchange for business referrals that were unrelated to city government.

The Washington Post has reported that the grand jury is investigating whether Alphonse Hill received kickbacks or other financial considerations from James Hill.