When word spread around Washington that Marion Jerome Woods, a former California bureaucrat, was considering the top job with the District's Department of Human Services, his friend, Rep. Julian C. Dixon (D-Calif.), sent him newspaper clippings about the U.S. attorney's investigation of city government contracts.

Another friend, Rep. Mervyn M. Dymally (D-Calif.), told Woods that the condition of the health and social services department presented "a very difficult situation."

Colleagues in California were more blunt. Woods recalled: "They said I was nuts."

However, "Woody," as he was known in California where he ran the largest state social services department, is far from being unbalanced. Friends and colleagues of the stern-faced Georgia native, who has curly, graying hair and an avuncular nature, said Woods enjoys a challenge.

"I'm here to contribute," said Woods, who became acting director of the District's Department of Human Services on July 1. "I think I have the experience to put together programs and provide the leadership that will serve the people."

Although the District's $860 million department is considerably smaller than the system Woods ran for seven years in California, the problems are as significant, he said. His tasks here will include helping to meet the needs of AIDS patients and the homeless, bolstering an inefficient health care system and revamping the youth services administration. He must also guide the department through a federal investigation of agency contracts.

Woods said he decided to leave his Sacramento, Calif., consulting business to return to government service because he liked the idea of working for a city that has a black majority. His appointment by Mayor Marion Barry to the $68,000 post must be approved by the D.C. Council, which will hold a confirmation hearing this fall.

The 55-year-old Woods has worked in state government for more than 20 years and was appointed to run California's massive benefit payments department in 1975.

During his lengthy career in government service, Woods challenged long-held attitudes about the abilities of blacks, women and the handicapped. He once spent a day rolling around his department and the streets of Sacramento in a wheelchair, he said, so that he could experience life from a different vantage point. "What I found out was that people would not look at me, they looked at the chair."

But his record as an administrator in California was decidedly mixed.

According to former colleagues, Woods restructured the money managing department into a $5 billion social services system that included welfare, food stamp and health benefits. Also, he oversaw services such as group home licensing and child and family protection. And he is credited with streamlining welfare administration and reducing its error ratings, producing a savings of more than $200 million.

Yet, during his tenure, Woods came under what was described as "occasional criticism" for personnel and contracting policies. His critics say he was not innovative and that his job was to keep things on an even keel.

San Francisco lawyer Marilyn Kaplan, who worked for a welfare rights organization during the 1970s, said it seemed that state finance officers wielded more power than Woods. "At the time, I didn't believe Woods was calling the shots. I wouldn't describe him as a particularly strong administrator," Kaplan said.

The most significant marks against his record include a legislative investigation of his contracting practices and his failure to install fully an expensive, statewide computer system to track welfare applications and payments.

Some lawmakers suggested in April 1980 that Woods' friends benefited from several no-bid contracts. A subsequent legislative report criticized how Woods' department evaluated contractors, repeatedly used special consultants and made emergency appointments that circumvented civil service hiring.

But a legislative investigation into the department's contracting found no wrongdoing.

Woods said recently that he remembers telling one member of the Assembly that it was his "objective" to do business with friends when he had the authority to choose. "I don't want to contract with any enemies."

The aborted computer system "was much too ambitious for a county-administered system," said Robert Horel, the department's current deputy welfare director. Horel, who also worked under Woods, said the former director left no particular problems for Gov. George Deukmejian's appointees to rectify.

Dixon Arnett, a Republican and chairman of the California Assembly's welfare committee early in Woods term, called Woods a "low profile" director who was one of then-Gov. Edmund G. Jerry Brown Jr.'s "most highly regarded appointees." Arnett, now legislative director for Sen. Pete Wilson (R-Calif.), said that when he heard Woods was coming to Washington, he told colleagues that "finally Barry has done something right."

Other Californians say Woods made few major blunders during his administration. His frankness and frequent visits to state lawmakers to lobby for his department enabled Woods to "change the attitude of the legislature towards social services," said California Assembly- woman Diane Watson.

When Woods met with Barry and Deputy Mayor Thomas M. Downs for the first time this spring, Downs said, he told Woods "with absolute frankness what has and could go wrong with the department." Surprisingly, said Downs, "the longer I talked about the problems of the agency, the more interested {Woods} became."

Woods, who was contacted last winter about the job by a Boston executive search firm, said that initially he was not interested but he changed his mind after meeting people who work for the the District. He said he was particularly impressed with Robert Washington, who heads the new mental health department, and Reed V. Tuckson, who was recently appointed public health commissioner.

Since taking over the helm of the department, one of Woods' first actions was to halt new contracts pending a review of existing contracts. By the end of August, Woods said, he expects his staff to prepare a preliminary draft of a contractors' handbook outlining rules for submitting periodic reports and the city's procedures for monitoring work by contractors.

Woods said that he will make changes in the human services agency where needed, but that he plans to move cautiously. He said he is not worried about being an out-of-towner with no political friends in the city government. "I didn't come here for that."

Barry said recently, "I like his style, his personality." He said Woods will have plenty of latitude to try ideas and implement programs. "He's not beholden to anyone politically but me." He said he gave Woods a priority list focusing on teen-age pregnancy, drug treatment and "self-reliance for welfare recipients." Woods also will oversee the transfer of St. Elizabeths Hospital and its 1,000 mental health patients from federal to city jurisdiction.

Woods is currently visiting program sites outside his North Capitol Street office. "I believe in management by wandering around. I don't intend to be a prisoner on the seventh floor."