A D.C. contractor arrested on a drug-related charge last week has refused to cooperate with federal authorities seeking his account of how he received $41,000 worth of city business after complaining to Mayor Marion Barry, sources said.

Herbert (Dusty) Young, the head of Aafro Construction Co., has told acquaintances that he asked the mayor for assistance during a May telephone conversation in which Young informed Barry that an FBI agent was watching the mayor's house. The mayor referred Young to David E. Rivers, a top adviser to Barry who formerly headed the Department of Human Services, according to the account given by Young. Rivers later told agency officials to look for work for Young, sources said.

In an interview last week, Barry said he never referred Young to Rivers for contracts. He also denied that Young informed him of an FBI surveillance of his house. Barry said Young would frequently complain that Young was being trailed by FBI agents, but Barry said he told the 58-year-old Southeast Washington man: "That's your problem."

Barry said through a spokesman last night, "I didn't need any tips from Young regarding surveillance." He said he had long suspected that his house was being watched and added that any surveillance did not concern him because he was not engaged in anything illegal or improper.

Rivers has previously been identified as a key figure in a federal investigation of the award of District contracts. John Mercer, an attorney for Rivers, said yesterday his client "has not done anything improper in the awarding of contracts whatsoever. You can bring anyone out of the woodwork and he stands on his reputation."

Young has given the following account in conversations with acquaintances:

Young, a longtime friend of Barry's, saw FBI agent Daniel E. Lund in a car behind Barry's house while attempting to pay a social visit to the mayor in May. Young recognized the agent because Lund had previously questioned him about District contracts.

Young immediately informed Barry's security agents of the FBI surveillance, according to the account. The next day, Barry called Young and asked him how he knew the man in the car was a federal agent and Young explained that he had been interviewed by the agent previously. Barry told Young he had seen a second agent across the street.

According to Young's account, he told Barry during the phone conversation that he needed work. Young, a general contractor whose firm formerly was called Playland Construction Co., had previously held contracts at the Department of Housing and Community Development and D.C. General Hospital, but has told acquaintances that he had been unsuccessful in obtaining District contracts for about two years.

When Young asked the mayor about getting city contracts, Barry referred him to Rivers, who headed the D.C. Department of Human Services until December when he was appointed secretary of the District, according to the account.

Sources said Rivers sent Young to see a Human Services official. By the end of May, Young was hired by the Human Services Department for two painting jobs at Oak Hill, the city's juvenile detention facility, the sources said.

Young has told acquaintances he sees nothing wrong with anything that Barry or Rivers may have done in helping him receive work.

Early last Tuesday, Young was arrested and charged with unlawful use of a telephone in connection with an alleged sale of an ounce of cocaine to an undercover FBI agent last November. While he was being held at the FBI's field office in Southwest Washington, federal prosecutors sought to talk to him about the work he had received from the human services agency but Young refused to cooperate, sources said.

G. Allen Dale, an attorney for Young, said yesterday, "My client is not cooperating with the government. There will be no cooperation on the part of Herbert Young." Young was released on $10,000 bond. A hearing on the drug-related charge is set for Monday.

According to an affidavit filed in U.S. District Court here, Young was introduced to an undercover FBI agent, Allen Crawford, in November and the agent contacted him Nov. 5 about purchasing cocaine. Two days later, Young called Crawford and instructed him to go to a Peoples drugstore in the Eastover Shopping Center in Oxon Hill, where the two met, according to the affidavit by FBI agent Lund.

According to the affidavit, Young's son, Lionel Young, gave Crawford a package of cocaine. The agent then followed Herbert Young to his construction office in Oxon Hill and paid $1,950 for the drug, according to the affidavit.

Young has told acquaintances that he never sold or gave drugs to the agent.

Barry said he knew Young from their work together at Pride Inc., an inner city self-help and job training organization led by Barry. The mayor said Young "never really made it" and appeared on several recent occasions to have been drinking when he came to Barry's house.

He said Young frequently complained that he was not getting paid or obtaining contracts from D.C. General Hospital. Barry said he asked a staff assistant to find out whether the hospital owed Young money. He said the aide determined that the bills had been paid.

Staff writers Victoria Churchville and Tom Sherwood contributed to this report.