The Prince George's County Council approved policies yesterday designed to increase the number of county contracts given to minority-owned businesses, but stopped short of setting up a mandatory set-aside for such companies.

The long-awaited decision represented a defeat for virtually the county's entire black political leadership, black business community and groups such as the NAACP, which had lined up behind the mandatory set-aside program.

Athough black leaders had been the driving force behind the legislation, none of three major votes taken yesterday fell precisely along racial lines. There are two blacks on the nine-member council.

The council voted 6 to 1 to adopt the strengthened voluntary program, which had been heavily pushed by County Executive Parris Glendening and Council Chairman Hilda R. Pemberton.

It defeated a mandatory set-aside -- a percentage of county business that could go only to minority firms -- on a 5-to-2 vote. Then it fell one vote short of the six needed to submit a proposal to all county voters that could change the county charter to allow a set-aside. Two council members were absent.

The issue of contracts for minority firms has been the most pronounced source of friction between blacks and Glendening in his five years in office.

"I hope the powers that be will not misread our numbers. We will not take this lying down," said Steve Brown, executive director of the Prince George's County branch of the NAACP. "We will have to go to a legal challenge."

Black business and civic activists, nearly 200 of whom packed the council chambers, expressed anger at the vote and threatened legal action against the county to prove that the voluntary method has not worked and that county contracting policy discriminates against minorities.

"The chairwoman has gone completely against the black community and she continues to carry the mantle for the county executive," Brown said after the vote.

Pemberton, who is black, pushed to strengthen the voluntary program, she said, because a more restrictive bidding process probably could not survive a court challenge. Pemberton proposed the compromise legislation, which would let voters decide whether to amend the county charter to allow a set-aside program.

"We have to be real," Pemberton said. "It is legally wrong to implement a mandatory set-aside at this time. Let's not invite a {court} challenge before it is time. {A charter amendment} will allow us to do what is legally permissible and morally right."

Glendening has steadfastly opposed mandatory set-aside legislation.

A mandatory set-aside program, in which a percentage of contracts -- in this case 30 percent -- would be restricted for bidding by minority-owned companies, has been the focus of a major political battle in the county since spring.

Proponents of the set-aside argued that minorities, who are rapidly nearing majority status in the county population, have been systematically cut out of the economic development boom in Prince George's. Minority companies received less than 20 percent of the contracts awarded in the fiscal year that ended in June.

"It is absolutely clear that if we want to sham, we can continue to deal with the goals," said Floyd E. Wilson Jr., the other black council member and sponsor of the set-aside legislation.

Under the new program adopted yesterday, restrictive bidding will be allowed as long as at least three minority firms are competing and the low bid does not exceed by 15 percent the past price for the contract.

Also, the county can negotiate with a minority firm on contracts valued up to $15,000, triple the current limit. Where feasible, a contractor will have to subcontract 20 percent of the work to a minority firm.

In the 6-to-1 vote approving the Pemberton-Glendening proposal, Wilson cast the dissenting vote. Anthony Cicoria and Wilson were the only members supporting the mandatory set-aside. On the charter amendment vote, Cicoria and F. Kirwan Wineland cast the opposing votes. Council members James M. Herl and Richard J. Castaldi were absent.