The D.C. Department of Human Services, in the midst of a major reorganization caused in part by a federal probe of city contracting, has tightened procedures for awarding contracts but is failing to pay many of its current vendors and some of its own employes on a regular basis.

The payment problems stem from the agency's decision to abolish its practice of awarding most contracts without competitive bidding, according to DHS officials. Since then, many contractors, whose contracts have expired, have found themselves providing services without pay because of delays by DHS in establishing an interim system to provide payments until new contracts are awarded.

In addition, nearly 100 St. Elizabeths Hospital employes have had trouble getting their paychecks on time since DHS assumed control of the mental health facility from the federal government seven weeks ago.

DHS officials say the hospital's payroll problems will be resolved shortly as the agency adjusts to the addition of some 3,000 former federal employes. The contracting problems and vendor payments are expected to take longer to sort out.

"Nothing short of a major restructuring of the department's administrating and contracting procedures will get us where we need to be," said Robert Little, a special consultant to DHS director M. Jerome Woods, who took over the agency during the summer.

Little said the agency, which administers the District's public health, social services and mental health programs, had been overseeing about 800 contracts that were scheduled to terminate Sept. 30. The agency faced "an ungodly paper crunch on renewals," he said.

At the same time, Little added, a new DHS director was struggling to reform a contracting system often criticized as inefficient, slipshod and prone to favoritism -- a charge that has made it a focus of a grand jury probe.

"It's obvious the department has a disproportionate number of sole-source contracts," Little said. "We've got to go back and do it the right way."

The contractors, some of whom are owed tens of thousands of dollars for services they have already provided, say they have been left in a precarious financial state while waiting for contract renewals.

"We had to get an emergency loan just to keep the phones from being disconnected," said Tony Russo, executive director of ConServe, which provides transitional housing and other services for the homeless and is awaiting about $68,000 from the city.

Helen Bergman, a codirector of Community Connections, which provides services to St. Elizabeths outpatients, said her group was owed more than $200,000 at one point but has finally started receiving some money from DHS.

"As a nonprofit organization, we don't have a lot of capital and reserve funds to float ourselves, should we not get paid," she said.

Little said DHS is "working furiously" to maintain services by switching contractors to a temporary emergency payment system until new competititively bid contracts can be awarded. Part of the overhaul will involve staggering contracts so that they don't all expire at the same time.

The transition, Little said, will be tough on many vendors, "but afterward, we will have a contracting system that will be open, well documented, competitive and able to withstand scrutiny from whomever."

The change in contracting methods cuts across all DHS operations but is being felt particularly by the mental health commission because of the commission's recent establishment and its takeover of St. Elizabeths operations. Payments and renewals of mental health contracts have been delayed, and some contractors have threatened to stop providing outpatient services.

The recent payroll problems at the hospital have also undermined confidence in DHS management abilities among employes, contractors and health specialists.

"We've got this huge new organization that shows up on the department's doorstep at exactly the same time the department is doing some internal reorganizing anyway, and things just got confused," said Mike English, the commission's chief administrative officer.

English said one result of the reorganization will be that his office "will probably be doing more of its paperwork at the commission level rather than the home {DHS} office. This will keep us closer to the contract service itself and better able to define the requirements."