Maryland's secretary of transporation abruptly resigned yesterday because, he said, the process of awarding construction contracts for Baltimore's multi-billion dollar subway system had been "tampered with" by a politically influential contractor.

Harry R. Hughes, who has been transportation secretary since the cabinet level department was created in 1971, charged that contractor Victor Frenkil improperly brought pressure on state officials in trying to gain a share of the construction management contract for the subway.

Hughes department, using new procedures designed to prevent a repeat of the contracting kickback scandals of the administration of former Gov. Spiro T. Agnew, had selected for the construction management contract another firm, the Ralph M. Parsons Company.

However, the State's Board of Public Works - which consists of Gov. Marvin Mandel, state treasurer William S. James and comptroller Louis L. Goldstein - has thus far refused to ratify the selection.

In the meantime, Hughes and Parsons officials charged yesterday, Frenkil threatened that the Parsons firm would not get the contract unless it included Frenklin's firm as part of their contracting team.

"If you take our firm on your team," Hughes quoted Frenkil as having told a Parsons executive, "we can pave the way for you."

"It seems rather obvious," Hughes said at a press conference at which he announced his resignation yesterday, "that Mr. Frenkil has been tampering with the system to get part of the work on the job."

As a result of these and other events surrounding the contract award, Hughes said in a letter of resignation to Mandel, the contract selection process "has been tampered with, and thus tainted, and therefore I can no longer in good conscience remain in your cabinet."

In a state noted for political corruption and for its tightly knit network of political loyalties. Huges became the first high official to resign in a public show of concern over a matter of ethics.

Hughes, a former majority leader of the Maryland Senate and former chairman of the state Democratic Party, has been a Mandel ally since the governor took office in 1969. He is also considered a likely candidate for statewide office in 1978.

In an emotionally charged meeting with his department's employees yesterday, Hughes said the "whole issue" in his decision to quit his $48,000-a-year job "was the integrity of the type of business we're in, we're probably more susceptible to hanky-panky than any other department in government and we haven't succumbed while I've been here."

Hughes had not consulted with Mandel and the resignation, which went into effect immediately, came as a surprise to most state officials. Thom Burden, Mandel's press secretary, said the governor accepted it "with regret and appreciated for his (Hughes') services."

Frenkil, who could not be reached for comment yesterday, is one of the region's largest construction contractors and is a personal friend of many high federal and state officials, including Gov. Mandel. He reached national attention in the early '70s when he was accused of using bribes, threats and favouritism to obtain $5 million in cost overruns for his work on the twin garages of the House and Senate in Washington.

Hughes resignation climaxed a nine-month dispute between Hughes and the board of Public Works, which mondel chairs, over who would get the contract to oversee subway construction.

It began last August when the Department of Transportation Professional Services Selection Board, the creation of a 1974 reform move, recommended the $25 million to $30 million management contract go to a five-company consortium headed by the California based Parsons firm. It was chosen over another group that included Baltimore Contractors Inc., the controversial firm headed by Frenkil.

The selection was immediately controversial. The AFL-CIO's Baltimore Metropolian Building and Construction Trades Council objected to Parsons on grounds that it was antiunion.Several state legislators objected on grounds that it was not a Maryland based firm.

Frenkil, meanwhile, was lobbying behind the scenes for his group, Singstad, Kehart, November & Hurka. Hughes said an investigation he made of the matter found that Frenkil and his allies had contacted members of the selection group on at least five separate occasions giving "the appearnace of improper influence.

Frenkil also contacted the Parsons firm. Joseph Volpe Jr., a company vice president, said yesterday that Frenkil began intervening in the contract process in May or June, 1976. Frenkil, he said yesterday that Frenkil, he said, told one Parsons executive "if we wanted the job, we should put him on the team."

"He made those overtunes a number of times," Volpe added, saying Parsons refused each time. "There wasn't room of anybody else and that's what we told Mr. Frenkil."

Frenkil also moved on another front. On Nov. 5, when the Parsons contract came up for approval before the Board of Public Works, his group, which had been found least qualified of the five finalists considered by the professional services committee, indicated that it could do the same job for about $5 million less than the Parsons firm.

This apparently caused the board to unanimously reject the Parsons proposal. State Treasurer William James yesterday said he had reluctantly joined Gov. Mandel and State Comptroller Louis Goldstein, a longtime friend of Frenkil, in opposing it.

The Frenkil group bid, however, was based on an estimate of hours the firm said the job would take different than Parsons.

"Good old Victor is a hardnosed, gungho businessman." Lt. Gov. Blair Lee III said yesterday. The Frenkil consortium, he said, had obviously deliberately used a lower number of man hours strung out over five years to accomplish their bid and there was no way to compare it with other bids.

"The public works board felt it was proceeding with two things that couldn't be compared," said member James.

Frenkil continued to call up the Parsons firm through late February. He made his late contact the week before a decisive March 2 public works board meeting. He said "it isn't too late," according to Parsons vice president Volpe. "He made it pretty clear that we weren't going to get it without him."

The Parsons proposal was again rejected at the March meeting, despite Hudges' endorsement of it. On March 21, Volpe requested an investigation by the U.S. general Accounting Office.

In his request letter, he detailed Frenkil's alleged threats to his firm and complained the Board of Public Work's action was "arbitrary and illegal. It violates the law of state and the rules and regulations prescribed pursuant to state law . . . the board's action makes a shambles and a mockey of the selection process."

A few days later, Sen. Clifford P. Case, (R-N.J.), who is ranking Republican member of the transporation subcommittee of the Senate Appropriations Committee, urged GAO to make a "full and prompt investigation." Case's office said yesterday that the senator has not received a response and it unclear what action GAO plans to take.

The conflict has slowly simmered to a boil since March. It came to a head early this month when Hughes threatened to stop work on the entire eight-mile long subway unless a construction manager was chosen soon.

His reason was that the federal Urban Mass Transit Administration, which is paying for 80 per cent of the line, has told the state not to approve any more contracts until the management issues is resolved. Mandel, however, told Hughes he would not allow him to do so.

Del. Frank Robey (D-Baltimore), chairman of a House subcommittee on law enforcement and transportation, said he met last Wednesday with Hughes and came away feeling the transportation secretary was doing the right thing by backing Parsons.

He described Hughes' resignation as "a great loss . . . He did a fantastic job."

"Under the terms of the contract there was some doubt if Frenkil could in fact carry it out," Robey added. "The subway tunneling requires a great deal of expertise Frenkil did not appear to have and it was a field of construction in which Parsons has an admirable record."

Del. Robert Jacques, of Montgomery County, said there is "no question Hughes was right about it, but they will futz around until Victor Frenkil gets a piece of it. Sooner or later, good old Victor will get his finger in that pie."

Hughes stopped short of directly attacking Mandel in both his press conference and letter of resignation. But he made it clear he questioned the motives of the State Board of Public Works.

"I think we've been combating a hidden phantom somewhere," he said.

In his strongly worded letter of resignation, said Frenkil's actions could only be "characterized as attempts to unduly and improperly influence the selection process and the selection of a firm to perform those professional services."

He also said he had been the victim of "factually unfounded and personally offensive" innuendos about his activities by two members of the board.

"Unfortunately, all attempts to reselve this matter within the system on a flair and objective basis have been thwarted by the board . . . I feel strongly that what has occurred over the past several months is uncalled for, not in the best interest of the citizens and taxpayers of this state and has done them, as well as the project, a costly and unwarranted disservice."

At his press conference, he said his role as a private citizen would enable him to feel freer to criticize the board and aid in any investigation undertaken.

The subway will be the most expensive public works project in Maryland history. It's first segment, estimated to cost $721 million, is to run from the Charles Center office complex in downtown Baltimore to a shopping center in the northwest part of the city.

Construction began last December with the digging of an airshaft near Bolton Hill on the northwest edge of the downtown. When the air sharf is complete, tunneling is to start there. This is scheduled to begin in July.