General Services Administration investigators have found that GSA has been paying millions of dollars to a New Jersey firm, Art Metal Inc., for chairs and file cabinets that do not meet GSA's specification.

GSA technicians, who examined and tested the office furniture, found it bore little resemblance to what GSA had specified when it sought bids from office furniture makers, according to sources. "Three models of chairs didn't meet the specifications on almost any part," one source said.

Although GSA knew from tests on preproduction prototypes that the office chairs did not meet specifications, the agency earlier this year awarded Art Metal a $5.5 million contract to make them. In the process, GSA turned down bids from three other firms whose chairs met specifications, according to the sources.

Robert E. Hughes, who was in charge of furniture buying for GSA until July, said yesterday that he objected to giving Art Metal the contract because its chairs did not meet the bid specifications. He also said that Art Metal's products were generally "shoddy."

But Hughes said he was overruled by Robert P. Graham, a former Citibank executive who was put in charge of GSA's federal supply service more than a year ago by GSA Administrator Jay Solomon.

"Graham said, 'Go ahead, we have no reason not to award the contract,'" according to Hughes. "He understood (the chair) didn't meet the specifications, but they (other GSA officials) believed it was better than what the specifications called for.

"The whole idea of competitive bidding is you bid on the same item. If you're not, it (the bid) ought to be rejected," said Hughes, who now works for a furniture manufacturer's representative.

Graham, who recently made Solomon angry by appearing to defend his employes' practice of buying typewriters and calculators for the government at higher prices than those charged by local retail stores, said yesterday that he told Hughes to make up his own mind about whether to go ahead with the $5.5 million chair contract.

"I recall entering the meeting (with Hughes) and saying, 'You make the decision as you see fit, and I'm prepared to accept your judgement," said Graham, who is paid $47,500 a year at GSA.

Graham said he understood that whether preproduction samples met the specifications was "irrelevant," because Hughes had sent Art Metal a letter reminding the firm that the final product must conform. However, investigators have found the office furniture that came off Art Metal's assembly lines also failed to meet specifications, according to sources.

Philip J. Kurens, president of Art Metal, said yesterday, "This matter is before the courts, and I cannot comment on the advice of counsel.

He was referring to Art Metal's court challenge of a recent decision by Solomon to rescind a new $9 million contract awarded to the firm in August to supply GSA with more filing cabinets.

Solomon was said to have been shocked that GSA had awarded the contract despite internal invesigations into Art Metal contracts and a July 3 Washington Post story describing federal worker's complaints about Art Metal office furniture.

"We have been receiving inferior equipment from them (Art Metal) for years," according to a 1973 memo quoted in the story from the Social Security Administration, which complained that more than 80 percent of 680 Art Metal filing cabinets had required extensive repairs.

C.S. Davis, chief of the procurement branch of GSA's office furniture division, has repeatedly told other GSA officials that nothing can be done about such complaints.

When the Agriculture Department complained last December that an Art Metal desk had arrived with crooked legs and drawers that failed to work, Davis wrote back that the government has "no legal recourse" against Art Metal, which considers such complaints "nuisance requests."

Art Metal is GSA's primary supplier of metal office furniture. Last year, GSA contracts accounted for $25 million of the company's $32 million in sales.

Art Metal has been represented in its dealings with GSA by Arthur S. Lowell, a Tenafly, N.J., lawyer who was quoted in the July 3 Post story as attributing many of the complaints about his firm to resentment by GSA employes about his previous GSA administrators, particularly Arthur E. Sampson.

Lowell recently hired Sampson, who left GSA in 1975, to head a private coal reclamation venture being formed by Lowell and Dr. Laszlo N. Tauber, whose Buzzard Point office building in Washington was leased for $2.5 million a year by GSA on Sampson's orders.

Hughes said Art Metal, like a number of other companies, has long employed "political pressure" in its dealings with GSA. When Hughes held up Art Metal's contract to make chairs for GSA earlier this year, for example, Newark Mayor Kenneth A. Gibson telegraphed GSA Administrator Solomon: "Under no condition should they (Art Metal) be disqualified until I have had the opportunity to confer with you."

Last fall, Gibson complained to President Carter that GSA was holding up another Art Metal contract, and Carter asked Solomon about the matter. Solomon has said he referred the complaints to Graham, the federal supply service commissioner. CAPTION: Picture, Shellback chair made for GSA by Art Metal Inc. as part of $5.5 million contract. By Charles Del Vecchio - The Washington Post