The University of Chicago's decision to honor Robert S. McNamara Tuesday for his "contributions to international understanding" is drawing the biggest protest on the Midway campus since students took over the administration building 10 years ago to protest the Vietnam war he once helped manage.

McNamara, former secretary of defense and now World Bank president, is to be the first recipient of the Albert Pick Jr. Award, the largest prize offered by an American Unversity for work in foreign relations. The $25,000 award is to be presented Tuesday evening.

The faculty committee that chose McNamara pointed to the contributions he made, in his role at the World Bank, to the development of Third World countries.

Nevertheless, almost one-third of the university's prestigious faculty have signed a petition printed in the university newspaper, The Maroon, disassociating themselves from the choice of McNamara. Even historian William H. McNeill, spokesman for the six-member committee that made the selection, has said that he now feels the choice was made in haste.

A protest of the selection will begin with a picnic on the school's main quadrangle Tuesday afternoon. The protest is to include a 1960s-style teach-in, complete with folk music and speeches by Chicago Seven defendant David Dellinger and Chicago journalist and university alumnus Studs Terkel. That night, students plan to protest across the street from the building in which a formal dinner honoring McNamara will be held.

Not only do many students and faculty members criticize McNamara's role during the Vietnam war, but they also deny that his work at the World Bank deserves the award. "The ineffective and foolish interventionism of the World Bank cannot justify what is supposed to be the moral equivalent of the Nobel Prize," said economics Prof. Donald McCloskey.

Susanne Hoeber Rudolph, chairman of the political science department, has been one of the few faculty members to endorse the McNamara choice. She says, "One boggles at declaring as irredeemable all those, from John Kennedy through Robert McNamara, who did not share one's position on the Vietnam war."

The faculty also has expressed concern that the university, which has long prided itself on being above politics, may be changing its policy by granting an award to a public figure.

President Hanna Holborn Gray, still in her first year in office, has agreed to form a faculty committee to decide whether the university should reconsider the grounds on which the Pick award is given. As it was envisioned after the death of trustee Albert Pick Jr. in 1977, the award could go to a "government official, scholar, journalist, religious leader, writer, concerned citizen, or molder of public opinion."

Anthropology Prof. Bernard Cohn is the leader of a large group of faculty members who oppose giving awards for nonacademic achievement.

"The University of Chicago is a great Midwestern university and a great international university, but we are not an Eastern university," said Cohn. "Harvard, Yale and Princeton have committed themselves to the education of the ruling class of out country while we are committed to an excellence in teaching, research and science. We are the major source of the academic leadership of the country and that is our great strength. Politicization is something we have fought against for a long time." CAPTION: Picture, ROBERT S. McNAMARA . . . Vietnam role criticized