Twelve years ago, James B. Adler was sifting through piles of congressional publications for a book on public affairs, and decided that an index would make his job easier. But when he went to the Library of Congress to find one he was told it didn't exist.

"I couldn't believe there was no adequate index for this treasure trove of information," Adler recalled. So he and his wife, Esthy, set out to compile one.

That led to the Congressional Information Service, a private firm that sells the index and microform reproductions of congressional publications in addition to such guides as an index to federal statistical publications.

Over the past few years, however, the government has begun moving in on the business of CIS and other private companies that collect, organize and sell information in print, microform or computerized data bases.

The Government Printing Office, for instance, gives many libraries, CIS' main customers, the same microform publications free. Proposals have been made in Congress and the executive branch to create new clearing-houses for information.

Now the private information industry seems to have found a friend in the Office of Management and Budget. OMB Director David A. Stockman sent a memo Sept. 11 telling departments and agencies to determine whether federal information centers, such as the Commerce Department's National Technical Information Service (NTIS) and the National Library of Medicine at the National Institutes of Health, duplicate private endeavors or pay their own way.

"The General Accounting Office and others have identified instances where the federal government is providing information services which are available from the private sector," Stockman's memo said. "In other cases, the government provides information services without charge or at less than full cost, thereby impeding the ability of the private sector to provide such services."

The memo was hailed by the Information Industry Association, a trade group representing 150 firms, including CIS, Dun & Bradstreet and The Washington Post Co.

"This document explicitly recognizes the adverse effect such activities can have on private sector information products and services," the association said in its weekly newsletter.

Industry contends that the government is wasting time and money by trying to distribute information as well as produce it when private distribution companies can do a better job. It is a $10 billion-a-year business.

Government agencies have countered that they have distributed their data for years and that taxpayers who buy information from profit-making companies pay twice: once for the government to collect it and again for the private companies to distribute it.

The GPO's move to micropublishing is having "a very, very significant impact" on CIS' business, said Adler, who has retired from CIS but remains on its board of directors. "There is no way we can compete, obviously, because the government is giving the information away."

A GPO spokesman said that it began reproducing many congressional publications in microform about two years ago, and will continue to increase its microform publishing because it is more economical than printing on paper.

Paul Zurkowski, president of the Information Industry Association, said government competition not only threatens free enterprise but also raises First Amendment questions.

"Who's going to control the switches of information?" he asked. If the government has sole control, he said, it could censor information by not making it readily available.

Computer data bases complicate the controversy. Among the projects the information association watches warily is the Commerce Department's Worldwide Information and Trade System (WITS), a $25 million pilot program of the Commerce Department's International Trade Administration.

WITS is a computer data base containing information about foreign market potential, currency fluctuations and foreign business regulations, among other things. It charges a small fee for access.

The information association contends that the WITS duplicates services provided by companies such as Dun & Bradstreet and the Journal of Commerce.

"We don't agree that private sector companies can duplicate what the government's been doing . . . ," said Maurice Kogon, director of WITS. Besides, he said, WITS is intended for smaller businesses who would be hard pressed to pay the private companies' rates.

While the information association views the OMB review as a step in the right direction, some of its members are concerned about the direction it could take.

Aspen Systems Corp., for instance, puts out publications in the health care and environmental health and safety areas, but also runs the National Criminal Justice Research Service under a contract with the Justice Department.

Its president, Herbert R. Brinberg, said he is concerned that, if the government decides to support only information centers that are profitable and eliminates the others, government will duplicate what private industry offers and thus cut off vital information that no one else will provide.

"The government has moved too often into areas where there shouldn't be government activity," said Brinberg, who chaired a committee that studied the NTIS a few years ago. "But there are certain activities it must perform. I get concerned when either side draws a sword from the scabbard."