David W. Fairweather was director of a research division at the Health and Human Services Department (HHS), overseeing dozens of studies on such topics as improving day care for children.

Jane L. Forman was a Washington consultant specializing in day care studies.

They met three years ago, after Forman's firm was hired by a contractor with grant money provided by Fairweather's office.

Their professional relationship soon evolved into a more personal one. Forman and Fairweather began dating in June, 1980, have been living together for the past year and now say they plan to get married.

During the same period, Fairweather administered and helped approve work on two grants that provided nearly $600,000 in federal money to REAP Associates, of which Forman is president and one of the two stockholders. These grants paid about $24,000 of Forman's salary last year.

The relationship between Fairweather and Forman involved a number of personal and professional dealings and common clients. It has extended to an outside business venture in which Forman has done occasional work for a private consulting firm that Fairweather runs, in addition to his current job at HHS, out of the house they share on Holly Street NW.

Fairweather and Forman say their relationship has not presented a conflict of interest. The inspector general's office at HHS is investigating whether Fairweather or REAP Associates violated any laws or regulations, an official with the office said.

It is not unusual in Washington for young professionals who meet through their work to become romantically involved. But when one works for a federal agency and the other for a private company in the same field, it sometimes becomes difficult to distinguish at what point the personal relationship creates the appearance of an ethical professional problem.

Fairweather and Forman stressed that Forman's company, REAP (Resources for Evaluation Analysis and Planning), has reported to HHS through intermediary firms, and that any of Fairweather's recommendations had to be approved by his superiors.

"I'm certainly part of the process," said Fairweather, who earned $51,807 a year as director of research and evaluation at HHS' Office of Human Development Services. But he said the fact that REAP was hired as a government subcontractor, not a direct contractor, "is a major distinction. This agency does not have responsibility for that subcontractor. We looked only at the scope of work and the total cost." Fairweather was recently transferred to another division because of staff reductions at HHS.

As for his relationship with Forman, he said: "I've had discussions with my supervisor about that relationship. He said I was entitled to a private life and I didn't have responsibility for making the decisions."

His supervisor, Richard E. Shute, said Fairweather did not tell him of the personal relationship until last November, about 1 1/2 years after they began dating. He said that the relationship gave the appearance of a conflict of interest, and that he directed Fairweather to stop working on any matter involving REAP.

"The first time I found out that David had a conflict of interest with regard to REAP was in November," Shute said. "I was a little bit alarmed at that. I told him, 'I want you to stay clear of that, to stay out of it.'

"There would be reason for someone to say they couldn't be objective in that situation. Any time an employe has a relationship with someone in a corporation with which this office does business...that employe needs to avoid making decisions that could benefit that company."

"I would say it never created a conflict of interest," said Forman, 33, who last summer rose from vice president to president of the small firm. "I don't think I should be barred from doing business with the agency because I have a non-marriage relationship with someone. We weren't even direct contractors.

"There wasn't any question whether David could manipulate the money," she said. "He couldn't reach in and change what was going on at REAP. There were a lot of levels involved."

Forman said that her work for Fairweather's private firm was mostly volunteer and that her pay was nominal. "I love David," she said. "We live together. He says, 'How would you design this training program?' and I help him out."

HHS records show that after he began dating Forman in June, 1980, Fairweather:

* Continued to serve as the government's project officer--the person responsible for ensuring that the work is adequate and on time--for one contractor's grant that provided about $430,000 to REAP after that date.

* Helped to extend the grant for another year in December, 1980, by approving a document that praised the work of the intermediary firm and REAP. The approval by Fairweather and others precluded any other firm from bidding for the job.

* Received progress reports on the work that said the grant was "Funded by David W. Fairweather, Ph.D" and other officials.

* Signed a grant, along with other officials in December, 1980, to a second contractor that is providing $167,000 to REAP, and then monitored the expenses as the government's budget official.

HHS regulations bar an official from "giving preferential treatment to any person... or losing complete independence or impartiality in the performance of government duties."

In 1978, Fairweather became the project officer for a $3 million grant to Welfare Research Inc. (WRI) of Albany, N.Y., to develop a management system for state and local day care programs. WRI hired REAP under the grant and sent Fairweather the subcontract for his "review and approval."

Forman said in a recent interview that Fairweather had no direct involvement with REAP's work. Before their personal relationship began, REAP charged the government for six working lunches and dinners involving Forman and Fairweather from June to October, 1979. Some of these meals were to "debrief" Fairweather on such topics as "general marketing and project discussion," according to REAP's records. Forman and Fairweather said the meals show only that he had a little involvement in REAP's work.

Forman said she began to date Fairweather the following June. She said she dealt with another HHS official for her part of the work and didn't withdraw from the job because she thought it would hurt the project.

Six months later, Fairweather said, he and other HHS officials approved a document that said only REAP and WRI had the necessary experience to continue the job. This extended REAP's grant for another year without giving other firms a chance to bid for it.

In the spring of 1981, the firm gave HHS a report saying "Special thanks are due to Dr. David W. Fairweather" and certain other people "for their support of our efforts to make this happen."

In a second instance in December, 1980, an HHS panel assembled by Fairweather's office made a $200,000 grant to the Day Care Council of America, which had said it would subcontract about half the work to REAP. Fairweather signed the award to the Day Care Council as the "program budget official."

The Day Care Council described REAP's work in its proposal and said to "contact David Fairweather" as a reference. Forman said the day care grant is bringing REAP $167,000 over two years.

Forman was listed as REAP's "corporate monitor," the person who manages the details of the grant, at a salary of $163 to $176 a day, for a total of $10,652 for 63 days. Forman said she relinquished those duties about six months ago, in part because of her relationship with Fairweather. "I don't think there was any conflict; it just made it easier," she said.

Fairweather said his role was to advise his superiors on the federal funding of the grant. "I had a role as the counter of the monies," he said. "I would know whether or not the products came in...and would request them if they were late."

Forman also says she has done some volunteer work for Fairweather's private firm, Fairweather Associates, but was paid only nominal sums. Fairweather said he has paid Forman by check for some of this work, "but that's a private business. I don't see where the connection has any problem at all." He said that his firm has no government contracts and that he works mostly with small businesses on his own time.

The couple's private business interests occasionally have overlapped. Last April, for example, Forman went to New York to talk to one of Fairweather's private clients, a group called Cancer Care, and charged REAP $185 for the trip, including $100 for theater tickets, the firm's records show.

Forman said she was hired by Fairweather Associates and has worked on long-range planning with Cancer Care's board of directors. But she took the April trip, she said, to try to convince Cancer Care to become one of REAP's clients.

"REAP has clients in common with D. Fairweather Associates," Forman said. "We are both employed by some of the same organizations." She said the theater tickets were to entertain private clients and were not billed to the government.

In addition, Forman said, "David has employed some of REAP's people on their own time. It was during off-hours and he paid them himself." Fairweather said he didn't recall this.

Last August, Fairweather's office at HHS no longer had the money to continue REAP's grant with the Day Care Council. Warren Master, who signed the original grant before taking over another HHS division, had his new office fund REAP's work for another year.

During the same period, Forman gave Master a private briefing on a non-competitive grant she was seeking, for $1.4 million, to analyze the cost of the Head Start program. Master said he asked Fairweather for advice on REAP's proposal but didn't know at the time that Fairweather was living with Forman.

"Had I known that, in all candor, I probably would have extricated David from the situation," he said. "I was probably one of the last people to find out about it. It's awkward and his friends just don't discuss it."

Master said that Shute soon told him of the relationship and that he raised the issue with Fairweather, who confirmed it. "I told David he has to be very sensitive to this," Master said. "He still feels the rest of the world is wrong."

Fairweather said he submitted his written comments in favor of the REAP proposal, but made a notation that he had a personal relationship with someone at REAP. Master decided to approve REAP's Head Start proposal anyway. He later withdrew it after the HHS grants officials objected that the plan was too costly and should be put up for competitive bidding.

Fairweather was transferred to Master's division early this year, and Master said he has directed him not to work on any matter involving REAP. He said Fairweather is "very professional" and "a high-integrity technician."

Master and Shute both gave high marks to REAP's work. Master said day care "is a fairly intensive area and REAP has an expertise in it. They do polished studies."