The Defense Department yesterday lifted a 23-day ban on government contract bids by General Electric, saying the company has instituted reforms designed to prevent a repeat of allegedly fraudulent practices for which its Space Systems Division was indicted March 26.

Air Force Secretary Verne Orr said only that division, indicted in Philadelphia on federal charges of falsifying time cards to collect money it did not earn from the Air Force, will remain ineligible to bid for government contracts.

"The Air Force is seeking additional assurances from General Electric concerning specific corrective actions to be taken in the Space Systems Division," the Defense Department said in a statement.

Orr did not estimate how much longer the division, which allegedly padded bills for work on Mark 12A warheads for the Minuteman missile, will be ineligible to receive new contracts.

The Air Force lifted the ban once to award the division a $4.36 million contract for "planning and support of launch operations" for two defense communications satellites. The ban was lifted for "national security reasons," the Air Force said last week.

Industry analysts had expressed doubt since the start of the prohibition that it would impose much of a financial hardship on GE, the fourth-largest defense contractor, partly because the Pentagon has no other recourse for some of the firm's products and expertise.

Deputy Defense Secretary William Howard Taft IV said the ban was "not a hitting over the head" but a case of following procurement rules. They require the Defense Department to impose a contract ban against an indicted firm until changes are made to correct conditions that led to the indictment.

Orr said GE has agreed to:

* Establish a contract-review board of four senior vice presidents who are to encourage employes to report wrongdoing.

* Appoint an ombudsman with a telephone hot line to receive reports about questionable contract practices.

* Make division chiefs responsible for any overcharging in their divisions and strengthen internal auditing.