After nearly two years of debate, the General Services Administration has inched closer to building a controversial federal office building in Newark that the agency had once said was not needed.

But in doing so, the GSA recently infuriated a key member of Congress when it flip-flopped overnight on the amount of money it needed for the project this year.

Now the $57 million project is proceeding, even though Congress has not completed action on the authorization that would signify that it is willing to complete the building.

The Newark project became a subject of controversy in 1983 when Rep. James J. Howard (D-N.J.), chairman of the House Public Works and Transportation Committee, first asked the GSA to plan the building.

Under a provision of federal law, Congress can ask the GSA to draw up what is known as an 11(b) report, a study that in the past has often been used to justify the need for a building that a member of Congress wants constructed.

Traditionally, the GSA had provided the necessary justification. But then-GSA Administrator Gerald P. Carmen balked on the Newark project, arguing that it was unnecessary.

Howard, in turn, ignored the GSA report and pushed through $9 million for fiscal 1984 to design the building and acquire a site for it. Eventually, it is expected that the building will be named after him.

Since then, GSA officials have taken the position that the building is necessary, because legislation has since been enacted to add two judges to the U.S. District Court in Newark.

But that didn't stem the disputes over the building.

In March, GSA Comptroller Raymond A. Fontaine said that unless Congress authorized enough money to complete the project, he would not release the funds to start work on it. Fontaine cited federal law, government regulations and a directive last year from the president's Office of Management and Budget.

Four officials from GSA's Public Buildings Service began lobbying the Senate Environment and Public Works Committee for the additional funds.

But last month, on the day after the committee had approved an amendment, sponsored by Sen. Frank R. Lautenberg (D-N.J.), to provide $46.6 million in additional funding, GSA's Public Buildings Commissioner William F. Sullivan told committee staff members that the agency did not need the money after all because it could proceed without it.

The reversal outraged Sen. Robert T. Stafford (R-Vt.), the committee's chairman. In a May 7 letter to Sullivan, Stafford wrote that GSA's position "has resulted in a committee action which at best was unnecessary and at worst could result in a costly mistake."

Stafford said he wanted "an explanation of why such misinformation was generated. This episode is all too reminiscent of those the committee has endured in the past. It not only damaged the confidence in your organization, but implies manipulation of million-dollar projects outside the scope of responsible decision-making."

For the next 10 days, nothing happened. But after a reporter asked Sullivan about the letter, acting GSA Administrator Dwight Ink wrote Stafford, "We do not believe that inclusion of the construction funding could result in a 'costly mistake.' " He said the agency would comply with the law, which, he said in this case, allows GSA to proceed with starting the early work on the building.

That decision still upsets Fontaine.

"It's stupid, it's wrong, and it goes against what we have been doing and with what OMB wants us to do," he said last month. But he said yesterday, after Ink had asked him to clarify his position, "I don't think he acted illegally because there's more flexibility in the law, as it is written, than there is in my interpretation of the OMB directive."

Fontaine said that split funding decisions are dangerous because it is hard "to have a contractor put up two stories of a four-story building and then wait, sometimes for several years, for Congress to authorize the additional funding."

The building, however -- at least for now -- is back on track.