Excerpts from the "Report to the Secretary of State on the Moscow Chancery Construction Project" by special consultant and former CIA director James R. Schlesinger, which was released yesterday:

Soviet security services have permeated our new chancery building in Moscow with a full array of intelligence devices -- for which we do not yet understand either the technology or the underlying strategy. That an attempt to compromise the building would be made was both foreseeable and foreseen. But, as a nation, we have failed to anticipate the boldness, thoroughness and extent of the penetration. Our task now is to take whatever steps are necessary to render the building secure and operationally effective -- as is required by the embassy's mission. This is feasible but will cost time and money. It will also depend upon considerably more cooperation from the Soviet Union than has ever been exhibited heretofore.

We should not lose sight of one central consideration: a reasonably secure and effective U.S. Embassy in Moscow is more productive to our interests than its Soviet counterpart in Washington is to theirs. Manifestly, a window on a closed society is more valuable than yet another window on an open one.

To counter past and future Soviet intelligence efforts a new, comprehensive strategy must be developed. I suggest:

That responsibility for carrying out the remedial action necessary be vested in one individual with the authority to treat all issues connected with the chancery project (including renovations to the present chancery) and with the mandate to develop and implement coherent U.S. government policy in this regard.

The dismantling of the upper three floors of the New Office Building (NOB) and their replacement using modern, modular, steel construction techniques.

The retention without significant reconstruction -- but after having made every effort to neutralize Soviet intrusions -- of the lower five floors of the NOB as unclassified (though restricted access) space.

The construction in the forecourt of the complex of a new 27,000-38,000 square-foot addition (the Annex) to house the most sensitive operations of the embassy.

The elaboration of a strategy of "defense in depth" so that the more sensitive elements will be placed in correspondingly secure segments of the building.

The adjustment, as necessary, of the conditions of the 1972 U.S.-Soviet agreement on new embassy construction to provide for the right to take all necessary measures to carry out reconstruction and construction efforts entirely with American citizen personnel.

The acceptance throughout government of the philosophy that the special requirements of an embassy behind the Iron Curtain transcend the traditional construction norms of the Department of State. These embassies function in a distinctly hostile environment under constant human and technical attack. The buildings must be capable of withstanding attempts by foreign intelligence services to acquire sensitive information. An unending game of move and countermove is played. To consider the requirements for design and construction of embassies in Eastern Europe in the same light as embassies in West Africa or South America ignores the security climate in which these embassies exist. Instead, recognition should be given to the need for incorporation of innovative security precautions in every phase of design and construction. In this regard, the traditional manner of funding the construction of U.S. embassies in adversary capitals should be reviewed. This review should be conducted in consultation with the concerned congressional committees.

That efforts should be expended to retain permanently at least a portion of the existing office building for use as a consulate, medical unit, trade office . . . .

That the Soviet Embassy be allowed to shift operations to Mount Alto {in Washington} only when our reconstructed complex in Moscow is ready for occupancy. The intelligence potential of Mount Alto, at the margin, is considerably less than popularly assumed.

If full Soviet cooperation is obtained and the necessary resources for the project are allocated in a timely manner, the new chancery complex should be ready for occupancy in 1990.

. . . Physical security must not be compromised for cost or other considerations. Materials and other equipment should be prestored under 24-hour guard in the U.S., should be accompanied on its journey to the Soviet Union and should remain under 24-hour guard while in storage . . . . We should not hesitate to reject materials or equipment which have risked compromise in any degree . . . . The Department of State, by itself, lacks the resources in financial reserves, personnel or experience to undertake this reconstruction project unilaterally . . . . Without the full cooperation of various elements of the U.S. government, the chances for successful reconstructing of the chancery building will be reduced . . . .

. . . The embassy and its staff will indefinitely remain prime targets for a Soviet intelligence system with sophisticated technical and human intelligence capabilities. We must constantly train and equip our people and upgrade our technology to meet these ever-growing and ever-changing challenges. Eternal vigilance is the price for continuing security.