A D.C. Department of Human Services contract that was intended to provide less costly mental health services than treatment at St. Elizabeths Hospital, wound up last year being nearly three times as expensive as the hospital, according to department officials and contract records.

The costs, which one department official repeatedly criticized as excessive, resulted from the fact that the agency paid the private contractor for nine months of service though it provided only three.

The contract to JMC Associates Inc. was canceled in midterm after midlevel officials complained that the firm had no place to treat patients, according to documents and interviews.

Two days later, however, the agency reversed itself and reinstated the contract, saying the District government was committed to minority business development. JMC Associates is a minority-owned firm.

JMC's contract has been subpoenaed by a federal grand jury investigating whether District officials steered contracts to particular firms. It could not be learned what aspect of the contract the grand jury is investigating.

Carla J. Mumby, who is listed in contract documents as JMC's chief executive officer and on corporate papers as its vice president, declined to comment on the contract. Her attorney, Joseph Gibson, said he could not answer any questions about the contract cost, but added, "There are such things as start-up costs and . . . the city might have agreed to pay" such costs.

James T. Jones, who is listed in corporate records as JMC's president, could not be reached for comment.

In a May 22 search of a firm run by local businessman John Clyburn, a key figure in the D.C. contracting investigation, FBI agents sought records of any contacts between Mumby and Clyburn. Mumby was listed as one of 60 counselors trained under a human services agency contract for drug counseling awarded to that Clyburn firm in 1985, contract documents show. Neither Clyburn nor his attorney, who is on vacation, could be reached for comment. Clyburn has previously denied any wrongdoing.

JMC, incorporated in January 1985, was one of three organizations that submitted bids in 1985 when the human services agency sought proposals to provide "crisis beds" for mentally ill individuals who could be treated without hospitalization. The contractors were to set up community residential facilities to provide round-the-clock care for chronically mentally ill patients, most of whom were referred by the city's emergency psychiatric unit.

All three organizations received contracts, according to Dr. Robert Keisling, director of the agency's emergency psychiatric response unit and the contract administrator.

According to contract documents, JMC was to receive $216,739 for providing four crisis beds for nine months. The agency set an overall contract fee, agreeing to reimburse for costs incurred up to that amount, but did not set an amount that could be charged per patient.

If JMC had served patients for the full nine months, the per-patient fee would have amounted to about $200 a day -- $25 less than the per diem rate at St. Elizabeths, contract documents show. The two other contractors, both nonprofit organizations, charged less.

Woodley House was awarded a one-year $150,000 contract to provide four crisis beds for what amounted to a per diem charge of $102, according to Edith Maeda, the group's director of programs.

Community Connections received a $211,000, nine-month contract for what amounted to a per-diem cost of $86, according to one of its directors, Helen Bergman. Maxine Harris, the program's other director, said that cost turned out to be "unreasonably low" and the group raised its figure to about $113 a day when the contract was renewed.

Department officials accepted JMC's more expensive proposal without negotiation, according to Keisling, who took over as contract administrator several months after the contract was awarded.

The charges were excessive, he said, in part because of a high patient-staff ratio and in part because "they rented a big office and hired a bunch of clerical people."

JMC had planned to open a facility in Northeast Washington, but the firm's plans fell through, according to department officials. Contract records show that JMC did not open a facility for six months. Nevertheless, the agency continued to pay JMC, according to interviews.

Keisling said he recommended that the contract be terminated because "the cost was unacceptable to me." The contract was canceled on April 23, 1986, according to contract documents. Gibson, Mumby's lawyer, said Mumby denied that the contract was ever canceled.

Two days later, in an April 25, 1986, letter to Mumby, Vallie D. Byrdsong, then chief of the agency's contracts division, said the termination was "rescinded" and gave JMC four more weeks to open a facility. "The Government of the District of Columbia is committed to minority business development," the letter said. "It is encouraging to see such a firm interested in meeting the challenge of improving the quality of life in the District."

Asked in an interview why the termination decision was reversed, Byrdsong declined to comment.

Keisling said he did not know who reversed the decision to terminate the contract, but that he was informed of the decision by Gladys Baxley, then chief of the agency's mental health division. A spokesman for the Department of Human Services said Baxley could not comment because of the ongoing federal investigation.

JMC finally found a facility at 1100 Euclid St. NW and was granted a provisional license to open a community residential facility with four crisis beds on June 23, 1986, according to documents.

In a letter dated the same day, Byrdsong said no further payments would be made until JMC's facility was "operational." The firm began accepting patients on July 7, 1986, contract documents show.

Keisling again criticized the costs of the JMC contract in a July 7 memo to Baxley. "To date we have spent $65,489 on JMC before the first patient has been admitted to this facility," the memo said. "I think the services of JMC have failed to meet the requirements of the contract and are too expensive."

Judging on the basis of one invoice, Keisling figured that each bed at JMC would ultimately cost $90,000 a year, or $10,000 more than a bed at St. Elizabeths.

Keisling's projection turned out to be low. Based on the 12 weeks JMC actually accepted patients, the department paid the equivalent of $621 a day per patient -- nearly three times the rate at St. Elizabeths.

Despite Keisling's complaints, the agency paid JMC $213,739 -- $3,000 less than the full amount of its 1986 contract. Agency officials said the JMC invoices were approved by Baxley.

When JMC sought renewal of its contract in September 1986, Keisling again criticized the proposed fees as excessive. In a Dec. 8, 1986, letter to JMC, Keisling said the proposed rate would amount to $274 a patient per day, "almost three times the cost of the other two comparable contractors and more than the per diem rate at St. Elizabeths Hospital . . . . "

The agency cut the rate in January, awarding a new nine-month contract for $308,533. Keisling said JMC is providing eight crisis beds, which would amount to a per diem cost of about $140 a patient. Keisling said the rate is still more than the nonprofit organizations charge but "things are much better than they were."

Keisling said the agency was slow to negotiate lower fees, but added, "I think the whole D.C. government and the federal government should be quicker on everything."

"Nobody said leave them alone and let them make as much money as they wanted," he said.