Top officials at the Department of Housing and Urban Development spent about $100,000 to hire outside lawyers to investigate allegations of racial discrimination inside the agency when a routine HUD probe would have cost only $3,000, congressional investigators said yesterday.

In their report, investigators at the General Accounting Office said HUD bent government procurement rules in selecting the lawyers and deviated from standard procedures for handling a bias complaint lodged against HUD's inspector general. The GAO charges were vigorously denied by HUD.

But the GAO report, released by Sen. Fred D. Thompson (R-Tenn.), was about much more than arcane aspects of federal regulations. It rekindled a long-running feud between senior HUD officials and the inspector general, Susan Gaffney, sparking accusations that aides to HUD Secretary Andrew M. Cuomo manipulated the contract awards.

The Cuomo-Gaffney dispute goes back about three years, but intensified last year when the IG appeared before the Senate Governmental Affairs Committee, chaired by Thompson. Gaffney, a Clinton appointee who has faulted HUD initiatives championed by Cuomo, accused the secretary and his top aides of trying to undermine her independence. Her office was also caught up in controversy over her selection of three cities run by black mayors for a probe into housing program corruption.

Yesterday, Thompson said the GAO report showed Cuomo aides "manipulated the procurement process" in an "extraordinary effort to discredit this longtime public servant." Thompson said the lawyers billed HUD $300,000 for their work investigating charges of racial bias in the IG's office.

HUD's chief procurement officer, V. Stephen Carberry, said the GAO conclusions were "flatly wrong and not supported by fact or law." Senior HUD aides said the lawyers would be paid according to their contracts, which specified payments of about $100,000.

GAO and HUD disagreed over several procurement rules, such as whether HUD should have advertised the new contracts, and whether it limited competition and invoked an "expert services" exemption to hire the lawyers.

The GAO probe began in December, when Thompson asked congressional investigators to look into HUD's handling of the complaint filed against Gaffney in January 1998.

Philip X. Newsome, the deputy assistant IG for investigation at HUD, alleged that Gaffney, who is white, discriminated against him when he applied for a promotion because he is an African American. The post went to a white man instead. Newsome said that the bias he faced was part of a pattern of discrimination in the IG office.

HUD officials responsible for handling bias complaints selected an outside investigator from a pre-approved list of government contractors for a fee of about $2,700. But about three months after the probe began, Cuomo adviser Howard Glaser and Deputy Secretary Saul Ramirez Jr. took steps to stop it and awarded two new contracts worth about $100,000.

The new contracts went to Deval L. Patrick, then at the Day, Berry & Howard law firm and now a Texaco Inc. executive, and Kumiki Gibson, an attorney at Williams & Connolly. Patrick, a nationally known civil rights expert, had served in the Clinton Justice Department. Gibson also had worked in Justice's civil rights division and spent four years as a legal adviser to Vice President Gore. Patrick and Gibson did not return calls for comment.

HUD officials, who asked not to be identified, said yesterday that they turned to Patrick and Gibson because of the sensitive nature of the Newsome case. Newsome was the first non-white to hold a senior executive position in the IG office since its creation in 1972 and his complaint came at a time when several IG employees had privately gone to members of Congress with similar bias allegations, the officials said.

In particular, Carberry said, HUD needed investigators "with special expertise" in order to "produce credible conclusions and recommendations for the agency's consideration. Charges of discrimination involving a high official are a serious matter that requires a serious investigation."

But a lengthy report produced by Patrick looking into bias in the IG's office has not been made public. With no administrative decision in his case, Newsome filed a lawsuit seeking damages.

Rep. James E. Clyburn (D-S.C.), chairman of the Congressional Black Caucus, said the issue is not "the fine points of federal contracting but the violation of basic civil rights of federal employees." He defended the hiring of Patrick and Gibson, saying "anything less would have been a failure by HUD to meet its legal and moral obligations." But Thompson said Cuomo aides had made "a total mess" out of Newsome's case and deprived him of a timely decision, effectively forcing him to file a lawsuit. The government's system for handling discrimination complaints can accommodate "even sensitive matters, even high-profile matters."

When asked if Newsome had been caught in a cross-fire between Cuomo and Gaffney, his lawyer, Steven Hoffman, said, "We will proceed to litigate our case the way the law says we're supposed to. Has this been used by various people for various purposes? No doubt it has."