Kevin Grevey signed a two-year contract with the Washington Bullets yesterday and rejoined the team after missing the first three days of training camp.

Because Grevey was a free agent, having played out his option last season, he was not considered a holdout and was not fined for his absence.

Terms of the contract were not disclosed, but both sides said they were satisfied.

It is believed that his salary will be around $185,000 a year.

"I wanted to stay in Washington all along," Grevey said after taking part in his first practice of the season last night at Fort Meade. "The whole idea of playing out my option was to test my fair market value. But because of the compensation rule, I couldn't really do that.

"I had a lot of people interested in me, but no one would make a firm offer. I signed with the Bullets because it wasn't going to do me any good to wait any longer. Nothing else was going to happen.

"I only missed three days of practice, so I didn't get too far behind."

Grevey got far enough behind to lose his starting guard spot to second year man Roger Phegley.

Phegley has played well so far in practice, but Coach Dick Motta said yesterday that the job doesn't belong to either him or Grevey, even though it is Phegley's for the time being.

"If I had to start a game tomorrow, Phegley would start," Motta said, "but there are five more practices before we play a game. The longer Kevin stayed out, the move it helped Roger, but he didn't stay out long enough to not make it an open thing for that starting spot.

"Who has a spot in training camp doesn't mean a thing," Motta said. "Exhibition games are just that -- exhibitions.There will be a time when I have to make a decision and even then it won't be binding. I can make a change anytime I feel like it.

"What it comes doen to is that I'll play the guy who will help us win. These things have a way of working themselves out sooner or later. The ultimate decision will be made by the players themselves, anyway, not by us. Roger hasn't done anything to disappoint us and Kevin, in his mind, feels the job is his. It should be a donnybrook."

Phegley stayed with the first five yesterday and said, "I'll do what I have to to keep the job.

"I can't expect Kevin to come to camp not expecting to be a starter. But I look at it the same way I did before he came to camp. I'm in front of him and whoever fits in best with the other guys will steal the position and be the starter when the season starts."

Grevey didn't seem too concerned about who is starting.

Bullets General Manager Bob Ferry said that he, got a telephone call yesterday morning from Grevey's California agent, Larue Harcourt, and was told Grevey was ready to sign.

Ferry said that Grevey "signed a multiyear contract that is very similar to the one we originally offered him back in January, with a minor adjustment that I think works out best for everyone."

Neither Grevey nor Ferry would say exactly what the adjustment was, but Grevey said, "the money was always there and we compromised on the years."

In another training camp development yesterday, the Bullets released three rookie guards. They were fourth-round draft choice Lamont Reid from Oral Roberts and Bladensburg High School, fifth-round draft choice Marshall Ashford from Virginia Tech and eighth-round draft choice Jo Jo Walters from Manhattan.

That leaves 17 players on the roster, but three of them, Mitch Kupchak, Phil Chenier and Steve Malovic, are out with back injuries.