MORE than two years before the space shuttle was first launched, a team of National Aeronautics and Space Administration engineers took one of its key contactors to task over shoddy workmanship on the critical safety seals that join segments of the shuttle's huge solid-fuel booster rockets. The booster's manufacturer, the Thiokol Corporation (now Morton Thiokol Inc.) insisted the design was adequate, but Government engineers were succinct in their disapproval: ''We find the Thiokol position regarding design adequacy of the clevis joint to be completely unacceptable,'' they wrote in a harshly worded memorandum on Jan. 19, 1979.

Seven years and nine days later, when Challenger disintegrated over the Florida coast, that design, and the dangers it posed, remained totally unchanged. The reason, investigators say: NASA and its contractor grew so committed to preserving an over-ambitious flight schedule and an aura of success that they stopped arguing.

''The whole adversary nature of NASA questioning the work of one of its suppliers just disappeared,'' said Air Force general Donald J. Kutyna, a key member of the Presidential commission that earlier this month recommended broad changes in the nation's space agency. ''No one wanted to be the one who raised a show-stopping problem. No one had the guts to stand up and say, 'This thing is falling apart.' ''

In fact, the strange twists and turns in the relationship between NASA and Morton Thiokol have made the space shuttle disaster a case study in how the Government and one of its critical suppliers can become captive to each other, paving the way for tragedy.

Both NASA and Morton Thiokol, each for its own reasons, became afraid to raise questions that could grind the shuttle program to an immediate halt. Exacerbating the problem was Thiokol's status as NASA's sole supplier of booster rockets: Had two companies been building rockets, some experts contend, the problems with the O-ring seals might have surfaced much earlier, as a competitor sought to steal away Thiokol's business by pointing out failings in Thiokol's design.

But since 1973, when Thiokol won out over three other bidders for the booster contract, NASA has had no place else to turn. And the commission concluded that Thiokol, dependent on remaining in NASA's good graces, overrode its own engineers' growing safety concerns ''in order to accommodate a major customer.'' The result was what one commission member called ''a kind of Russian roulette'' with every launching - and a set of lessons, many believe, about the Government's ability to work with industry on large technological projects.

From the Pentagon to Capitol Hill, the Challenger inquiry, one of the most intensive accident investigations by the Government to date, is striking familiar and worrisome chords. Some compare it to last year's debacle over the Sgt. York antiaircraft gun, where the Army, pushing a pet project, reportedly aided Ford Aerospace in hiding test results that showed the weapon did not work. Ultimately, the weapons project was killed. Similar disputes are currently brewing over the Army's Bradley tank and the Air Force and Navy's troubled new medium-range air-to-air missiles. All raise the same basic issue: How can enormously complex high-technology equipment be tested and monitored independently, free of pressures from the manufacturer or the political sponsors?

But the more immediate question, particularly potent because seven astronauts died in the Challenger tragedy, is simply: Who - or what - is to blame?

The Presidential commission and its chairman, William P. Rogers, studiously avoided naming names, primarily faulting NASA's flawed decision-making systems. And Thiokol's top executives declined to be interviewed for this article. But Rep. James H. Scheuer, a New

York Democrat who sits on a Congressional committee that oversees the space program, is less constrained. ''What Thiokol's management did, before the launching and then to the engineers who told the world about it, was utterly repugnant, just disgraceful,'' said Mr. Scheuer, who tangled publicly with Charles Locke, Morton Thiokol's chairman, at a Congressional hearing earlier this month. ''There is a lot of blame to go around,'' he said, ''but Thiokol deserves a fat share of it.''

For Morton Thiokol, whose salt canisters remind consumers that ''when it rains it pours,'' assessing liability, both to NASA and the astronauts' families, has become a critical issue, one that could cost the company tens of millions of dollars. (See box on page 8.) Moreover, Thiokol's actions after the accident - particularly its short-lived effort to strip responsibility from engineers who testified that they had warned of impending disaster - fueled a movement in Congress to strip Thiokol of its treasured role as sole supplier of solid rockets for the shuttle. More than 200 Congressmen and Senators signed a petition recently to find a second source.

The Senate is considering a bill to extend ''whistleblower'' protection to employees of contractors who aid Federal investigations. And Thiokol's normally tough-talking chairman, Charles S. Locke, apologized to Congress two weeks ago for telling The Wall Street Journal that dissident Thiokol engineers were going to have to return to ''productive work'' and ''not wander around the country gossiping,'' presumably with Federal investigators.

WHEN NASA drafted final plans for a space shuttle in the early 1970's, it marked a turning point in the design of manned space vehicles.

The shuttle was the first spacecraft designed to fly into orbit, then return to earth like an airplane. It was also the first craft ever to send astronauts aloft partly on the power of solid-fuel rockets, rather than the liquid fuels that powered the Mercury, Gemini and Apollo programs. Already an industry had arisen around solid-fuel technology, and the biggest customer was the military, which turned to solid fuels in the late 1950's to propel intercontinental ballistic missiles.

Those weapons systems, however, waxed and waned with Congressional whim, and rocket makers knew that the winner of the prestigious shuttle contract could become the industry's giant. ''Everyone was knocking himself out to get that one,'' recalled Harold W. Ritchey, who was chief executive of Thiokol until his retirement in 1977, in a recent interview. ''It was simply the biggest thing in the history of solid propellant rockets.'' There was no shortage of bidders. In addition to Thiokol, which made its name in the 1930's as one of the first manufacturers of synthetic rubber, three other contenders vied for the $1.8 billion project: Aerojet Solid Propulsion, Lockheed, and United Technologies. Thiokol ranked second, tied with United Technologies, on technical merits, scored highly on management skills, and won hands down on price - a critical issue for NASA, which had reluctantly turned to solid fuel technology in the first place as an economy move.

Thiokol won the award on Nov. 20, 1973, and Mr. Ritchey still remembers the day. ''Everyone ran up and down the halls waving his arms and shouting,'' he recalled. NASA was apparently pleased as well; it singled Thiokol out for praise on many fronts, including what a selection committee called an ''innovative'' design for the joints that join the huge rocket sections together. (The rocket was so large that if it were cast as a single piece, it could not be transported from Thiokol's Brigham City, Utah works to the Kennedy Space Center in Florida.) Lockheed protested, noting that Thiokol had been rated last on ''design, development and verification,'' and claiming that NASA's evaluation was ''marred by plain mistakes, arbitrary judgments and improper procedures.'' But NASA was upheld by the General Accounting Office.

It was clear from the beginning, contractors say, that NASA was not interested in getting a second supplier for the rockets - even though ''second sourcing,'' as the practice is called, was increasingly commonplace at the Pentagon and among other Government agencies seeking to assure that their suppliers offered them the most competitive price.

''It just didn't make economic sense,'' recalled Philip E. Culbertson NASA's general manager. ''This is an agency that never bought enough of anything to make it worthwhile to have more than one source. The production rates, especially in the early days of the shuttle program, just would not have supported it.''

Indeed, multiple sourcing can prove extraordinarily expensive in the rocket business, at least while a new spacecraft is under construction.

Each rocket must be ''qualified'' to assure that it meets specifications; qualification tests can easily cost in excess of $100 million. ''The bottom line,'' said one longtime NASA official who insisted on anonymity, ''is that even if we wanted two sources, we didn't have the bucks.''

Thiokol's troubles began with the first major qualification test, a simulated motor firing in 1977. After a series of design changes in the joint and its synthethic rubber O-ring seals, the force of firing bent segments of the rocket away from each other. That opened up the joint, a potentially deadly scenario: A solid rocket is like a giant firecracker, unable to be turned off once lit, and a leak of superheated gases could trigger a calamity in mid-flight.

The test results prompted a sharp reaction from NASA's Marshall Space Flight Center in Huntsville, Alabama, which was responsible for the booster program. For the next three years, Marshall officials -their concern escalating - wrote memo after memo, some warning that should hot gases escape through the seal the result could be a ''catastrophic failure.'' While the records uncovered by the Rogers commission are scanty, it appears the memos evoked little response from Thiokol, which concluded that ''the condition is not desirable but is acceptable.''

But as the date of the first shuttle launch approached, NASA gradually grew less vocal about its worries.

Even after reviewing 122,000 pages of documents and taking 12,000 pages of testimony, members of the Presidential commission say they do not fully understand why.

''You've got to think it had everything to do with the shuttle going 'operational,' '' said one investigator, using NASA's term for the craft's becoming a regularly scheduled spacetruck to the sky. In subtle ways, he continued, NASA's top management ''conveyed the thought that it didn't want to hear about delays'' that would further annoy Congress, which was already questioning why NASA was falling behind its plan.

In testimony before the Rogers commission, Thiokol officials have generally denied that the company ignored warning signs, saying it consistently made the most prudent engineering decisions it could based on the evidence at hand. ''The O rings consistently got a lot of attention,'' said Thomas S. Russell, Thiokol's vice president of development and strategic planning. ''A lot of new design ideas were being looked at,'' he said, and some - including a system to minimize the rotation of the joint at ignition - were planned for incorporation in new boosters scheduled for delivery around 1988.

THE company's engineers and documents obtained by the Presidential commission tell a different story. They indicate that top-level managers with an understanding of the technical problems largely fled the company, aided by golden parachutes, in the aftermath of the merger. ''It created a schism,'' one engineer said, ''between technical guys who understood about rockets, and the Chicago guys, who understood about salt.''

But by last summer, amid alarming evidence that O rings were eroding in flight, Thiokol's veteran engineers were growing convinced the changes were not coming fast enough. The engineers - like Roger Boisjoly, acknowledged within the company as the expert on the seal problem -wrote a string of memos predicting imminent catastrophe, but both Thiokol management in Utah and the Marshall Space Flight Center barely responded. At one point last summer Thiokol engineers even set up a laboratory test that suggested the rubber seal failed to follow the movement of the rocket casing at temperatures below 75 degrees - later a critical issue - but there is no record that anyone paid attention.

To deal with the problem, Thiokol set up a task force of ''nearly 40 fulltime'' engineers and technicians, said Mr. Russell. But the commission documents strongly suggest that the task force was starved for resources - one internal company memo started with ''HELP!''

The chairman of the the Presidential panel, blaming NASA more than Thiokol, concluded that the problem was ''almost covered up'' at Marshall, at a time when NASA was quickly falling behind its own launching schedule.

One reason the seal problem may not have seemed so urgent to top management, many speculate, is that by last summer, with nearly a score of successful shuttle launches behind them, NASA and Thiokol were seduced by their own accomplishments.

''Each time the shuttle flew and nothing happened, someone suggested that the risk wasn't as bad as they first thought,'' Richard P. Feynman, the Nobel laureaute physicist who quickly became the commission's most colorful and outspoken member, said last month. ''So they kept lowering their standards, bit by bit, until the situation got so bad that Thiokol was flying in a condition that no one would have tolerated a few years ago.''

Experts in corporate behavior say that Thiokol's reaction to its own success is hardly unique. ''You see it happen time and again, particularly in any environment where you mix engineers and managers,'' said William H. Starbuck, a professor at New York University's school of business who is preparing a case study of the Challenger disaster. ''The engineers build in big tolerances - maybe 10 times stronger than they need. And the managers see that things are being overdesigned, so they pare back. It works. But you can only pare back so much.''

SOME believe that a second supplier of the rockets, whose own engineers would have watched the process far more closely than a disinterested outsider, might have sent up a red flag.

''It's often critical to have more than one source when technological uncertainty is high - when you don't know for sure the best ways to go,'' said Norman Waks, the chief management scientist at the MITRE Corporation, the non-profit Massachusetts company that oversees large systems engineering projects for the Pentagon. That technique worked, he noted, in the early days of the nuclear Navy, when competitive testing over a period of years proved that one nuclear reactor design - not the one originally favored by most engineers - proved more efficient.

Many others, Thiokol included, argue that the presence of a second source would have contributed nothing to safety. NASA, they note, would have likely required the second manufacturer to follow the identical booster that Thiokol made, for fear that it would prove far too complex to monitor two different design types.

''In some ways, you can't really lay the blame on Thiokol at all,'' said Joseph F. Sutter, a vice president of the Boeing Commercial Airplane Company and a member of the Presidential panel. ''In every major defense program I've been familiar with, there has always been one person in charge for the Government. At NASA there was no one,'' he said. Thus, even if Thiokol's engineers were willing to go over their own managers' heads, they had no one to go to. Ironically, some speculate that Congressional pressure on NASA to secure a second supplier for the booster in the months just before the Challenger accident may have contributed, in a small way, to the disaster. Thiokol officials were well aware by January of this year that they were in jeopardy of losing their sole-source status, in part because competitors had lobbied heavily on Capitol Hill all last year for a chance to help satiate NASA's growing appetite for booster rockets. Sen. Slade Gorton, the Washington

Republican who chairs the Senate subcommittee on Science, Technology and Space, suggested in a recent interview that the prospect of losing part of the lucrative contract ''put some pressure on Thiokol's management the night before launch.'' That was the night of the now-famous argument with NASA, where Thiokol engineers insisted that with temperatures dipping below freezing it was too cold to risk a launch. Those engineers were overruled by superiors at Thiokol, whom NASA had warned to ''put on their management hats.'' ''They must have felt,'' said Sen. Gorton, ''that unless they went along with NASA and approved a launch, NASA would find another contractor that gives it answers it liked.''

But criticism of Thiokol's management is hardly limited to its actions before the fateful launch. One company engineer who was among those gathered in the Wasatch Division's conference room watching the shuttle launch on television said everyone there ''had a pretty good idea'' what had gone wrong within seconds after the explosion. But NASA officials, speaking privately, say no one from Thiokol came forward to voice their suspicions.

In fact, it took several weeks before the story about the night-before-launch arguments came to light, and then only when mid-level engineers, with trepidation, talked to a private session of the Rogers commission and to The New York Times. Within weeks, two of the engineers who provided the most damaging testimony, Mr. Boisjoly and Allan J. McDonald, were stripped of their authority, deprived of their staffs and prevented from seeing critical data about the investigation. Mr. Rogers, outraged, released their closed-session testimony and said it was ''shocking,'' adding that the engineers were ''punished for being right.''

Now the company has recovered somewhat. After first denying that any engineers had been demoted, it announced that they were reinstated.

A host of managers who had overruled the engineers were transferred to unspecified jobs or forced into early retirement. In his testimony two weeks ago, Mr. Locke said that what seemed like a company effort to demote the engineers was actually an effort to keep the dissenters from direct contact with NASA, which he said could produce ''friction which would be counterproductive to the important work ahead.''

''In retrospect,'' he said, in what committee members viewed as considerable understatement, ''we must criticize ourselves for not being sufficiently sensitive to how these actions would be perceived.'' ANOTHER THREAT TO THIOKOL'S BOTTOM LINE

Since 1973, Thiokol has earned about $150 million in profits from the shuttle contract, on contract-related revenues of about $1.6 billion. But a little-discussed, yet standard clause, of Thiokol's contract with NASA calls for a $10 million penalty, and the potential loss of roughly $2.5 million more in incentive payments, if the solid-fuel boosters are determined to have caused a ''mission failure.''

It is not clear whether NASA, which itself was found responsible for the remarkable string of ignored warnings, incomplete tests and faulty designs that contributed to the Challenger disaster, plans to enforce the penalty clause. ''We are still assessing our rights and remedies,'' said Susan Smith, chief counsel at NASA's Marshall Space Flight Center. ''It would be inappropriate to say yet what we are going to do.''

Thiokol also faces the likelihood of suits - or the threat of them - by the astronauts' survivors. By Federal law, NASA seems partly protected against suits brought by families of the five astronauts who were Government employees. Thiokol and its insurers may be sued by all of them. A Houston attorney who represented the families of the astronauts who died in the 1967 Apollo fire says he already is negotiating an out-of-court settlement with Thiokol, but he will not reveal the name of his client. Thiokol declines to comment.

Shuttle operations account for only about 20 percent of Morton Thiokol's revenues. Analysts agree that the accident will take its toll on the bottom line, but say the stock has already been discounted for that. Shuttle flights seem unlikely to resume before 1988, and then at a pace far below NASA's target of one every two weeks.

And competitors are moving in. Aerojet has circulated a proposal for a single-piece rocket with no seals or O rings. Hercules Inc., meanwhile, wants to become a second source. ''At this point I think NASA is going to have to get two suppliers,'' said Henry A. Schowengerdt, president of Hercules Aerospace Company. ''The question is when.'' AT A GLANCE: MORTON THIOKOL

All dollar amounts in thousands, except per share data:

Three months ended:

March 31...1986...1985: Revenues...$518,454,000...$496,920,000. Net income...36,068,000...106,941,000. Earnings per share...$0.76...$2.18. Year ended: June 30...1985...1984: Revenues...$1,847,200...$1,745,200. Net income...197,900...109,800. Earnings per share...$4.01...$2.17. Total assets, June 30, 1985 ... $1,368,200. Current assets...582,800. Current liabilities...317,000. Long-term debt ...152,700. Book value per share, June 30, 1985: $14.98. Stock price, June 26, 1986: N.Y.S.E. consolidated close: 36 3/4. Stock price, 52-week range ... 40 1/2-30. Employees, June 30, 1985 ... 17,900.

Headquarters ... Chicago.

Photo of Donald J. Kutyna and James H. Scheuer (NYT/Jose R. Lopez; AP); photo of the shuttle disaster; graphs of Morton Thiokol's 1985 revenues and operating earnings by industry sector (Prudential-Bache Securities) (Page 8)