A Law School think tank is refining a new way of debating public policy and settling disputes that proponents say is ultimately more effective and more democratic than normal governmental channels.

Under the so-called Negotiated Investment Strategy, representatives of all groups affected by a public policy decision work together to find the best solution to government problems. While the concept sounds simple, it is only slowly being accepted by bureaucrats and elected officials familiar with it.

The team developing the concept is just coming off the first major test of its strategy, which participants are calling an important success, and tomorrow the group will be formally awarded a $75,000 state contract. Working with the Massachusetts Department of Social Services, the Public Dispute Project of the Program on Negotiation will be the first to use the strategy on a statewide basis.

The Harvard-based Program on Negotiation--headed by Williston Professor of Law Roger Fisher is a university consortium designed to advance the theory and practice of conflict resolution. Members of the group have been at the forefront on developing the new negotiating technique, which has been put to its first real test over the past year in nearby Malden, a crowded, working class industrial city of 53,000 generally skeptical of Ivy League planning.

But for the past decade Malden has struggled with a web of increasingly tangled financial and social problems and decided to use the Negotiation Project's technique to tackle them all at the same time

Malden Mayor Thomas H. Eallon first got wind of the approach when he heard the executive director of the project. MII professor Lawrence Susskind speak at a Kennedy School conference for newly elected mayors. He has said the concept interested him because as a new mayor it would allow him to work with a large constituency and study a wide range of issues simultaneously

Susskind himself first encountered the concept called a Negotiated Investment Strategy (NIS) about five years ago when it was first being developed. He mediated a negotiation over finances between the federal, state and local governments in Columbus. Ohio, but he says he was not completely satisfied with the way the negotiations transpired.

He says he had been looking for ways to improve the method and was looking for a test case when Fallon approached him. However, Susskind and his aides emphasize that they were not attempting to solve Malden's problems for the city, but they were merely showing the people there how to do it themselves

The whole key to the project was going in and convincing Malden that they could deal with these issues themselves," says Denise T. Madigan, staff coordinator for the project

The Malden project used three negotiating teams representing the major constituencies in the community: the city government, businesses and residents, with Susskind acting as mediator.

The groups met separately and together to discuss the city's problems and hammer out solutions to an array of city problems. The issues considered ranged from the school system and taxes, to urban renewal and improving police protection, to simply sprucing up the city's image away from that of a run-down industrial area.

The general idea is to let people from different constituencies understand better the concerns of counterparts in other constituencies. "The process was very effective for it made everyone realize how things go in government," says Malden City Planner Edmund P. Tarullo.

Bernard Rotondo, manager of human resources at Data Printer Corp.--Malden's largest employer--adds. "It was a very positive experience because it gave me and other members of the business community the chance to work with a lot of people we never get to meet." Rotondo headed the business team during the negotiations.

After a year of negotiations, the result was an inch-thick document containing 148 specific and general recommendations for the city. It was signed by all the teams at an official ceremony June 23.

Although participants admit they sometimes felt they were biting off more than they could chew by considering such a wide range of issues, they say that as their negotiating skills developed they were able to deal with a wide variety of issues systematically and efficiently. They point to the program as a successful example of cooperation, the result of which is a workable blueprint for improving the city