The Defense Department has approved a $3.5 billion Army plan to build an improved version of the Apache attack helicopter, hundreds of which are in Saudi Arabia with troops in Operation Desert Shield.

Under a full-scale development contract expected to be signed this month by McDonnell Douglas Helicopter Co., of Mesa, Ariz., 227 existing Apache helicopters will be modified to fire a new version of the Hellfire anti-radar missile, the Army said Thursday.The airframes of the Apaches also will be modified to give it increased electrical power, increased cooling and other features that will enable it to operate better in adverse weather, said Maj. Nancy Burt, an Army public affairs officer.

The Army got the official go-ahead for the "Longbow Apache" project last Friday from John A. Betti, the Pentagon procurement chief who announced Wednesday he is resigning Dec. 31. The first Longbow Apache is to be delivered to the Army in April 1996.