Navy bid to be announced after Commons recess

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The Government is considering announcing who will oversee the £4bn Royal Navy carrier project after Parliament breaks up on 21 December for Christmas, in a bid to defuse MPs' anger that the work is set to go to KBR, a subsidiary of the controversial US contractor Halliburton.

Such a high-profile public project is normally announced to Parliament. However, the Government may make its decision public around 23 December, which will prevent MPs from asking questions about the contract until the new year.

The emergence of KBR as the most likely choice as "physical integrator" on what will be the most powerful warships ever built in the UK has caused a political storm, drawing in the Ministry of Defence, Treasury and Downing Street.

While the MoD is responsible for recommending a contractor to ministers for final approval, Gordon Brown has become involved because more than 1,000 jobs at the shipyard at Rosyth in Fife - on the doorstep of his constituency - could be lost if KBR is given the contract. KBR may press for most of the shipbuilding to be done at Nigg, a disused oil platform yard it owns.

At the same time, there have been strong rumours in London and Washington that the Pentagon has conveyed a message to the British Government that it would like to see the US group succeed in winning the co-ordinating role over Amec and Bechtel, which also made bids.

The sensitive decision has now been pushed to Downing Street, with advisers to Tony Blair aware that if the job goes to KBR it will bring to the fore controversy surrounding the Iraq war. Halliburton, which used to be headed by the US Vice-President, Dick Cheney, has been one of the major subcontractors in Iraq and has been accused of using its political connections to make huge profits from the war-torn country.

One source close to the situation said: "This is a nightmare for Blair. He is going into the new year with another drama over Iraq on his hands."

Despite the controversy surrounding it, KBR, formerly Kellogg Brown and Root, is likely to prevail in its attempt to secure the physical integrator role, overseeing an alliance of all of Britain's shipbuilders, including Babcock and BAE Systems, which will actually construct the carriers.

But KBR is expected to have to agree to keep jobs at Rosyth because otherwise the decision would look too much like political vengeance by Mr Blair against the Chancellor, Downing Street insiders fear. The decision comes at a particularly difficult time for the two, who have not had meaningful communication with each other for a month.

Downing Street may also try to use the decision to give the job to KBR to exert pressure on the US administration over a separate business venture. Downing Street has been trying - so far without success - to get the White House to hand over about $600m (£313m) allegedly owed to the nuclear group BNFL for cost over-runs on clean-up work carried out by the nuclear group in Idaho and Tennessee.