BT has suffered yet another commercial blow, this time at the hands of the Government.
The embattled telecoms company was commissioned last April to design, build and run the Government's internet portal UKOnline – a key part of a £1bn drive to get public services online by 2005. Earlier this month its contract was quietly terminated.
A Cabinet Office spokeswoman refused to comment on why the deal was scrapped and whether it was due to the quality of service provided.
BT also refused to comment on why it lost the contract, but said it was still in the running for another contract relating to UKOnline.
"Although the original negotiations have ended, BT and the Cabinet Office are presently reviewing the best way forward for the portal. This includes evaluating an alternative relationship between BT and UKOnline," said a BT spokesman.
The spokesman admitted it was "unfortunate" that matters had reached this stage.
UKOnline provides a one-stop shop for people wanting to access government websites and services. The portal includes official information on "life events" such as learning to drive or having a baby. It is now being managed in-house.
The Office of the e-Envoy, headed up by Andrew Pinder, is already understood to be considering new partners. The online service, which went live in December, will not be disrupted.
The Government is no stranger to controversy surrounding its moves to get public services online.
At the end of last year, its plans took a serious knock after talks with its preferred IT provider, Compaq, to wire up government departments' services on the internet, broke down. Compaq maintains it left the project because the brief had changed.