In 1999 RM and ICL were named preferred suppliers for the Classroom 2000 Private Finance Initiative to provide information and communications technology to all 1,227 schools in Northern Ireland.
However, after 18 months of negotiations the company last month walked away from the talks, according to RM director Phil Hemmings. "We could not agree a satisfactory balance of risk and reward," he said.
The Northern Ireland Education Department was demanding penalty clauses worth up to 10% of the contract's value, according to a source close to the negotiations.
The deal to install and manage 50,000 work stations would have been one of the UK's biggest Windows 2000 roll-outs.
Its collapse will be an embarrassment to the Government since Northern Ireland has one of the lowest levels of IT use in the UK. It will also cost RM dear. The company has been forced to write off more than £5m because of the cancellation, a third of last year's £15m operating profit.
The Classroom 2000 problems follow last year's decision by the Home Office to drop a Sema-led consortium as its preferred bidder for the £350m IT 2000 infrastructure project after almost two years and opt for an ICL bid instead.
These examples highlight the growing problems of implementing public-private partnerships and the difficulty of medium-sized IT firms have in securing major public sector contracts
Sema was dropped after disagreements about risk allocation. The IT 2000 contract was the first to pass through the Gateway Review process, a scheme to prevent major project failure, introduced by the Office of Government Commerce (OGC), but Hemmings said there was little input from the OGC or e-envoy's office in the Classroom 2000 negotiations.
Hemmings said that the Classroom 2000 experience reinforces the new IT project guidelines from the e-envoy's office that major IT programmes should be broken down into smaller projects.
The Northern Ireland education department is discussing how to salvage Classroom 2000 and ICL told Computer Weekly that it wanted to play a significant role in the project.
A spokesman for the Northern Ireland Education Department said it was unfortunate that mutually acceptable terms and conditions could not be agreed with RM.
"Notwithstanding this disappointing outcome, the department remains firmly committed to strengthening the ICT infrastructure in schools. Alternative ways of providing this are now being considered as a top priority," he said.