A US defense contractor that was dropped from the UK’s electronic border control project due to its poor performance is suing the government for £500 million.

The government appointed Raytheon to lead the £740 million e-borders project in 2007, but terminated its contract with Raytheon in July 2010 citing "extremely disappointing" progress.

"Elements had not arrived on time, the next critical parts were running 12 months late, with the risk of further delays, and there is no confidence in [Raytheon] to be able to address this situation," Immigration minister Damian Green told MPs at the time.

Now, Raytheon claims the termination "was unlawful and that Raytheon is entitled to recover substantial damages for wrongful termination”.

“We have made counterclaims in the arbitration in excess of £500 million in respect of these matters," the company’s UK CEO Robert Delorge wrote in a letter to the home affairs select committee.

Delorge wrote that the blame for projects failure lies with the government, claiming that Raytheon had only "limited visibility of any targets or policy objectives that the government may have had for the e-borders programme”.

Keith Vaz MP, chairman of home affairs committee, told the Telegraph newspaper he was "deeply disappointed that such a high profile project … has ended with such costly litigation with the possibility that the taxpayer will have to pay millions of pounds even though the programme has not been completed."

The e-borders project is designed to allow immigration officials to measure the precise number of people entering and leaving the country. "E-borders continues to reduce the risk of terrorism, crime and immigration abuse," the UK Borders agency said in a statement. "The contract has now been transferred to alternative suppliers."

UPDATE The Home Office has informed Information Age that those alternative suppliers are IBM, Serco and Fujitsu.