MINISTERS are to review the future of the troubled Borders Railway project after one of the two remaining bidders signalled it would abandon the race for the £230 million contract.
The IMCD consortium's move came after The Scotsman revealed yesterday that a key partner in the group had quit.
The Scottish Government's Transport Scotland agency is now faced with a sole bidder for the 30-mile line, with one source close to the project warning it could call the whole process into question. Another said: "This is an embarrassing moment for the Scottish Government."
One of the other two short-listed bidders withdrew from the contest after one of its member firms quit last November.
First Minister Alex Salmond yesterday attempted to reassure MSPs by saying the line would go ahead and pointing out that there had been only one bid for the 445m M74 extension in Glasgow, which is due to open in two weeks.
However, no other bidders dropped out of the process while preparing their tenders, as has happened with the Borders project, with the short-listed firms thought to have spent at least hundreds of thousands of pounds on their bids since being selected in March last year.
In an untested method for rail projects, the winning bidder will have to fund and maintain the line, receiving access charges from train operators and government repayments over 30 years, but profits will be capped.
The IMCD decision was triggered by Carillion unexpectedly leaving the consortium, whose bid was due to be submitted within the next three months.
Its partners were construction giant Sir Robert McAlpine and Spanish firm Iridium.
American rail firm Fluor quit the New Borders Railway consortium in November, which led to the group abandoning its bid. The remaining bidder is Dutch-owned construction group BAM, which has been involved in various Scottish rail projects and laid track for Edinburgh's trams.
The Borders line, due to be opened in 2014 at an expected total cost of 295m, would run between Edinburgh and Tweedbank, south of Galashiels.
In a joint statement, Borders SNP MSP Christine Grahame and Scottish Borders Council leader David Parker welcomed Mr Salmond's assurance about the project continuing.
But Liberal Democrat transport spokesman Jim Hume said the progress of the project had been in question since the SNP came to power in 2007 and said transport minister Keith Brown "must now explain to the people of the Borders why this project now faces grave uncertainty".
A Transport Scotland spokeswoman said: "The Scottish Government is committed to the Borders Railway project. We still await formal confirmation, however - through discussions with IMCD - it is clear they now intend to pull out of bidding."Our requirements have always been clear and we carried out extensive consultation with the industry before embarking on the procurement process
"If IMCD do confirm their intentions to pull out, we will have one bidder remaining.
"We have successfully delivered single tender projects before - the M74, due to open later this month ahead of time and under budget, clearly demonstrates our ability to deliver. We will now consider our options to determine the best way to proceed to deliver the project."