Wates has been dropped from a £100m prison scheme in Leicestershire as part of a Ministry of Justice drive to cut costs

The contractor, which carried out early design work on the juvenile offenders facility at Glen Parva, will have to bid for the job under a competitive tender.

The news comes as rival contractor Kier was tipped to pip Wates and Interserve to the long-awaited £150m Featherstone prison in Wolverhampton. A formal announcement is expected next week but Building understands the firm was given the “unofficial nod” at a meeting with the MoJ. The ministry said it would announce the winning contractor shortly.

Movement on the prisons programme will be welcomed by the industry, which has been hit by delays since the prison service drafted in civil servant John Aspinall to overhaul its procurement strategies last year.

Further uncertainty came in April, when the government announced it would scrap its £2.9bn Titan jail programme in favour of five smaller schemes.

Wates is understood to have taken the Glen Parva scheme to outline-proposal stage before it stalled. A source at the firm said the company never expected to get the full contract automatically.

The programme has been hit by delays since John Aspinall started to overhaul procurement

A source familiar with the situation said: “Wates was doing Glen Parva but then Aspinall was brought in and suddenly everything has to be competed for. I wouldn’t be surprised if all the big firms were going for it.”

The MoJ spokesperson said it had held a bidders’ conference on 19 May followed by talks with contractors who had expressed an interest in the scheme.

Chris Booton, prison director for Wates, said: “We’re delighted to be on the tender list.”

In a separate announcement this week, the Scottish prison Service named Carillion preferred bidder ahead of Skanska on a 700-cell prison at Bishopbriggs in East Dunbartonshire.