Transport Company FirstGroup released the following statement:
"Until this point we had absolutely no indication that there were any issues with the franchise letting process and had received assurances from the DfT that its processes were robust and that it expected to sign the contract with FirstGroup soon.
"We are extremely disappointed to learn this news and await the outcome of the DfT's inquiries. The DfT has made it clear to us that we are in no way at fault, having followed the due process correctly.
"We submitted a strong bid, in good faith and in strict accordance with the DfT's terms."
Boris Johnson says the rail franchise fiasco strengthens his case for taking charge of London's commuter services.
The future of rail services in the south-east has been thrown into disarray after ministers called a halt to several franchise competitions.