Home Secretary Theresa May said the government would look carefully at an Arbitration Tribunal's decision to award a £224 million pay out to US defence firm Raytheon.
In a letter to the MP Keith Vaz, she said: "The Government stands by the decision to end the eBorders contract with Raytheon. This decision was, and remains, the most appropriate action to address the well-documented issues with the delivery and management of the programme."
She added: "We are looking carefully at the tribunal's detailed conclusions to see if there are any grounds for challenging the award."
The Home Secretary said key milestones had been missed by Raytheon in 2010 and parts of the programme were running at least a year late.
"The situation the Government inherited was, therefore, a mess with no attractive options," she said. "All other alternatives available to the Government would have led to greater costs than the result of this tribunal ruling."
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