The £115m section from Tomatin to Moy will be retendered once contract terms and conditions have been altered to better reflect the risks of a challenging construction market.
Balfour Beatty Civil Engineering, John Graham Construction and Wills Bros Civil Engineering were shortlisted to bid for the 9.6km stretch of the A9.
It has now emerged that Transport Scotland only received one bid, which was much higher than budgeted.
Transport Minister Jenny Gilruth said that even allowing for the real-world impacts of the volatile economy, it had been decided that a contract award at this time did not represent best value for the taxpayer.
She told Holyrood that Transport Scotland will now retender the project, with the aim of achieving a contract award before the end of 2023.
Transport Scotland plans to modify its standard contractual terms and conditions for large road projects to encourage more bidders, and ultimately achieve best value for the public purse.
“This procurement process coincided with external factors including the pandemic, disruption caused by Brexit, and the war in Ukraine, with the inflationary impacts of those all affecting significantly the construction market,” she said.
“This has been a difficult decision to make but we believe it to be the right, and indeed the only responsible one to take in all the circumstances.
“However, let me assure everyone that Transport Scotland is already taking the necessary preparatory steps for the urgent re-tendering of the Tomatin to Moy project.
“Work has begun to update contract terms and work will continue on preparations for the new procurement for Tomatin to Moy, with the firm aim of achieving a contract award before the end of 2023.”
Gilruth also advised Parliament that Transport Scotland’s work to determine the best procurement route for the remainder of the programme has also been impacted by recent and ongoing economic volatility.
While this work is ongoing and expected to conclude before the end of this year, it is now clear that the A9 Dualling Programme will not be completed in full by 2025.
She said: “Transport Scotland is urgently considering a range of different options to provide Ministers advice on the most efficient way in which to dual the remaining sections.
“That consideration will include updating the evaluation of options involving the use of design & build contracts, to reflect changes to contractual terms and conditions developed from engagement with the construction industry. I expect to have that advice by Autumn 2023 at which time I will update Parliament to put forward a renewed timescale for completion.
“Our investment of over £430 million to date means much has already been achieved and while much is still to be done, this Government is absolutely committed to completing the A9 Dualling programme.”
