Transport minister Theresa Villiers said the deal to hand the West Coast Main Line franchise to First Group will be delayed following the High Court legal challenge by Virgin Trains.
In a written statement to the House of Commons on Monday, Villiers said: "As a result of a legal challenge, which the government intends to defend robustly, we have not yet signed the contract with First West Coast, and consequently the competition remains live. I cannot give the full commercial details of the winning bid, or indeed of the other bids. Nor is it usual or appropriate – once litigation proceedings have commenced – for the Government to comment on the detail of that, other than to say that our legal advisers are fully engaged in addressing and responding to those proceedings."
The Department for Transport announced last month that it intended to award the InterCity West Coast franchise to First West Coast, a subsidiary of First Group.
The new franchise is planned to begin operation on Sunday 9 December 2012. The franchise will operate for a core term of 13 years and 4 months, with an option to be extended to operate for up to 15 years.
First Group bid £5.5bn compared to Virgin's £4.8bn bid. Virgin claims the procurement process was flawed and has sought a judicial review. First Group said it was confident the DfT's process was rigorous and fair.
Villiers added: "Taken together, I believe that the commitments in First West Coast's bid represent significant improvements for passengers and will provide a good return for the taxpayer.
"I will continue to keep the House updated, subject to the constraints of legal or commercial privilege."
The contract was due to be signed by First Group and DfT last week.
More than 150,000 members of the public have signed an online petition asking for the decision to be reviewed.