The £12.7bn project to computerise NHS medical records hit another snag today when one of the key contractors was fired.

Fujitsu, which was contracted for an £896m 10-year installation of the system in the south of England, has been removed from the project after 10 months of negotiations.

The company blamed the NHS for trying to change the terms of the contract to make the system's delivery more flexible, but without spending any more money.

"Regrettably, and despite the best efforts of all parties, it has not been possible to reach an agreement on the core Fujitsu contract that is acceptable to all parties," said Connecting for Health, the NHS body that organises contractors.

"The NHS will therefore end the Fujitsu contract early by issuing a termination notice.

"We acknowledge the work that Fujitsu has done in providing key information services to trusts in the south of England, and recognise its commitment to providing a smooth transition to new arrangements."

The ill-fated NHS project is now four years behind schedule and this latest setback looks likely to delay its completion still further.

Accenture has already dropped out, and replacement contractors willing to work on the project may prove difficult to find.

"The award of these contracts was 'rushed' through. The reasons for this could have been political or simply macho posturing," said Martin Hart, chairman of the National Outsourcing Association.

"It has been implied that areas of the contract were woolly and that the objectives were not clear.

"Outsourcing contracts, especially on this scale, take time. It could be that NHS demands exceeded the scope of the project. Contracts need to be flexible to cater for changing requirements. Nailing suppliers to the wall will invariably end in tears."

The e-records project has faced criticism that it is too ambitious and unwieldy and, like many other government IT projects, has faced accusations that the goals were too nebulous and prone to change.

"It is of little surprise that the most able and sensible suppliers jumped clear of the project early on," said Simon Williams, director at independent IT consultancy DMW Group.

"Accenture exited in 2006 and IBM was fortunate not to win a bid for the work in the first place. All this leads to a strong conclusion that the contract terms were unfairly weighted in favour of the NHS.

"The project should not have even started if it was not a 'win win' situation for all parties."