The Transport Secretary said American-based CH2M had chosen to “take a step back” from the project and that the company was not guilty of “some massive misdemeanour”.
But shadow transport secretary Andy McDonald claimed the situation “stinks to high heaven” as a Tory MP said no more HS2 contracts should be awarded until a full inquiry is undertaken into what happened.
CH2M was chosen by HS2 Ltd last month to deliver Phase 2b of the £55.7 billion high-speed rail line, running from Crewe to Manchester and Birmingham to Leeds.
But the contract signing was delayed as HS2 Ltd was reportedly investigating concerns from third-placed bidder Mace that there may have been conflicts of interest.
CH2M has been involved with HS2 Ltd since 2012 and was awarded a £350 million deal to develop Phase 1 of the line from London to Birmingham.
Mark Thurston, HS2 Ltd’s new chief executive, is a former CH2M employee, as was his temporary predecessor Roy Hill, while it has also been reported that dozens of CH2M employees are also on secondment to HS2.
Mr McDonald said during transport questions: “I don’t agree with the Taxpayers’ Alliance when they say this doesn’t pass the smell test, because it stinks to high heaven.
“Will the Secretary of State order an immediate independent inquiry into these goings-on because his silence on this issue speaks volumes?”
Mr Grayling replied: “The announcement made yesterday that CH2M HILL have decided to withdraw from the contracting after an issue, not a massive one, but an issue emerged with the contractor process is the right one. I’m grateful to them for doing that.
“It is the right thing to do. I want to make sure that the contracting processes in Government recruit the right expertise, corporate or individual, but we are also robust in making sure that if things aren’t done right then that’s addressed and that’s what has happened.”
But Cheryl Gillan, Tory MP for Chesham and Amersham, said confidence in HS2 had been “called seriously into question” as she asked if CH2M had jumped “or were they pushed”.
She also called for a full inquiry to take place before any more contracts are awarded as part of the project.
Mr Grayling said: “CH2M have done the right thing in taking a step back, having identified a problem that would have called into question whether they could and should operate this contract.
“This was not some massive misdemeanour. It was an error in process which has caused them to take a step back.”