Daon, whose board members include former Homeland Security secretary Tom Ridge, became embroiled in political controversy earlier this month when it emerged that it had formed an "operational" partnership with the Transportation Security Clearinghouse (TSC), an affiliate of the American Association of Airport Executives trade body.

Under the terms of that partnership, Daon would have carried out background checks on airport, rail and maritime workers, who will be issued with tamper-proof identification under the planned scheme. The total project will cover 10 million workers, and will cost about $1.2bn.

Last year, Republican congressman Harold Rogers passed a provision to ensure that the AAAE would be mandatorily hired by the Department of Homeland Security to oversee contracts related to the transportation worker identity card project.

Critics questioned how the association could accurately assess contract requirements given its lack of expertise in the area of biometrics, and TSC subsequently signed a deal with Daon.

The Transportation Security Administration, part of the Department of Homeland Security, said last week that it will now conduct a full and open competition for all aspects of the identity card programme rather than awarding any work outright to the association or to its TSC affiliate.

The move came after rivals of Daon's lobbied the US Congress to scrap the arrangement that would have guaranteed Daon the work.

"We don't mind either way", said Daon chief executive Tom Grissen of the Department of Homeland Security's decision. He said the Irish firm will continue to work with the US government.

Last week it was reported that Daon has won a contract to provide one million identity cards for all citizens of Qatar over the age of 16. It has been estimated that the contract could be worth as much as $500m to the company.