IT has been confirmed that a £220m partnership deal for east Cleveland is facing a serious setback.

Redcar and Cleveland Council has announced that Amey no longer the preferred bidder for the private finance building programme - which means the authority will have to put the project back out to tender.

The council's second choice, Liberata, will be back in the running but Amey also has the option of making a second bid.

The council has emphasised that national speculation about Amey's finances played no part in the decision.

Instead, the authority claims "significant features" of the original Amey tender have proved unachievable.

If the deal had gone through, it promised a £45m Private Finance Initiative, which would have funded a new building for the Freebrough Community College, with sites in Skelton, Loftus and Brotton.

A new town hall, business centre, information technology initiatives and 600 new jobs were also part of the project.

Amey would have provided essential council services but would also have been able to tender for other council contracts across the country.

However, council leader David Walsh said the authority has to be sure it clinches the right deal.

He said: "We must ensure any contract we enter into is consistent with the council's obligation to secure best value and the step we have taken in drawing the reserve bidder back into the process is an essential part of achieving that."

A spokesman for Amey said the company accepted the decision but said that it remained fully committed to the project.