Lockheed Martin is pulling out of a race to supply the U.K.'s National Health Service (NHS) with potentially billions of pounds worth of IT equipment and services.

The decision, confirmed by a company spokesman Monday, comes as the NHS is preparing to select winners of one national and five regional contracts aimed at creating a national electronic patient record system.

The company was bidding for the national programme, valued at £2.3 billion over three years, against IBM and BT, an NHS spokeswoman said.

The national programme aims to create electronic appointment booking, care records and prescribing, along with providing the underlying IT infrastructure with sufficient connectivity.

Although a Lockheed Martin spokesman declined to comment on exactly why the company was dropping its bid, a report published in The Observer newspaper over the weekend cited a source close to the bidding process as saying that the company was unhappy with the terms of the contracts.

The report said that the NHS is requiring contract bidders to guarantee against equipment failures and breakdowns, shifting all the risk to the suppliers.

An NHS spokesman refused to comment on the report Monday but did issue a statement confirming that Lockheed Martin had withdrawn its bidding from the programme.

"We are pleased that they have given us notice of their withdrawal now, rather than at a later stage of the competition and value the efforts they have made and the innovation they have brought to the competition up to the point of their withdrawal," the statement said.

The Observer also reported that other vendors such as IBM and Accenture were concerned about the contract stipulations, potentially threatening to upset what has been dubbed the biggest IT outsourcing project in history.

However, a spokesman for Accenture "categorically denied" that it was withdrawing from the bidding. "We are at the beginning of the negotiations but we are confident we will be able to negotiate a fair and equitable contract, and we are able to competitively bid to meet those high standards," the spokesman said. The company has been short-listed for regional projects in the North East and East, he said.