BAE Systems and Accenture have both abandoned plans to manage the project. Their decisions follow the leaking of two memos which suggested that fingerprint data, a key security plank for the cards, may not be included for cost reasons.
The lack of fingerprint data also suggests a scaling down of the scheme, which was originally intended to include iris scans and an interlinked national database.
The news will come as a blow to retailers who hoped that the ID cards would make selling age-restricted products easier.
The second leaked memo also contradicted prime minister Gordon Brown's promise that the cards would be voluntary.
The government will now have to run further supplier reviews to fill the gaps left by BAE and Accenture.