This will come as bad news for Fujitsu, due to a number of botched government projects in recent years.
There is also increasing concern that the rollout of superfast broadband in the UK is being carried out within an anti-competitive process, where BT is the only supplier to have been awarded any public funds up until this point. Fujitsu is the only other supplier signed to the framework.
A spokesman for the department told Computerworld UK: "The suppliers appointed to the BDUK framework are Fujitsu and BT. Frameworks are within the scope of HMG's supplier performance policy, and any supplier identified as high risk will be scrutinised particularly carefully before the award of further work."
Although the statement doesn't officially say Fujitsu is on the blacklist, if reports are correct (they have not been denied by the Cabinet Office or Fujitsu), it is likely that local authorities will continue to select BT over the coming months for broadband contracts. This will inevitably heighten concerns about competition in the industry.
The UK government has said that it hopes to have the best broadband network in Europe by 2015, and has committed a minimum of £730 million up until 2015 to support the rollout.
TechMarketView director Georgina O'Toole this week wrote a very interesting post on the supposed 'blacklist' and argued that it is wrong to consider it in this way.
She said: "So let's get a few things straight. Firstly, no-one in government is using the term 'blacklist'. That is just the media interpretation. And secondly, there is no indication that high-risk suppliers will be banned from Government contracts, as many press reports have indicated. Indeed, we suspect this would be legally unenforceable."
All of these points are technically correct. It is good practice for the government to act as if it is a commercial entity, as you wouldn't find corporate giants dishing out multi-million pound contracts to suppliers that had failed it repeatedly in the past. It is also correct to say that the government isn't actually 'blacklisting' suppliers.
However, it is unlikely that a government CIO would select a supplier that has been labelled 'high risk', if not to simply protect his or her own career. If a CIO selected Fujitsu for a £100 million broadband rollout, which then went wrong, central government is unlikely to be forgiving of the loss to taxpayer's money.
Also, this new system may create an interesting dilemma for suppliers and government procurement chiefs, who in the past have been seen to have an unwritten rule. Suppliers may be unwilling to bid for government work going forward, which is often so publicly scrutinised if there are any problems, if they know that there is the possibility that they may get 'blacklisted' from future contracts.
As a result will this open up the door for SMEs who are perhaps less well versed in the pitfalls of public sector work? Or perhaps haven't had their pitfalls broadcast in the media, so may get more interest when applying for government contracts if they are competing against 'high risk' suppliers.
Will we be hearing reports in months to come of small companies that have been blacklisted from future government work?
Finally, it will be interesting to see whether or not government performance is ever taken into account. If suppliers are going to be subject to scrutiny in future projects, so should government CIOs. Although suppliers play a significant role in failed projects, a CIO should also be managing them effectively.