In reality, this is nearly completely the supplier's fault. However, they've likely already been paid much more than their contract minus the damages cost.
Unfortunately for Graham, they are ultimately responsible, they are out the money, and it isn't anyone's duty to reimburse any of that money to them.
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Originally Posted by Addick
It could be liability thing where The City identifies the firm as too risky to deal with due to their likeliness to engage in unnecessary and costly litigation.
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Think about it this way. You have hired a contractor to do some work on your house, which is done (with a few hiccups along the way), and you've paid them all the money that they are entitled to. They then sue you to try and get more money out of you. No matter what the result of the lawsuit is, are you going to hire the same company again to do your next project?
I don't know why the city shouldn't have the right to do the same thing as any private company would do. Not allowing the city to pick who they want to give contracts to could very easily open them up to fraudulent contractors who would repeated sue the city. Saying Graham couldn't bid on projects doesn't mean that projects wouldn't get tendered.