The Government is refusing to allow the National Lottery to sign an extension contract with its existing technology supplier to provide cover for the potentially tricky handover to the new operator.

The Department of Public Expenditure and Reform, which is overseeing the process, is understood to have baulked at the likely €9 million cost of extending US firm Gtech's contract when it expires at the end of this year. As a result, there is no back-up plan if something goes wrong with the transfer to a new technology platform, scheduled for early next year.

The process involves the overhaul of the franchise’s central hardware and software system as well as the installation of some 4,000 ticket terminals.

It emerged three months ago that lottery operator An Post was urgently seeking an extension to its contract with Gtech.

This followed a protracted privatisation process, which was delayed by a dispute over the transfer of staff to new operator Premier Lotteries Ireland, comprising An Post and UK operator Camelot.

An Post is understood to have written to Gtech in late January requesting a six- month extension. The letter is understood to have said there would be an economic and reputational risk to the franchise by not having cover during the transition.

Gtech is believed to have acquiesced to the request, but on the terms of its existing contract.

The department did not answer a request for a statement yesterday. National Lottery boss Dermot Griffin said it intended to make a contingency arrangement with Gtech.