The U.S. canceled a $25 million federal contract for working in Afghanistan to a company owned by a Democratic campaign contributor that was awarded without entertaining competitive bids.

The cancellation comes after Fox News first reported on the details of the contract last week, prompting lawmakers to make inquiries into the deal. State Department Spokesman P.J. Crowley told Fox News that USAID terminated the award and is now working on an appropriate resolution.

The contract had been awarded on Jan. 4 to Checchi & Company Consulting, a Washington-based firm owned by economist and Democratic donor Vincent V. Checchi that was hired to provide "rule of law stabilization services" in war-torn Afghanistan.

A synopsis of the contract published on the USAID Web site said Checchi & Company would "train the next generation of legal professionals" throughout the Afghan provinces and thereby "develop the capacity of Afghanistan's justice system to be accessible, reliable, and fair."

The legality of the arrangement as a "sole source," or no-bid, contract was made possible by virtue of a waiver signed by the USAID administrator.

When Checchi was contacted by Fox News for its earlier report, he confirmed that his company had indeed received the nearly $25 million contract but declined to say why it had been awarded on a no-bid basis, referring a reporter to USAID.

Asked if he or his firm had been aware that the contract was awarded without competitive bids, Checchi replied: "After it was awarded to us, sure. Before, we had no idea."

Joseph A. Fredericks, director of public information at USAID, told Fox News the Checchi deal was actually a renewal of an existing contract, awarded in 2004 by the Bush administration after a competitive bid process.

Rep. Darrell Issa, R-Calif., the ranking Republican on the House Oversight and Government Reform Committee, told Fox News the no-bid contract in this case "disturbed" him.

Issa had written to USAID Administrator Rajiv Shah requesting that the agency "produce all documents related to the Checchi contract" on or before Feb. 5. Citing the waiver that enabled USAID to award the contract on a no-bid basis, Issa noted that the exemption was intended to speed up the provision of services in a crisis environment.

Sen. Claire McCaskill, D-Mo., who chairs the Senate Homeland Security and Governmental Affairs Committee's Subcommittee on Contracting Oversight, told Fox News she, too, was seeking answers about the Checchi contract.

As a candidate for president in 2008, Obama, then a senator, frequently derided the Bush administration for the awarding of federal contracts without competitive bidding.

Less than two months after he was sworn into office, President Obama signed a memorandum that he claimed would "dramatically reform the way we do business on contracts across the entire government."

"If you want to say this violates the basis on which this administration came into office and campaigned, fair enough," Crowley told Fox News.

Federal campaign records show Checchi has been a frequent contributor to liberal and Democratic causes and candidates in recent years, including to Obama's presidential campaign. The records show Checchi has given at least $4,400 to Obama dating back to March 2007, close to the maximum amount allowed.

Click here to read the contract award.