BATON ROUGE, La. (AP) — The Louisiana attorney general's office advised Gov. Bobby Jindal's administration to cancel a nearly $200 million Medicaid contract with a Maryland company that has ties to the governor's health secretary.

David Caldwell, head of the attorney general's public corruption unit, said Friday that the office has an ongoing investigation into the awarding of the contract to CNSI, which was supposed to take over Medicaid claims processing next year.

Caldwell said the contract was improperly handled. He said there was inappropriate contact between CNSI and employees of the Department of Health and Hospitals, among other issues.

"We conveyed to them the original bid submitted by CNSI was non-responsive and should never have been let in the first place," Caldwell said.

A Baton Rouge-based federal grand jury also is investigating the decision to give the contract to CNSI, which employed DHH Secretary Bruce Greenstein from 2005 to 2006. When the contract was awarded two years ago, Greenstein denied any involvement in the selection, but lawmakers criticized his handling of the process.

On Friday, a day after the governor's Commissioner of Administration Kristy Nichols announced the contract was being scrapped, CNSI said it will challenge the termination of its contract.

"CNSI will pursue every legal avenue available to the company," spokesman Sonny Cranch said.

Nichols said the decision to cancel was made in consultation with the attorney general's office. She said her office was cooperating fully with the investigation.

In a letter telling CNSI of the contract termination, the Division of Administration cited state law that allows for the nullification of a contract if "it is determined after an award that a solicitation or award of a contract is in violation of law."

CNSI won the 10-year contract in 2011, beating three other companies for the work, but critics said the company underestimated the true cost of the job and made incorrect assumptions to win the bid. CNSI submitted the lowest bid, but didn't get the best technical score among applicants.

Under questioning from lawmakers during his confirmation hearing in 2011, Greenstein acknowledged a change he pushed in the bid solicitation made CNSI eligible for the Medicaid contract. He also met with a top CNSI official within days of taking the health secretary's job.

Caldwell said the Senate confirmation hearing put the CNSI contract on the attorney general's office radar.

The company said unsuccessful bidders protested the decision and the governor's Division of Administration upheld the award to CNSI.

"Our sole interest has always been to install and operate a Medicaid management information system in Louisiana that will save the state millions of dollars in operating costs, while improving health care outcomes for the most vulnerable populations in Louisiana," Larry Iversen, CNSI's executive account manager in Baton Rouge, said in a statement.

Greenstein's office directed all questions about the investigation and contract cancellation to the Division of Administration and refused further comment.

Asked about Greenstein's future in the Jindal administration, the governor's chief of staff Paul Rainwater said in a written statement, "We have confidence in Bruce."

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