TALLAHASSEE, Fla. -

Florida is dipping into federal grant money that was supposed to help improve the state's schools in order to settle a bitter contract dispute.

Education Commissioner Tony Bennett earlier this month agreed to settle a lawsuit filed against his department by a Tallahassee-based technology company.

The Department of Education is paying $1.25 million to Infinity Software Development. Infinity was hired to build a website intended to help students, parents and teachers master new academic standards.

But the deal ended acrimoniously with Infinity suing the state and the state terminating the contract.

The money to build the website came from Florida's $700 million Race to the Top federal grant aimed at helping improve student achievement in the state. Before the contract was terminated the state had already spent nearly $2.5 million on the project.

Joe Follick, a spokesman for the state Department of Education, said the agency has determined that using the grant money for the settlement is allowed. Follick refused on Thursday to elaborate on why it was allowed.

An Internet news operation, the Florida Current, reported Thursday the settlement had been approved.

The settlement not only includes a payment to Infinity - it also calls for the removal of the company's name from a vendor complaint list maintained by the state. The president of Infinity did not return an email request for comment.

Florida's effort to create the website as part of its education reforms dates back more than two years.

In early 2011 the state initially chose Microsoft to design and build the website. Infinity, however, challenged the contract by contending Microsoft should have been disqualified because the software company was unwilling to hand over ownership of the equipment and software to the state.

The state agreed to hire Infinity in July 2011, but it took until December of that year to sign a final contract. Emails obtained by The Associated Press showed that one point of disagreement was who should manage the contract.

Those emails showed that Steve MacNamara, then chief of staff for Gov. Rick Scott, was involved in a push to give the governor's office the ability to resolve any disputes related to the contract.

Then-Education Commissioner Gerard Robinson in November 2011 wrote directly to MacNamara to protest "your desire to have another party manage the contract." MacNamara told the AP last year that while Scott and Robinson met once to discuss the contract, he was "not involved in the negotiations" and left all discussions to his deputy chief of staff.

Months after the contract was finally signed, both sides were at an impasse. Florida officials complained that Infinity was behind schedule and had turned turn in unacceptable lessons and tests in areas such as math, civics and biology.

Infinity in its lawsuit contended the delay in awarding the contract shortened the time to get the work done by 10 months and required the state to meet tight timelines in order to keep the project on schedule.

But Infinity officials maintained the company was unable to complete its work because the department did not review the work in a timely fashion or failed to sign off on work done by the company.

Infinity in September warned state officials about the problems and asked for a payment of at least $3.23 million to cover completed work. The letter stated that if lost profits were included the total due Infinity was $4.5 million.

The bitter dispute leaves in limbo the fate of the Web-based system that was intended to provide practice lessons and tests for the standards that will be phased in for math, English, science and civics.

Last year the department said it would rebid the contract and move ahead with the website. But that hasn't happened yet.