Lots of possibilities, which you will never know because you're not privy to the company contract. Other answers already say this, so I'll just provide a bit of extra insight.
Quite possibly, even likely is that they don't want to hire you, they're saying that for reasons of their own, but have no intention of hiring you in reality and the contract is a good excuse.
If your current company is losing the contract and you're the one who does the work it makes no sense to hire you in some situations. But it does make sense to try and keep you happy for a bit so they can get everything terminated happily and cleanly.