Baltimore's Board of Estimates rejected Wednesday a $7.4 million contract with IBM for a new phone system that has been at the center of a City Hall turf war — a dispute that city officials said they would have to resolve before they could move forward with a deal.

The spending board voted 3-2 against the contract. Mayor Stephanie Rawlings-Blake, who voted against it, later said the city could still award the deal to IBM if her technology office and Comptroller Joan M. Pratt could reach an accord over implementing the system. Rawlings-Blake also raised the possibility of doing the work in house.

Pratt, whose office oversees the city's phones, said further delaying the contract would postpone the anticipated savings an updated phone system would bring. She has repeatedly questioned purchases by the mayor's technology office of phones and hundreds of thousands of dollars worth of equipment as she sought bids to replace the outdated phone system.

"Here we have, in my opinion, a clear example of fraud, waste and abuse in city government," Pratt said. "The taxpayers should be outraged and in an uproar this type of activity is taking place today before this board."

Rawlings-Blake dismissed Pratt's concerns as "an unproductive and a convenient distraction to the really important issue at hand." The mayor and her aides have said her technology office spent just $55,000 on Voice over Internet Protocol equipment for a pilot project, including $3,300 on six high-tech video phones.

"The real question is whether or not the city should now spend over $7 million dollars on this contract before us today and who should be involved in implementation of this significant technology upgrade," Rawlings-Blake said.

Rawlings-Blake's two appointees to the board also voted against the contract; Pratt and City Council President Bernard C. "Jack" Young voted in favor.

Todd Eberly, an assistant professor of political science at St. Mary's College of Maryland, said this kind of intragovernmental dispute contributes "to the feeling that government is inefficient and cannot do things the way a business would." He said there was "no reasonable justification" for the mayor's technology office and the comptroller to pursue overlapping phone upgrades without working together.

"These are the classic examples people point to when they say they don't have faith in government," he said. "It's the sense that one hand doesn't know what the other is doing, and it ends up costing more money."

At the meeting Wednesday, the contract was presented to the spending board by the city's purchasing department, which answers to Rawlings-Blake. Timothy Krus, the bureau's acting chief, said the deal was a "competitively bid procurement," and IBM was found to be the sole "responsive and responsible bidder."

The controversy over the installation of a VoIP phone system has pitted two of the city's top officials against each other and transformed normally torpid Board of Estimates meetings into heated exchanges.

Pratt and Rawlings-Blake met privately before the meeting, and an aide pulled the mayor's two appointees to the spending board into the room shortly after. Young announced from the dais that there would be a short delay because of technical issues, then grinned.

Rawlings-Blake and Pratt appeared exasperated during the morning meeting, which ran for nearly two hours. Rawlings-Blake sipped orange juice and coffee and ate a granola bar as Pratt and others spoke.

After casting her vote, Rawlings-Blake read remarks from a script that indicated when she should pause and when she should look at Young.

Even during her days as council president, Rawlings-Blake said, turning to Young, "I would not have voted for a multimillion-dollar contract if I thought there was a way to do it better, faster and cheaper.

"Moving forward, our city's technology professionals have advised that we can implement a modern telephone system with less outsourcing, in less time and with less cost," she said. "We must fully evaluate that advice before approving an almost $8 million contract with an outside firm."

Pratt has accused the Mayor's Office of Information Technology of trying to take over the phone system upgrade from her office and of not telling her about its phone equipment purchases. Pratt said the Municipal Telephone Exchange, which reports to her, had collaborated with the technology office to assess the city's needs, write a request for bids and review the bids that arrived.

"This project does not exclude MOIT's participation," she said. "It never did."

Pratt repeated accusations that the technology office improperly bought hundreds of thousands of dollars' worth of phone-related equipment last year under an existing computer supply contract.