Congress had asked the scanner manufacturer to find a way to produce more generic passenger images, but after failing to meet the Congressional timeline, the company terminated its government contract, a TSA administrator told Bloomberg.
The TSA had already started removing the scanners from 76 major airports last year; it now says it will get rid of the remaining 174 machines.
The move ends a $5 million contract with OSI Systems' Rapiscan unit, which will eat the costs for the project, according to Bloomberg. The TSA will replace the Rapiscan machines with versions made by L-3 Communications Holdings Inc.
The x-ray scanners created an uproar when they were first put into use a few years ago after the failed Christmas Day underwear bombing. Privacy advocates complained that the machines produced images of passengers that were too revealing.
The replacement machines from L-3, known as millimeter-wave scanners, detect potential threats automatically using a computer program and display a generic cartoon image of a person's body.