Five of the most senior executives delivering the Future Cities programme were told their contracts were being terminated early after bidding for further work while still working for Glasgow City Council.
It has been claimed council staff and other officials connected with the £24million UK Government-funded scheme arrived at the Future Cities headquarters late last week and told the five to hand over security passes and pack their belongings.
They were then escorted from the building.
It is alleged they were removed because they had set up an organisation, called Urban Tide, to do similar projects, including winning a contract for a Scottish Government study on smart cities.
Sources claim the five, including Future Cities director Michael McLaughlin were not dismissed for carrying out other work but for allegations they were bidding for contracts elsewhere without disclosing it to the city council.
Allegations the project has caused friction at the council have also been played down.
Funded by Westminster's Technology Strategy Board, the Future Cities project aims to showcase 'digitally-enabled urban design', from use of apps to access city services and data to new "intelligent street lights".
Outside contractors make up about half the 38-person Future Cities group. The rest are secondees from the council and from Access, a for-profit limited liability partnership. It is jointly owned by the council and Serco. A spokesman for the council said only: "A number of contractors who were engaged in the programme have reached the end of their contracts."
Sources with the Future Cities team have claimed the council had tried to present the team as employees of the authority, with many actually running their own private companies.