A private consortium called Connect Plus has won the £6.2 billion contract to develop and operate the M25 motorway.
The decision is hugely controversial, as two of the firms behind Connect Plus - Balfour Beatty and Atkins - were among the five shareholders in Metronet, the failed London Tube firm, which went into administration last year.
Following Metronet's failure, the tax payer was forced to repay the £1.7 billion in debts it left. Connect Plus is made up of Skanska, Balfour Beatty, Atkins and Egis.
Connect Plus will be responsible for widening the M25 to four lanes between junctions 16 and 23 - for which work will begin tomorrow - and junctions 27 and 30. Work is due to be completed before the 2012 Olympics. In addition, the Hatfield Tunnel on the A1(M) will be refurbished.
The contract also includes operation and maintenance of the M25 and the Dartford Crossing for a 30 year period.
Transport Minister Andrew Adonis said: "The widening schemes, combined with the maintenance and operation of the M25 network for the next 30 years, will reduce congestion, improve journey time reliability and safety and bring benefits to road users."