But since my company still have ongoing business with them I don’t want not selecting them for this project will effect our current relationship with them and I’m having some trouble wording this. Any help would be great…so far this is what I got:

"On the basis of all responses, we plan to narrow the field and negotiate contracts with a short list of vendors. We have determined that another supplier is the most qualified for our requirements. This email is notification that your company’s was not selected as a finalist. On behalf of the selection committee, I want to express our sincere appreciation for the time and effort you and your team have taken to respond to our requests..."