A Los Angeles City Council panel declined Monday to take a vote on a proposed contract with Google Inc. to replace the city's e-mail system, passing the decision on to the full council amid unresolved concerns about the cost and necessity of the contract.

In a potential setback for Google, the city's Budget and Finance Committee adjourned after nearly two hours of testimony in which the merits of upgrading the current system were debated by city officials, consumer advocates and executives from Google and Microsoft Corp.

The full council is tentatively scheduled to vote on the contract Tuesday.

At the heart of the deliberations is whether the city should go to the expense of replacing its long-standing e-mail system -- considered slow and clunky by many employees -- with a system wholly owned and operated by Google.

The proposed contract has also focused attention on a growing rivalry between technology giants Google and Microsoft over the way data would be stored and accessed in the future.

Web giant Google, of Mountain View, Calif., would use its own far-flung network of computer servers to store and secure e-mail for many of the city's 30,000 employees. That would probably include city law enforcement agencies, such as the Los Angeles Police Department, where sensitive data is often exchanged over e-mail.

Though critics of the $7.25-million contract have pointed to security concerns over Google's storing city data in its so-called cloud of servers, the main focus of attention Monday was the extent to which the agreement with Google would deliver budgetary savings to the city.

Google's main selling point for its e-mail and document software is that it is a "dramatically lower-cost solution," as a Google executive recently described it to The Times. Officials in the city's Information Technology Agency, which selected Google's bid from among 15 submitted to the city (seven of them from Microsoft), have also said that the Google system would save the city millions of dollars.

But a recent city analysis found that, instead of offering clear budgetary savings, installing and running Google Apps would actually exceed the cost of the current Novell system by $1.5 million over the five-year life of the contract.

"It didn't give me a warm feeling in my stomach that we should jump off this cliff together," Bernard C. Parks, the chairman of the City Council committee, said of the disputed savings. "It looks like we're going on a promise -- and it just doesn't look like, substantively, it's being supported."

Google contends that if the city were to hire the company to handle all of its e-mail, L.A. technology officials could free up many resources now tied to the operation and upkeep of the current system. Moreover, moving to a next-generation cloud system could offer a variety of other benefits, including the ability to more quickly rebound from a disaster, and stronger security than the city's current offering.

Even so, Parks said with a clear note of skepticism, "the urgency case hasn't been made."

According to the terms of the contract negotiation, the City Council has until Dec. 1 to approve or reject the plan. If no action is taken by that date, the contract is automatically approved.