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The federal government had to remind Irving about the potential for conflict of interest when the firm joined forces with BAE in late 2016 to bid on a multi-billion dollar contract to provide maintenance and support for the navy’s new Arctic patrol and supply ships.

The Irving-BAE alliance was not successful in that bid, but it led the government to remind Irving it had an obligation to “ensure that the Canadian Surface Combatant competition is conducted in a manner that is free from real or perceived conflicts of interest,” according to February 2017 documents prepared for defence minister Harjit Sajjan and released to the Conservatives under the Access to Information law.

Andre Fillion, assistant deputy minister for defence and marine procurement at Public Services and Procurement Canada, said Friday’s decision is not a contract award. “It’s an important step to getting to contract award in the coming months,” he said.

Negotiations will now begin with Lockheed Martin. if negotiations proceed accordingly a contract is expected to be signed sometime between January and March 2019.

But Fillion said if there are issues with those negotiations and an agreement is not reached, the government will then turn to the next highest-ranked bidder. The government has declined to identify that firm, but the other bidders were from the U.S. and Spain.

The Canadian Surface Combatant program has already faced delays and rising costs. In 2008 the then-Conservative government estimated the project would cost roughly $26 billion. But in 2015, Vice-Admiral Mark Norman, then commander of the navy, voiced concern that taxpayers may not have been given all the information about the program, publicly predicting the cost for the warships alone would approach $30 billion.

• Email: dpugliese@postmedia.com | Twitter: davidpugliese