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The multi-billion dollar sole source deal to build a new fleet of warships for the Royal Canadian Navy is being reviewed by a newly-formed Cabinet committee set up to take a closer look at controversial defence procurement contracts.

Irving Shipbuilding in Halifax was awarded the build contract as part of Canada’s largest-ever defence procurement project, the $26-billion Canadian Surface Combatant program.

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Irving was also named as the prime contractor on the design phase. That role allows Irving a say in designating sub-contractors for the project, and awards Irving a cut of their payment — which could be even more lucrative than building the ship hulls, since up to 70 per cent of the cost of the vessels derives from the complex combat systems that will be installed on them.

That role as prime contractor is now “under active discussion,” said a senior industry source.

Irving’s appointment as prime contractor was greeted with shock in the industry. Since the contract was awarded without being put out to tender, accusations followed that the taxpayer might have received a better deal had competing bids been received.