Health Minister Sarah Hoffman announced today that her government will not go ahead with a proposed plan to expand private laboratory services and build a 'mega-lab' in Edmonton.

"We're not moving forward with any project," Hoffman said.

She has ordered Alberta Health Services to cancel the request for proposals on a $3-billion laboratory contract that was awarded last year under the previous government to an Australian company called Sonic.

Last October, Alberta Health Services announced that Sonic Healthcare of Australia had been chosen as the preferred vendor for a 15-year contract to provide hospital and private lab services in the capital region.

DynaLife, the company that had done much of that lab work for years, launched an appeal of that decision. The text of the decision was released on Thursday

AHS president and CEO Vickie Kaminski said the appeal panel found her organization had "breached its duty of fairness" in the request for proposal process in a "substantive" manner.

However, Kaminiski read a section of the decision which said AHS conducted the process with integrity, despite these problems.

AHS president and CEO Vickie Kaminski said a decision will have to made on lab services within two years due to increasing demand on the Edmonton lab. (CBC) "So while there was a breach of fairness, it wasn't intentional," she said. "They weren't sure how deep the breach actually went and said they just could not find documentation of us mitigating against it."

The government now plans to review how to deliver lab services in Alberta before making any decisions.

The Health Sciences Association of Alberta represents 1,100 DynaLife lab workers and another 500 who work in the public system.

President Elisabeth Ballermann said she was pleased with Hoffman's decision. She said her members have long wanted lab services delivered by the public system.

"I'm convinced that we can do high quality, world-class work in the public sector," she said.

Ballermann was also concerned that under the contract, the new facility to house the Edmonton lab would be owned by a private company, not by Albertans.

"We have long held the view that this is a critical piece of public infrastructure that we should, as Albertans, own and operate," she said.

AHS will incur at least $30,000 in costs for the cancellation -- $10,000 per proponent. The health authority will face additional costs contained in the letter of intent with Sonic. Kaminski wasn't able to say what they were.

The cost of the appeal was $764,000. The entire cost of the RFP to date is over $2.5 million.

On Thursday, Hoffman said she did not see enough evidence that adding more private services would improve Albertans' health.

"I'm of the opinion that this would have been an experiment. And I'm not prepared to experiment with people's health and well-being."

Talks were underway with DynaLife to extend services past March 2016 because the appeal delayed the changeover to Sonic.

Kaminski said the current lab is getting too small to deal with increased demand. She said the government will have to have a definitive plan in the next year of two.