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The Liberal government announced the Chantier Davie Shipyard in Quebec will be granted the sole-source contract to provide a temporary supply ship for the navy.Francis Vachon/The Globe and Mail

After putting the project on hold, the federal government announced Monday the Chantier Davie Shipyard in Quebec will be granted the sole-source contract to provide a temporary supply ship for the navy.

Procurement Minister Judy Foote said the contract, which is valued at up to $587-million, will be given to the shipyard to upgrade a civilian tanker to act as a military replenishment ship while the navy's long-delayed, joint support ships are built as part of the national shipbuilding program.

"After amassing the facts and carefully deliberating, the Government of Canada determined that proceeding with [Davie] is the most viable course of action to provide the navy's [temporary] at-sea oil replenishment capacity," she said in a statement.

The Conservative government had arranged for Davie to retrofit the ship through a sole-source process rather than a competitive one after it was forced to retire its two, 45-year-old replenishment vessels.

At the time the Harper government's move was unprecedented.

Documents obtained by The Canadian Press revealed a line was added to contracting regulations giving cabinet authority to award a deal to a single company if there are urgent "operational reasons" and it fulfills an interim requirement.

Defence sources had told The Canadian Press that Prime Minister Justin Trudeau put the plan on hold because his government was uncomfortable with the sole-source nature of the arrangement.

The Liberals also faced pressure from the two companies that received contracts in the national shipbuilding program – Irving Shipbuilding, in Halifax, and Seaspan, in Vancouver. Both wrote letters protesting the deal with Davie.

Mr. Trudeau's decision sparked a strong rebuke from Quebec politicians who pointed out the ship was already purchased and in the Davie yard and that hundreds of workers had already been hired.

Ms. Foote noted in her statement that the agreement signed by the Conservatives required the government to pay Davie $89-million should the project not proceed.

The minister said the government will "undertake a review of the process" for sole-source contracts for military procurement.

Davie's work should be completed within two years and the ship is contracted to serve the navy for a period of five years, with an option to renew for up to another five.

The Quebec shipyard estimated the government contract will create 1,100 jobs with the yard, and another 400 with sub-contractors.

Opposition Parti Quebecois member Martine Ouellet said Davie deserved the contract because the yard was left out of the national shipbuilding program.

Without replenishment ships, the navy's frigates are forced to rely on other countries for ammunition, fuel and food while on long overseas deployments.

It also affects the navy's ability to deploy more than one warship at a time.

Davie is located in Levis, across the St. Lawrence River from Quebec City.