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The federal government is being sued for $195-million for cancelling an $867-million contract to manage Canadian visa application centres around the world, a dispute that ended up at the cabinet table.

The retendered contract, now valued at $1-billion, was awarded last month to VF Worldwide Holdings, an Indian company that previously handled Canadian visa services for the government.

A statement of claim filed in Ontario Superior Court on Wednesday by Ottawa-based Le Group Conseil Bronson Consulting and Cox and Kings, a global corporation that is headquartered in Mumbai, accuses the government of acting in bad faith.

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The two companies claim that they won the multimillion-dollar visa-application services contract in 2016 but bureaucrats at Public Services and Procurement Canada suddenly cancelled the solicitation and retendered the procurement.

The statement of claim alleges that the government acted in bad faith by disclosing the companies’ pricing strategy to officials at the Immigration, Refugee and Citizenship department and “the information began to leak out to the public” after the contract was re-tendered.

“Eventually it leaked to the Plaintiffs’ competitors,” the court document alleges. “The fact that the incumbent scored higher on the financial evaluations was the result of its ability to get a ‘second kick at the can,’ and with the knowledge that the original winner, being the Plaintiffs, had bid $0 for the government portion of the final bid.”

The two companies had proposed that they would not charge the government for visa work but impose fees on the people seeking visa applications. According to the statement, the plaintiffs were the successful bidders until they were suddenly told in October, 2016, that Ottawa was cancelling the solicitation.

Officials subsequently told the bidders that their proposal did not represent “best value for Canada” and would have had the potential for “negative socio-economic impacts on Canada affecting the volumes of people willing to apply for a visa to come to Canada.”

The statement of claim argues that the two companies offered “best value for Canada” because the government would receive the visa services for free. The statement also said the companies did not plan to increase the fees charged to visa applicants.

Immigration Minister Ahmed Hussen and then-public services minister Judy Foote were consulted, as was cabinet, according to court documents. The government claimed cabinet confidentiality so it is not known what was discussed about the contract.

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The statement of claim also raises concerns that immigration officials “purposely began communicating using PINs and BlackBerry in an attempt to avoid creating a trail of evidence.

“That conduct has affected the ability of the Plaintiffs to obtain a full and fair discourse in this proceeding. The Plaintiffs plead that a negative interference should be drawn as a result of this conduct,” according to the statement of claim.

David Baird, president of Bronson Consulting, accused the government of stonewalling and leaving the two companies no option but to seek redress through the courts.

“We competed for this contract and won it fair and square. Then the government refused to award it to us without any justification,” Mr. Baird said in a statement to The Globe and Mail on Wednesday. “We cannot understand why the government handed our competitor in India a billion-dollar project, particularly when doing so will cost Canadian taxpayers tens of millions of dollars. For a government that talks so much about openness and transparency, something smells rotten.”

A spokesman for Public Services and Procurement Canada said the government would not comment on a case before the courts.

“The Government of Canada is committed to transparent and fair procurement and to obtaining best value for Canadians. We cannot comment on this particular case as it is before the courts,” Pierre-Alain Bujold said in an email.

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