The federal government scrapped plans to replace the military's aging army trucks last week because the project was $300 million over budget, an official has confirmed.

"The initial cost that was estimated was somewhere in the neighbourhood of $400 million," said Chris Alexander, parliamentary secretary to the minister of defence, in an appearance on Power & Politics.

Excerpts from the Public Works email

"Economic, marketplace and budgetary circumstances have changed since this solicitation process began," read the last-minute notice from Public Works, sent July 11.

"Therefore, the Government of Canada needs to reassess this procurement to ensure that the right equipment is acquired for the army at the best value for Canada, prior to proceeding with a new solicitation."

"The re-evaluated cost, was well over $700 million, a 40 per cent increase, and there wasn't spending authorization for that larger amount."

The Department of National Defence has been grilled for adding new, more costly specifications for the 1,500-truck fleet without the approval of the Treasury Board.

The discrepancy was dealt with at the 11th hour, and Public Works emailed bidders just three minutes before the deadline to pull the plug.

The bidding companies were left reeling after having spent hundreds of thousands preparing for the bid, which was called down last Wednesday.

Retroactive permission taken for granted

The government initially said marketplace and budgetary circumstances were to blame, but CBC News has learned that the reasons are more complicated.

CBC's James Cudmore reports that the military has known for years that it was going to have to spend millions more than the government had budgeted in order to buy the trucks the army wanted.

Sources tell CBC News that the military thought it would be able to get government approval for the additional spending retroactively, and pushed ahead with the program.

The day before the July 11 deadline, the deputy ministers for Defence, Public Works and the Treasury Board met to discuss the program.

The decision to halt the project was made the next day, and bidding companies were only notified three minutes before the deadline.

"The expenditure authority to spend that larger amount was not there, and so the ministers and the government have taken the difficult but responsible decision to re-evaluate," said Alexander. 

Project 'reeks of incompetence,' NDP says

Liberal defence critic John McKay said that the entities responsible for overseeing such procurements, namely the Treasury Board and Public Works, have been "gutted." 

"The consequence is that the Conservative Party has spent all kinds of time tap-dancing around the rules that the Treasury Board has set," said McKay, adding that this is "just one in a long list of procurement boondoggles."

NDP defence critic Jack Harris agreed, highlighting the F-35 stealth-fighter deal, and added that the latest event "reeks of incompetence."

The cancellation is not fair to contractors who invested time and money into the bid preparations, Harris argued. He said taxpayers are too often kept in the dark about the ballooning costs of military purchases.

Project deemed 'urgent' in 2006

The last-minute cancellation of the program raises questions about the future of the long-delayed military acquisition. The on-again-off-again plans have been a long time coming, as former defence minister Gordon O'Connor announced the project to great fanfare back in 2006.

The new Standard Military Pattern Vehicles were to replace trucks in the current fleet, which are rusted out and have brake problems after decades of use. The medium-weight trucks, which have been in use since the 1980s, are reaching the end of their service life.

The trucks are considered the workhorses of the regular and reserve forces, ferrying supplies to troops at home and abroad.