The Government has halted a £6 billion procurement programme for search and rescue helicopters, after the preferred bidder admitted it had had access to commercially sensitive information.
Ministry of Defence police are now investigating how the information came to be in the possession of CHC Helicopter, a member of the Soteria consortium.
The deal was supposed to replace the RAF's Sea King fleet, but Transport Secretary Philip Hammond said in a statement to Parliament, also released to the London Stock Exchange: "The Government has sufficient information to enable it to conclude that the irregularities that have been identified were such that it would not be appropriate to proceed with either the preferred bid or with the current procurement process."
The statement continued: "The Department for Transport and the Ministry of Defence will now consider the potential procurement options to meet future requirements for search and rescue helicopters in the United Kingdom, including options to maintain continuity of search and rescue helicopter cover until new longer term arrangements can be put in place."
Defence Secretary Liam Fox had disclosed in December that information had come to light regarding the bid which "required clarification".
The statement from Mr Hammond also disclosed that a former member of the joint MoD and Department for Transport (DfT) project team working on the procurement had then advised the consortium.
Mr Hammond said in his statement: "In mid December, the preferred bidder in the SAR-H competition, Soteria, had come forward to inform the Government of irregularities regarding the conduct of their bid team which had only then recently come to light.
"The irregularities included access by one of the consortium members, CHC Helicopter, to commercially sensitive information regarding the joint MoD/DfT project team's evaluations of industry bids and evidence that a former member of that project team had assisted the consortium in its bid preparation, contrary to explicit assurances given to the project team.
"Since December, our two departments have been working with Soteria to better understand the situation and its implications for the procurement process. In addition, the Ministry of Defence police are investigating how the commercially sensitive information came to be in the possession of the bidder. It would be inappropriate to comment further on the details of the investigation until it has finished."
In a statement, a Soteria spokesman said: "Soteria is disappointed to learn that the UK Government has announced the cancellation of the SAR-H programme. Soteria is evaluating the Government's decision and if given the opportunity is confident that it is capable of delivering the SAR-H programme and stands ready to work with the UK Government."