Last year, Canada's Department of Public Works asked the defence industry for ideas on the possible purchase of manned airborne intelligence, surveillance and reconnaissance planes.
But a formal bidding process won't go forward because of concerns over "security and technical feasibility," according to a notice posted this week on the government's procurement website.
Instead, the government plans to hold a future competition for some surveillance "elements" and "obtain the others directly from the U.S. government," the notice said.
The Americans are in the process of selling some of their MC-12W Liberty aircraft, which were used by the U.S. air force and army in Afghanistan to monitor the border with Pakistan and track Taliban fighters in remote, mountainous regions.
The turbo-prop planes were equipped with the same sensor suite as MQ-1 Predator drones and were similar in configuration to the Beech King Air 300, which is owned by the Department of Public Safety, but operated by the Canadian Security Intelligence Service.
It is just the latest twist as the federal government struggles to re-equip the military with a much leaner defence budget.
The government's 2008 defence strategy, which is in the process of being updated, called for the purchase of spy planes capable of monitoring vast swaths of territory with not only sensors and cameras but infrared technology as well.
They would be used not only to keep tabs on remote regions of the country, like the Arctic, but also foreign battlefields.
That role is partly filled today by the air force's CP-140 Aurora, which the government planned to replace.
But earlier this year they decided against retirement, opting instead to keep the 1980s vintage Auroras flying until 2030 with a multi-million dollar life-extension program.
The decision was made even though published reports in some technical journals speculated the air force could save up to $2 billion over the next 20 years by going ahead with the replacement — a calculation the military disputes.
The Conservatives had initially set aside $3 billion to replace the planes — the leading candidate was the Boeing P-8 Poseidon — but deep defence cuts forced a re-evaluation.
Senior executives with the U.S. defence giant pitched defence officials on the merits of the turbo-prop plane in October 2011, according to internal defence records.
At the time, the government was still undecided about whether to buy new aircraft or extend the life of the CP-140s for an estimated $630 million.
Boeing officials assured National Defence they could deliver a brand new fleet for $3.1-billion, just slightly more than the budget envelope — planes that would be cheaper to operate and less expensive to maintain, according to briefing material prepared for the military's second-in-command.
Air force planners were skeptical, especially of claims that the per-hour flying cost would be $8,000 per hour, a little more than half of the current rate for the older planes.
"While the impressive capability of the P-8 cannot be denied, there is also little doubt that the upfront cost estimates by (the evaluation) team are more than currently allocated for (the) project," said a May 2012 briefing obtained by The Canadian Press under the Access to Information Act.
"The fact we cannot afford to buy the aircraft renders moot any comparison in operating costs."
Maj. James Simiana, an air force spokesman, said this week defence planners are standing by their position that there "no overall cost savings by replacing the Aurora fleet with the P-8."
During the Libya bombing campaign, the CP-140s were updated with an advanced surveillance suite and flew along the country's northern coast to help NATO warplanes target forces loyal to dictator Moammar Gaddafi.
They also flew surveillance and mapping missions over Afghanistan.