£6bn air-sea rescue sale halted in insider probe

The £6 billion privatisation of search and rescue helicopter services was cancelled at the last minute today because of "irregularities".

Ministers called off the move after the preferred bidder admitted it had been helped by a former Whitehall insider and given access to "commercially sensitive information".

Ministry of Defence police have been called in to investigate how CHC Helicopter, a member of the Soteria consortium, got hold of the information.

The Government will now have to restart the entire process which was due to see the ageing fleet of Sea Kings - the helicopter flown by Prince William - replaced.

Sources said the Coalition still wants to see search and rescue services privatised, but admitted the last-minute cancellation will leave a "capability gap" that will need to be filled somehow - possibly by extending the life of existing helicopters.

Comments made by David Cameron last month led to speculation that the prince may have intervened on the future of RAF helicopters after an announcement on privatising the fleet was delayed in December.

But Transport Secretary Philip Hammond told markets this morning that Soteria had come forward to reveal "irregularities regarding the conduct of their bid team".

These included the fact that CHC had access to information about the joint Ministry of Defence and Department for Transport project team's evaluation of industry bids, and evidence that a former team member had helped the consortium.

Mr Hammond said it would not be "appropriate" to proceed with the current procurement process as a result.

He added the Department of Transport and the Ministry of Defence would now consider its options "to maintain continuity" of search and rescue helicopters until longer-term arrangements can be put in place.

Soteria was due to take over search and rescue services from 2012 for 25 years, replacing the Sea King with the Sikorsky S-92A. The service is currently provided by the RAF, Royal Navy and the Maritime and Coastguard Agency. Prince William is based at the search and rescue headquarters on Anglesey in North Wales.

The consortium said it was "disappointed" by the cancellation and indicated it would bid again.

Former Liberal Democrat leader Sir Menzies Campbell called the incident "grossly embarrassing all round".