Canada blasts SNC-Lavalin unit's federal contract

A pedestrian walks past the SNC-Lavalin Group Inc., headquarters in Montreal, May 7, 2009. REUTERS/Christinne Muschi

OTTAWA (Reuters) - The Canadian government on Wednesday branded as unacceptable what it said were excessive prices charged by a subsidiary of SNC-Lavalin Group Inc SNC.TO under the terms of a major federal contract.

La Presse newspaper said the SNC-Lavalin unit, Profac, was given a contract in 2004 to maintain 320 federal buildings. The company charged more than C$5,000 ($4,860) to install six lights and C$2,000 to buy two plants, the paper said.

“These costs are absolutely unacceptable ... there’s an audit that’s actually under way right now. We’re going to review all these things and we want to put an end to it,” said Treasury Board Minister Stockwell Day, who is responsible for keeping a grip on government expenditures.

Day told the reporters the contract -- awarded when the previous Liberal government was in power -- had generated around 200,000 receipts.

La Presse said the contract had been renewed twice and would run out in 2013. If the deal continued to 2015, it will have cost a total of C$6 billion, the paper said.

SNC-Lavalin -- Canada’s biggest engineering company -- said the prices cited by the newspaper were taken out of context and its rates were “absolutely consistent” with the going market prices for servicing commercial property.

“By virtue of the volume of work we manage, we have also been able to obtain very competitive prices and rates from suppliers through economies of scale thus transferring those savings to the Government and ultimately, Canadian taxpayers,” the company said in a statement.

($1=$1.03 Canadian)

Reporting by David Ljunggren; editing by Peter Galloway and Andre Grenon