Ottawa has awarded a $3.2-billion contract to replace the aging Sea Kings helicopters to U.S.-based Sikorsky.

Announcing the contract the newly-named defence minister, Bill Graham, called the model a "world-class helicopter that is at the forefront of modern technology and will serve our needs for years to come."

A military version of the Sikorsky S-92 will be delivered and will be called the H-92 Cyclone. The first of 28 new choppers is expected to be delivered in 2008, the final one by early 2011.

"This is a very significant announcement for the armed forces of Canada," said Graham Friday at a news conference at the Shearwater air base, near Halifax.

"We have the best-trained people in the world in the Canadian forces. The government is committed to ensuring that they have the resources that they need."

There were two options being considered for the replacements: Sikorsky and the Cormorant by EH Industries of England. But Graham said the H-92s "met all the requirements of the military and was at the lower cost."

He said the decision came after "a fair and open contest and a very rigorous evaluation of the two competing bids."

"The Sikorsky h-92 represents the right helicopter for the Canadian forces at the best price for Canadians."

Minister of Public Works Scott Brison, who also spoke to reporters, said the evaluation included such criteria as technical compliance, an ability to meet all the contractual conditions, a willingness to enlist Canadian companies in building the choppers and the lowest purchase price.

The contract will bring in $1 billion to manufacturers in Atlantic Canada with a total commitment by Sikorsky to investing $4.5 billion in "industrial activity" across Canada, said federal Fisheries Minister Geoff Regan.

But in a report in Friday's Globe and Mail, an aircraft industry source said the commissioned choppers were "cheaper and less capable" and that the decision was made to avoid going with EH, the same company with which the Liberals broke an earlier contract in 1993.

At the time, then-prime minister Jean Chretien called the deal a "Cadillac" expenditure the country couldn't afford. The government paid $500 million in cancellation fees.

The source also said the new helicopters will not be compatible with new support ships that the military intended to purchase. The Cyclones are also not designed to carry large numbers of troops or large amounts of heavy equipment, he said.

"We're right back to where we started," Scott Taylor, editor of Esprit de Corps Magazine told CTV News. "In the meantime, we've put our soldiers at risk for an entire decade, our air force at risk for an entire decade ... . It's a sad day for the Air Force."

Critics said the process has been ridiculously slow and badly flawed. In the end, the government chose a helicopter that has no track record because Canada will be the first to use it as a military aircraft.

Conservative defence critic Gordon O'Connor also said the purchase took far too long.

"We're not going to congratulate the government because they've delayed this project for 10 years, and through those 10 years they've created a risk for our crews," said O'Connor.

But Retired Col. Lee Myrhaugen, who flew helicopters for the air force, is pleased that a decision has been made.

"It's just going to be such a quantum leap. It's going to put us back where we were some 40 years ago with the Sea King when it was introduced on the cutting edge of technology," he says.

The Paul Martin government promised in December it intended to buy 28 maritime helicopters to replace the Sea King fleet, which has been plagued by several serious accidents and repeated mechanical failures in recent years.

The Sea Kings won't be decommissioned anytime soon. Once the new choppers are purchased, the Sea Kings will be phased out gradually, as the new choppers are delivered at a rate of one per month over more than two years.

The Sea Kings were purchased in the 1960s, making most of them older than the crews who fly them. Every one hour of flight now requires about 30 hours of maintenance.

Ten people have died in four fatal Sea King crashes over the years and mishaps have resulted in 13 aircraft being withdrawn from the original 41-helicopter fleet.