The Alberta government paid a penalty of $805,000 to call off discussions with Australian-based Sonic Healthcare to provide lab services and build a centralized medical laboratory in Edmonton, CBC News has learned.

Alberta Health Services confirms that amount is on top of the $3.73 million dollars the government spent on the request for proposal process that started in December 2013 under the previous Progressive Conservative government.

The process was abruptly halted last August by Alberta's new minister of health, Sarah Hoffman. The penalty brings the overall cost of the RFP to $4.5 million.

Hoffman says she stands by her decision to stop further work on the proposed "mega-lab", even if the bills are adding up.

"I do share disappointment that we had to pay anything," Hoffman said this week. She adds it would have cost much more had AHS proceeded to negotiate with all three proponents seeking the contract.

"I think paying something up front to make sure you get the right deal long-term is worth that cancellation fee."

In October 2014, Alberta Health Services announced that Sonic Healthcare Limited of Australia was chosen as the preferred vendor for the 15-year, $3 billion contract to provide hospital and private lab services in the Edmonton zone to AHS and Covenant Health.

Almost immediately, Dynalife, the company already providing lab services in Edmonton, launched an appeal citing problems with the process. An AHS appeal panel agreed with Dynalife, and the RFP was scrapped.

Removing laboratory services from inside hospitals also raised concerns with medical staff and healthcare workers.

At the time, Elisabeth Ballermann, president of the Health Sciences Association of Alberta, which represents 75 per cent of the 2,000 workers affected by the changeover, worried about the loss of pension benefits.

When the NDP won a surprise majority government last May, Ballermann was quick to add her voice to those lobbying the new government to change course by stopping privatization in the health care sector.

With time running out on an existing contract between AHS and Dynalife, and with the RFP process on hold, Hoffman announced in August her government would halt talks with Sonic, and not carry out the previous PC government plan of creating the centralized lab service.

Hoffman wanted proof privatizing the labs would provide better service than the mixed public-private system now in Edmonton.

She asked the Health Quality Council of Alberta to review how AHS approached the RFP, and if it considered an expanded publicly-funded system as one of the options.

In a report released last month, the HQCA found AHS didn't look at how privatization compared to other options.

"In the work leading up to the RFP, alternatives for public or combined public-private options for the delivery of laboratory services in Edmonton and northern Alberta were not fully considered," Charlene McBrien-Morrison, executive director of the HQCA, said at the time.

After reading the report, Ballermann said she felt "an incredible sense of vindication."

The most recent provincial budget added $2 million to assess health facility needs in the Edmonton area.

A new steering committee has been formed to consider recommendations from the HQCA report, putting laboratory facility needs as a priority.