TORONTO - The federal government and the Gates Foundation have agreed not to proceed with plans to fund construction in Canada of a facility to make pilot lots of experimental HIV vaccines, sources have told The Canadian Press.

Several sources said that portion of the Canadian HIV Vaccine Initiative will not proceed at this time, but the two parties are committed to finding other ways to collaborate in the as-yet elusive quest for an HIV vaccine.

The project, first announced in February 2007, was to cost nearly $90 million, with $28 million of that coming from the Gates Foundation. It was part of the larger Canadian HIV Vaccine Initiative, a project for which Canada had earmarked $111 million.

Confusion has surrounded the future of the proposed vaccine production facility since late last week, when four short-listed groups were notified they were not successful in their bids. A statement announcing that the project would not go ahead was briefly posted on the Public Health Agency of Canada's website, but was quickly pulled down.

Neither the federal government nor the Gates Foundation has confirmed that the decision has been taken. And neither Prime Minister Stephen Harper nor Bill Gates, billionaire founder of the Gates Foundation, would take questions on the issue after they met privately Thursday at the World Economic Forum in Davos, Switzerland.

But the issue was reportedly on the agenda for the meeting.

"My understand is that both the Gates Foundation and the government of Canada -- and I can't speak for either one of them of course -- my understanding is both of them remain committed to a partnership," said Dr. Alan Bernstein, executive director of the New York-based Global HIV Vaccine Enterprise.

"And that they're now going to have a fresh look at the partnership in the light of several things."

Bernstein, a Canadian, is the former head of the Canadian Institutes of Health Research and as such is well acquainted with research capacity and facilities across the country. He said the decision not to go ahead was based on the calibre of the bids that came forward.

"My understanding is that they looked at the applications and decided that they weren't acceptable, for reasons that I don't know. And I really don't know," he insisted.

The short-listed groups were from the International Centre for Infectious Diseases, based in Winnipeg; the International Consortium on Anti-Virals, based at Trent University in Peterborough, Ont.; Laval University in Quebec City and the University of Western Ontario in London.

Three of the four bidders have acknowledged publicly they were informed by the head of the Public Health Agency of Canada, Dr. David Butler-Jones, that their bids were rejected. And a couple have indicated they were told it was due to shortcomings in the bids.

It appears other issues may have also played into the decision, among them questions about whether the special manufacturing facility was the best way to spend the available money.

The idea behind the plant was that there was a belief there was insufficient capacity, globally, to make pilot lots of future experimental HIV vaccines. Pilot lots are required for the clinical trials needed to prove whether a vaccine is safe and works and can be licensed.

The plant would not have been used to make commercial lots of HIV vaccines if and when any are brought to market; that would be the job of the pharmaceutical industry.

But Bernstein said it isn't clear how great the need for test lot production capacity actually is. There are commercial contractors who can make pilot lots of vaccine, if future HIV vaccine candidates are made in traditional ways, he said.

If a more novel technique is used, getting test lots made might be more difficult, Bernstein acknowledged. But given that it's not clear what techniques will be used to make future HIV candidate vaccines, how many there will be and how soon they will come forward, "the demand ... is at best unclear and it needs a careful look."

Bernstein said the issue of how to make pilot lots of future HIV vaccines is being looked at as part of his organization's review of its strategic plan. That review is currently underway.

The Canada-Gates Foundation partnership was structured in such a way as to fit in with the goals of an earlier iteration of the Global HIV Vaccine Enterprise's strategy plan, he said.

While Bernstein acknowledged the decision will be a bitter blow to the consortiums that hoped to secure the project, he doesn't see the decision as a setback in the search for an HIV vaccine.

"I don't think that's entirely a bad thing, because time has moved on and science moves on," he said.

"And so while the applicants might be disappointed, understandably, I think the basic elements of the (Canada-Gates) partnership are intact.... This is a major commitment on the part of the government of Canada to HIV vaccines."