OTTAWA - Repeated claims by Brian Mulroney that he cancelled the initial version of the Bear Head armoured vehicle project while he was still prime minister are being challenged by a former Mulroney chief of staff.

Norman Spector contends that Mulroney, in his testimony before a public inquiry, has offered an inaccurate picture of his handling of the project backed by German-Canadian businessman Karlheinz Schreiber.

"What we've learned about Mulroney is that he's very slippery with words and evasive with his testimony," Spector said in an interview with The Canadian Press.

"He didn't cancel the project in any incarnation. He never cancelled it."

The original version of the Bear Head project, first floated in the mid-1980s, would have seen the German firm Thyssen AG set up a plant in Cape Breton to build light-armoured vehicles for sale to the Canadian military as well as for potential export.

The proposed site of the plant changed after 1992 to east-end Montreal, and the project also shifted away from domestic sales toward a heavier emphasis on export markets.

Mulroney has acknowledged that he accepted at least $225,000 from Schreiber to promote the later "reincarnation" of Bear Head after he left office in 1993.

But during four days of testimony last week at the inquiry headed by Justice Jeffrey Oliphant, Mulroney asserted that he had ditched the original proposal after Spector informed him in late 1990 that it would cost taxpayers too much.

Mulroney pointed to that decision, in his first day on the stand, to rebut any suggestion that he had been unduly influenced by Schreiber in personal meetings held to discuss the project.

"He had so much influence with me, and I was so deeply indebted to him, that I cancelled the project," Mulroney said sarcastically.

"I killed the deal."

In later testimony, Mulroney suggested he had ordered Spector to put an end to the project, and that Paul Tellier - then the country's top bureaucrat as clerk of the Privy Council - was in the loop as well.

"When I gave Spector that directive, and he spoke to the clerk of the Privy Council - passing on exactly what I had said, this matter is dead - that is the end of it in that configuration as far as I am concerned."

Mulroney's qualifying phrase - "in that configuration" - is important because evidence at the inquiry has made it clear the project didn't actually die but clung to life in an eventually altered form.

Memos from Tellier continued to flow through the bureaucracy and Mulroney has acknowledged he held subsequent meetings with Schreiber, cabinet minister Elmer MacKay and Fred Doucet, a former prime ministerial aide who had signed on with Schreiber as a lobbyist.

Spector has testified that, when he met with Mulroney in December 1990, he reported to him that the project would cost at least $100 million a year, and up to $765 million in total, beyond previous estimates.

Mulroney's response, said Spector, was to tell him "If that's the case the project's dead" - a comment that Mulroney has since confirmed as accurate.

But that's where the agreement between the two men ends.

Mulroney never followed up by issuing explicit orders to kill the project, Spector said in an interview over the weekend after reading media accounts of Mulroney's testimony.

"It is not true to say he cancelled it, or he instructed me to cancel it," said Spector. "That never happened. I deny that categorically."

Spector told the inquiry, when he testified in April, that he passed Mulroney's December 1990 comments on to Tellier and Robert Fowler, then the deputy defence minister - but was surprised to find in the following months that the project continued to live.

Mulroney first made the claim that he had "instructed" Spector to kill Bear Head in testimony at a court hearing in 1996.

Since then, Spector complained in his weekend interview, an "urban legend" has grown up because Mulroney has continued to cite the incident as "evidence of his bona fides" in his dealings with Schreiber.

The 1996 court hearing was part of a libel suit Mulroney filed against the RCMP for accusing him of taking kickbacks in the sale of Airbus jets to Air Canada. He won a $2.1-million settlement and no charges were ever laid.

Since then, however, Mulroney has faced heavy criticism for keeping his $225,000 in earnings from Schreiber secret during the 1996 testimony.

He returns to the Oliphant inquiry for a fifth day of testimony Tuesday, with questioning expected to centre on why he waited six years before declaring the money for tax purposes.