West Sussex County Council has paid £4m in compensation to Amey over a contested highways procurement process.
The authority announced it had to dip into its reserves to make the payment, which followed a High Court challenge from Amey.
The payoff was revealed as part of West Sussex draft budget proposals. The Cabinet will go through the proposed budget for 2020/21 before it goes before a meeting of the full council on February 14 for final approval.
A council statement said: 'The budget report also identifies that money from reserves has been used to settle an outstanding claim and associated costs of the contested procurement process for highways maintenance. A sum of £4m has been paid to the claimant Amey after it instigated legal proceedings.'
It was reported that West Sussex was ready to make Ringway Infrastructure Services Ltd responsible for maintaining its roads in early 2018 following what it described as ‘a successful procurement process’.
However, the High Court challenge from rival bidder Amey collapsed the process and led to Balfour Beatty being given an interim contract as a continuity appointment.
Amey alleged a 'manifest error' in the scoring of two criteria and claimed that it should have been awarded the contract. The council applied to have this claim struck out but this was rejected by Justice Stuart-Smith.
After the collapse of the procurement process, West Sussex officials suggested it would have been too difficult to bring in a new company, particularly for winter service, and so gave Balfour an interim contract.
Based on the loss of projected savings and further costs as a result of the contract extension, the full cost of the debacle could be close to £7.6m, according to reports.
A spokesman for the council conceded that while the direct costs and indirect financial consequences would be higher than the settlement sum, the authority could not give an exact figure.
However, he disputed that projected savings should be included in the loss to the council.
Amey was approached for comment.
West Sussex has now broken its highways procurement up into different lots. Under the new model, the total work is worth around £22m per annum.
Under single supplier contracts for highways maintenance services of five years with options to extend to a maximum of 10 years, beginning on 01 April 2020, lot one covering core services was awarded to Balfour Beatty Living Places and lot two for drainage and cleansing was awarded to Drainline Southern Ltd.
Lot 4: Carriageway & Footways Resurfacing was awarded to:
- Aggregate Industries UK Ltd
- Associated Asphalt Contracting Ltd
- Balfour Beatty Living Places
- FM Conway Ltd
- Tarmac Trading Limited ·
Lot 5: Carriageway Surface Dressing and Carriageway & Footways Treatments was awarded to:
- Colas Limited
- Eurovia Infrastructure Limited
- JPCS Limited
- Kier Highways Limited
- Road Maintenance Services Limited ·
Lot 6: Infrastructure Improvements – Planned Works was awarded to:
- Balfour Beatty Living Places
- Dyer & Butler Ltd
- Jackson Civil Engineering Group Ltd
- Landbuild Ltd
- Tarmac Trading Limited