Westminster City Council has reached a £600,000 settlement with parking services provider Mouchel over the awarding of the UK's biggest parking contract.
Cllr Lee Rowley, cabinet member for parking, told Surveyor the council 'deeply regretted' the original decision, which he described as 'an error in procurement' Mr Rowley said: 'We faced a conundrum. We had advice that we could be liable to £4m-worth of costs should it go to judicial review.
'We decided it was not a prudent position to take to spend money on the trial, even though we were confident of winning.'
The deal is the result of a decision by the city council last year to not award the £50m parking enforcement contract to Mouchel, who were named preferred bidder in March 2010, before being revoked and reopened for tender.
An accelerated procurement process resulted in NSL being named successful tenderer in June last year.
But Mouchel then launched a legal challenge of the decision to award the contract to NSL, formerly know as NCP.
Mr Rowley attacked the decision by Mouchel to take the city council to court. 'It is regretful that private companies feel they can hold local authorities over a barrel.
'It is a mark of the litigious culture we are moving into - nothing is fallable.'
The news comes against the backdrop of the prime minister David Cameron's anticipated Open Public Services White Paper, which seeks to allow private companies to enter a bidding contest for all public services, and could see a considerable amount of work outsourced.
Mr Rowley stated the situation Westminster had to contend with does not mean outsourcing is undesirable for local authorities though.
'There is no issue with the market and I'll defend that approach. But there needs to be a framework that works, and there is a whole series of issues surrounding this issue.
'Procurement law is becoming increasingly complex and it is a difficult framework in which councils have to operate.
'We need to have a competitive marketplace, but one in which contracts are simple enough to work.'
