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.
Amey was approached for comment.