Exclusive: Hull in turmoil as legal advice snubbed in deal

A confidential report, seen by the Yorkshire Post, was given to the cabinet at a behind-closed-doors meeting and detailed five options for awarding the repairs and maintenance contract, previously held by failed contractor Connaught.

Of the three prospective companies to replace Connaught, it recommended using a combination of Kier Support Services and the council-owned firm Kingstown Works Ltd (KWL) because it was "economically advantageous" and both had a track record of "performance and quality".

But the authority's top legal and finance officers warned against awarding the contract to Lovell Partnerships because it was the most expensive option – costing 4.3m more than the other bidders – and could break European Union procurement regulations.

It also scored the lowest in terms of quality according to the council's own indicators and the firm had no track record with the authority.

Despite this the cabinet awarded the contract to Lovell Partnerships.

KWL has since threatened to take legal action against the council, and Hull's Liberal Democrat leader Carl Minns has responded by moving to sack the board of the firm, stating that it would be "absolutely ludicrous if a wholly council-owned company took the council to court."

Mr Minns said that a meeting of the council will be held on November 9 to vote on whether to remove the board, made up of three Liberal Democrat councillors, three Labour, an Independent and a Conservative.

The report states that the five options were either to award the contract entirely to one of the three companies, or break it up to award sections of it to a combination of Kier and KWL. Lovell Partnerships would only accept the deal if it was awarded the whole contract.

The Lovell Partnerships bid was the only option that would not result in any immediate job losses. Each of the other four would result in cuts of between 104 and 115 staff.

However it was also the most expensive, leading to accusations that the cost will result in job losses elsewhere.

The report states that the officers believed the Lovell Partnerships' bid should not be supported "given the financial impacts and no additional perceived benefits".

It states: "Officers are not minded to recommend this option as it is the most expensive, scored lowest in terms of quality and Lovells have no proven track record with Hull City Council."

Coun David Woods, portfolio holder for the environment, defended the cabinet's actions and denied that the decision to save 100 jobs was politically motivated to boost Liberal Democrat support.

The council needs to make savings of 70m before March 2013 but Coun Woods said that these decisions cannot always be made on a monetary basis.

"There were recommendations – but there is always more than one option," he said.

"There are lots of ways to look at costs – yes there was the potential to make savings here, but you have to look at the impact of those redundancies, there is no point saving with one hand if you incur greater expenses with the other."

Coun Daren Hale, Labour chairman of the KWL board said: "Directors of KWL have legally to put the interests of the company first and safeguard the well-being of the company and its 300 employees," he said. "Clearly going forward the decision taken will threaten jobs."