The council admitted the pay-out would hurt frontline services at a time of cuts but said the settlement was cheap compared to a potential court ordered compensation award of £4 million and huge legal costs.
In March last year, Westminster council named Mouchel as its preferred bidder for its £50 million parking contract, the biggest and most lucrative in Britain, but was then forced to revoke its decision and reopen the tendering process.
A faster than usual tender then resulted in a June decision that the contract should go to the company formerly known as NCP but which is now called NSL.
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