LANCASHIRE County Council has agreed to pay £200,000 to two NHS trusts which won a court challenge against its decision to give a £104million contract for public health provision for under-20s to a private company.

It revealed the payment of legal costs as it announced the re-run of the final stages of the competition for the delivery of school nursing and health visitor services.

In November the authority awarded the contract to Virgin Health Care Ltd, part of tycoon Richard Branson’s business empire.

It rejected a joint bid by existing providers the Lancashire Care NHS Foundation Trust and Blackpool Teaching Hospitals Foundation Trust, with the former responsible for arrangements in Hyndburn, Ribble Valley, Burnley, Pendle, Rossendale and Chorley.

The two NHS bodies successfully challenged the decision and in April the High Court ordered a re-run of the tendering process.

Cllr Shaun Turner, the council’s cabinet member for health, announced it would re-evaluate the existing two tenders by March next year when the current contract expires.

He said: “We have also agreed to pay 75 per cent of the trusts’ legal costs for this case, which will mean we do not have to go back to court.”

He estimates this to be £200,000.

Cllr Azhar Ali, leader of the county council’s Labour opposition group, said: “The fact that the county is only re-running the final stages of the tendering process is positive.

“I hope this process can be conducted in an open and transparent manner to avoid any further legal challenges and costs to Lancashire’s council taxpayers.”

Public health services for up to 19-year-olds consist of school nurses and health visitors, trained midwives and nurses who support new mothers and their children up to the age of five at home.

Cllr Turner said: “We will now be able to move forward to finalise this procurement process."

“Where services are not being delivered in-house, we are under a legal duty to open them up to competition. The decision in this case was in no way political.” A spokesman for Lancashire Care said: “Following the outcome of the trial where the court found deficiencies in the evaluation process, the trust agreed to Lancashire County Council’s request to re-evaluate our original bid.

"We are mindful of the need for this matter to be resolved as soon as possible.”

A Virgin Care spokesman said it would be inappropriate to comment.

Services in Blackburn with Darwen are not involved in the contract and are delivered by a deal made with the two towns’ all-purpose borough council.