Mayo County Council may have to pay damages of some €10 million to a Co Clare engineering company after a High Court judge found yesterday that the company was unlawfully eliminated from the tender process for a £7 million (€10.47 million) contract for construction of the Knock/Claremorris bypass.

Mr Justice O'Neill upheld a challenge by Clare Civil Engineering Ltd (CCEL) to the council's award of the contract to another company, Frank Harrington Ltd in 2000. The judge held that the council had wrongly found that CCEL had failed to properly complete the tender documents and consequently wrongly eliminated CCEL from the tender process.

Because of a provision that the contract would be awarded to the most economically advantageous tenderer, the judge said that without the unlawful elimination of the CCEL tender, CCEL would have won the contract because its price was some £300,000 below that of the successful tendering company.

It followed that the Council was liable to CCEL in damages for whatever recoverable losses the company had suffered, he said. He adjourned the case until next week to allow the sides to consider the decision.

The case arose after the council published a contract notice for award of the contract in February 2000. The notice did not specify the award criteria. In April 2002, CCEL tendered for the contract and was given voluminous contract documents. The award criteria were sent out to tenderers. The instructions limited the criteria to be used to establish the most economically advantageous tender price.

In May 2000, the Council's project engineer wrote to CCEL seeking further information on its tender. CCEL delivered that information a week later. A month later it was told informally it would not get the contract despite having the lowest tender. In July, the company sought a reason and was told it did not complete two sections in the tender documents as required.

Following the award of the contract to Frank Harrington Ltd in August, CCEL took High Court proceedings in October 2000.

Yesterday Mr Justice O'Neill said the council had erred in its determination of what was required by CCEL in completing those documents and that CCEL had adopted the correct approach.

The judge held that council's decision was a manifest error.