Controversy over a £6.2m transport deal linked to a former Sutton Council employee has forced a neighbouring council to retender its contracts.

In September last year Croydon Council awarded a contract to Olympic South to ferry vulnerable children to and from school.

However, it emerged in January, Sutton Council’s former transport officer Michael Lawrence had advised Croydon on the contract.

He then left the authority to take up a job with Olympic South, a Merton-based cab company, shortly afterwards.

It was also revealed Mr Lawrence was at Sutton Council when they awarded their own contract to Olympic South in December 2008.

Croydon Council confirmed Sutton’s expertise was sought, but said it was not involved in deciding which companies were awarded contracts.

However Croydon councillors called for a full inquiry and the council has now put all its 13 transport contracts out to tender.

It is understood two members of staff also face a disciplinary hearing over the deal.

Sutton Council also launched its own investigation, but said it found “absolutely no evidence of bias or unfairness”.

Councillor Colin Stears, executive member for adult social services and health at Sutton, said: “It is a myth that one person was responsible for awarding this contract – a large team of officers, including finance professionals, evaluated the different bids and recommended the best option to members.

“We awarded the contract to Olympic South in December 2008 ahead of other bidders, with knowledge of their financial situation, because of their ability to provide a good and reliable service at excellent value for money.

“Croydon Council’s decision to re-tender the contract for their SEN transport follows issues concerning their specific procurement process.

“We do not have any such concerns.”

Croydon Council’s investigation found no evidence of fraud but raised concerns about the evaluation process.

The council has refused to explain what these concerns are.

Council Leader Mike Fisher said: “We have shared all of our findings with the district auditor who is fully aware of our investigation and happy with the action the council has taken in retendering the contracts.”

In October 2009 auditors expressed doubt Olympic South could continue.

In the published accounts for the transport firm dated October 2009, auditors notes the company’s liabilities exceeded its total assets by £79,571.

Henry Bilinski, director of Olympic South, refused to comment.

Companies can now bid for the four-year contracts with Croydon Council which will come into place in April 2011.

The Sutton Community Transport Group is one of the companies awarded a transport contract from Croydon. Their contract began in January.

Christian Evans, operations manager, said: “I have bought new vehicles on the back of the Croydon contract and moved to a new depot and hired new staff.

“I am quite confident we will get another contract but there is a huge amount of uncertainty with staff.

“Things have been going well and this is going to disrupt services even with the best will in the world. We will do our best to keep providing the best service we can.”