Senior staff at Shellharbour City Council recommended a company for a multimillion-dollar waste contract despite raising concerns about an industry reputation of underbidding.
In documents obtained by the Mercury, the officers also warned about a possible industry backlash if their preferred tenderer won the contract.
Councillors, who ignored the officers' recommendation and gave the contract to the existing contractor - Thiess Services - have copped a grilling about their decision during a public inquiry.
They have been criticised for picking Thiess, given the officers' preferred tender was $1.9 million cheaper over the six-year contract.
However, aside from the price difference, the confidential council documents show Thiess Services was ahead in meeting most of the criteria for both parts of the contract - garbage collection, and processing and recycling.
The council officers' concerns about possible underbidding and an industry backlash counter claims made to the public inquiry last week that councillors had not acted in the interest of ratepayers, or even contrary to law.
Six bids were received for garbage collection, while two companies entered bids for both collection and processing.
Commissioner Richard Colley has suppressed publication of the name of the recommended tender.
The documents show the recommended company's bid for garbage collection was just over $1.7 million a year - more than $600,000 a year cheaper than the highest tender price and $200,000 below Thiess Services' bid.
A report signed by tender assessment panel chairman and council's group manager, customer and environmental services Graham Standen to general manager Brian Weir, said: "There has been sentiment amongst the waste industry that (X company) have used their market influence to underbid for council contracts.
"In case of Part B of the Request for Tender (for processing and recycling), (X's) tendered price was approximately 50 per cent less than the only other tenderer.
"While the decision to appoint (X) as the preferred tenderer may produce some negative market reactions, council is satisfied that the provisions of the Local Government Act have been complied with.
"The needs of Shellharbour ratepayers will be best served by the appointment of (X)."
During their grilling at the inquiry, councillors justified ignoring the recommendation by citing their concerns over such a low tender bid.
They outlined their fears that the recommended company was trying to grab a monopoly of waste and would later increase prices, as well as a lack of guarantee on job security for Thiess workers.
Company X has denied claims of underbidding.
According to the council documents, the tender contest ultimately came down to a two-horse race with Thiess Services winning higher evaluations from the assessment panel than the council's preferred tenderer in eight of 10 non-price criteria.
When heavily weighted tender prices were added to the evaluation mix, company X came out the winner.
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