Bristol's top council lawyer has warned that an out-of-court settlement to a firm which did not succeed in winning a multi-million pound contract could happen again.

Cabinet councillors reluctantly agreed a few weeks ago to pay out £800,000 to a Surrey-based firm which did not win the contract to build a new £21-million leisure centre at Hengrove Park.

Stephen McNamara, the council's top lawyer, said the bidding process was so complicated, it was impossible to rule out a similar settlement in the future.

Furthermore, if the firm which received the money decided to bid for another contract with the council in the future, then it would have to be treated fairly and might win the work.

DC Leisure Management threatened to sue the council over the way in which the tendering process for the new complex was handled.

But instead of facing a drawn out and potentially costly legal battle, the council is paying an £800,000 settlement.

The complex, which is due to open in two years, will include an Olympic-size swimming pool, sports hall, gym, crèche and other facilities.

Mr McNamara said: "Procurement is one of the most complicated areas of law and an area of increased litigation.

"It would be unlawful for us to have some sort of clause, a get-of-jail card, which prevented us from taking any risk.

"If it was possible to do that, we would be in the position of no one coming forward to bid for a project because they wouldn't be prepared to take such a gamble. And why should they?"

Mr McNamara said the tendering process was so complicated because it involved rules of procurement, European regulations, British law and volatile financial markets.

He said: "I have never known the law change so frequently on a weekly, two-weekly and monthly basis, while this litigation was being handled."

He said the only way to eliminate risk on behalf of the council was not to go ahead with imaginative, large-scale projects at all.

He said: "What we can do is to always do our very best to work carefully and thoroughly to reduce the risk as much as we possibly can in the future.

"But that risk can never be completely eliminated.

"It could happen again – not just for us but for any council in the country."

The council will borrow the money to pay the settlement.

It is understood that it will pay £35,000 over 25 years, which is a relatively low amount in comparison to the size of the contract.

The leisure complex is part of a £100m development at Hengrove Park, which will include the new south Bristol hospital and a skills academy.

A consortium called Bristol Active Ltd has won the contract, under PFI (Private Funding Initiative), where a private firm is contracted to design, build, finance and run facilities in partnership with a local authority.