UPDATE 1-Mouchel wins delayed Bournemouth deal, shares up

Thu Nov 11, 2010 4:55am EST

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* Outsourcer gets full council approval after scrutiny

* Contract will last 10 years and save council 40 percent

* Shares rise as much as 6 pct, up 4 pct by 0947 GMT

(Adds details, background)

By Golnar Motevalli

LONDON, Nov 11 (Reuters) - British local authority Bournemouth Council has awarded outsourcing firm Mouchel MCHL.L a 10-year, 150 million pound ($242 million), contract to provide IT services and facilities management.

"Full council approved the award of an Incremental Partnership Contract to Mouchel, for an initial period of 10 years, with a proposed contract start date of 1 December 2010," Bournemouth council said in a statement emailed to Reuters.

Shares in Mouchel, which warned of an uncertain outlook last month, climbed as much as 6 percent and by 0932 were 4 percent higher at 91.25 pence.

Local authorities across Britain are cutting costs aggressively after central government took an axe to their budgets in a bid to bolster public finances.

Some councils have already taken to outsourcing the bulk of their services, and Bournemouth said the contract with Mouchel would help it save up to 40 percent of its revenue budget over the next ten years.

In July Bournemouth council decided to defer its decision on whether to finalise the deal with Mouchel, which beat larger rivals Serco (SRC.L), Capita (CPI.L) and Balfour Beatty (BALF.L) to secure "preferred bidder" status for the contract.

At the time councillors complained Mouchel had not presented sufficient financial information.

"Assurances were given at council by Mouchel as to their financial position and ability to deliver the contract as offered," the council said on Thursday.

Government spending cuts are seen as an opportunity for some outsourcing companies to win new business but increased public scrutiny and financial difficulties at companies such as Connaught CNT.L and Rok ROK.L have made councils more wary.

Execution Noble Analyst David Brockton said the contract was evidence that Mouchel could benefit from cuts to public services but he kept his "sell" recommendation.

"This is the first major win for Mouchel in some time ... However, until we have confirmation that the group's financial position is secure we maintain our cautious stance."

($1=.6192 Pound) (Additional reporting by Rosalba O'Brien; editing by Paul Hoskins)

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