Capital trams face another year's delay

The German-led consortium is also thought to have asked for up to 80 million extra to begin work on Princes Street from today, which would raise construction costs by a third.

Its bosses have been accused of "unacceptable" behaviour and the "worst kind of brinkmanship" over one of Scotland's biggest projects.

The firms are thought to be demanding the extra payment and an extension until well into 2012 after blaming delays which have hit the project since the contract was finalised last May.

Although insiders at Edinburgh City Council are adamant the dispute centres on Princes Street, The Scotsman has learned contractors are blaming delays at Leith Walk and Gogarburn.

TIE, the council's tram company, said it has no intention of putting up any more money.

Insiders told The Scotsman yesterday the dispute between TIE and German firms Bilfinger Berger and Siemens could drag on for several months and throw the Edinburgh Airport-Newhaven line into chaos.

Construction work is due to be completed by January 2011 to enable trams to run by July of that year. The prospect of those dates being achieved is now thought to be in serious doubt.

The closure of Princes Street to traffic is going ahead as planned today, even though the planned work to lay tram tracks has been shelved indefinitely.

Officials at the council and TIE have decided to go ahead with the massive traffic shake-up, but retailers are demanding the city centre is returned to normal if the dispute is not resolved within the next few days.

Lawyers have been called in in an attempt to break the deadlock after a bid to renegotiate a fixed contract on infrastructure agreed last May was dismissed.

Council leader Jenny Dawe said the firm had tried to impose "unacceptable" conditions before it started work on Princes Street. Insiders at the local authority said the demands had come as "a bolt from the blue," despite claims that talks had been ongoing for the last few weeks.

A spokesman for the consortium said TIE had failed to meet "contractually agreed conditions" and work could not get under way until agreement had been reached on extra costs.

Talks are expected to continue throughout the weekend over the stalemate, revealed just hours before work was planned to start on Princes Street, which is due to remain closed until the end of November.

Insiders blamed Bilfinger Berger, the world's tenth largest construction firm, for the chaos.

The Scotsman has been told it is unlikely the consortium, which was awarded an initial contract in October 2007, will walk away from the project. But a source said it was not surprising the consortium was seeking more money.

He said: "When the contract was originally signed, there were a huge number of unknown factors and things were rushed through.

"The 512 million cost of the project was the absolute bottom line, which relied on no problems being encountered.

"There have been delays with the utilities (pipes and cables] diversion contract, which should have been completed in November. Because of this, Bilfinger Berger will have incurred large extra set-up costs for the construction contract, and would have had workers and equipment waiting on site. It was only a fixed-price contract if the original timescales were adhered to."

TIE has a 33 million contingency fund, which it plans to put towards a second line.

Andrew Burns, opposition Labour group leader on the council, said: "This is frankly unacceptable behaviour. A detailed, clear contract has been in place for months and to raise new conditions literally days before work is about to being on Princes Street smacks of the worst kind of brinkmanship."

Tom Campbell, the chief executive of Essential Edinburgh, the main retailers group in the city centre, said: "I will be seeking assurances that if these matters are not resolved within the next few days, a decision is made to reopen Princes Street pending a revised timetable being agreed with the contractor."

The construction element of the tram project was agreed last May at 239 million, when it was hoped the first tracks would be in place by September.

It had been initially agreed at 220 million, but was renegotiated after the firms raised concerns about the strength of the euro against the pound. But it is understood delays in the work to move underground pipes and cables are being largely blamed by the consortium for its extra cash demand.

A spokesman for the consortium said: "As the client failed to meet contractually agreed conditions and as no agreement has been reached on the resulting additional costs, construction work in Princes Street cannot yet commence.

"Bilfinger Berger advised the client on several occasions work can only begin when the contractually agreed preliminary services have been completed."

Dogged by hold-ups on far from smooth journey

January 2005 – Officials admit the initial completion date of the trams project has slipped from 2008 to 2009.

February 2005 – Edinburgh's failed congestion charging referendum means a planned third tram line to the south of the city is scrapped.

October 2005 – Officials admit the capital's streets will need to be dug up twice, firstly to move underground utilities and then to lay tram tracks.

January 2006 – It emerges that one of the two remaining tram lines, linking Haymarket and Granton, is in doubt due to funding problems.

June 2006 – TIE chief executive Michael Howell quits. Willie Gallagher appointed to run the project.

September 2006 – Final completion date put back from July 2010 to February 2011.

March 2007 – The first work to divert utility pipes and cables in Leith gets under way.

June 2007 – The new SNP administration at Holyrood agrees to fund the trams scheme despite a pre-election commitment to scrap it.

May 2008 – TIE signs final contracts for the project, which will now cost 512 million. Finish date put back to July 2011.

October 2008 – City centre left gridlocked after the closure of Princes Street at the Mound.

November 2008 – Willie Gallagher stands down.

December 2008 – Interim TIE chairman David Mackay admits it is "inevitable" cost will rise. Plans to close Princes Street for most of 2009 are confirmed.