A new report into Edinburgh City Council's Property Conservation Department reveals the authority will bring in an outside firm next month to help tackle the outstanding bills.
A scandal broke over repairs ordered by the department after residents said they were billed for work that was substandard, unnecessary or not done. Many of the jobs are being challenged.
The bill for disbanding and replacing the beleaguered department with a new system has now risen by a further £700,000 since late last year, to £3.7m. This is understood to include hiring the debt collectors, although the council would not say how much it was paying them.
It said the move was needed to help it recoup the £33.6m owed after the department arranged to have hundreds of emergency, or statutory, repairs on buildings carried out by contractors.
There is £23.2m worth of statutory repairs work for which bills are to be sent out, while there is £10.4m of debt outstanding for previously billed works. The council is also only one-third of the way through the complaint cases, with 239 cases having been considered so far.
Officials have begun to notify people of their adjudications. So far, six are going to full appeal, around 30 are under review after being challenged and the council is "in the process of responding to the remainder".
Bad-debt provision is at £7.2m but the write-off is expected to rise after a debt summary at the end of March, by which time the 487 outstanding cases to date should have been heard.
Of the bills pending, invoices totalling £5.7m are now currently suspended until the outcome of known complaints.
Architect Lorn Macneal, 56, inspired others to come forward after he challenged surveyors over a £300,000 bill. He cut his costs to £40,000.
In the debt report, Mark Turley, director of services at the council, said: "It is recognised billing and debt recovery is unlikely to be concluded in a reasonable timescale using solely internal resources."
The department has been investigated for fraud. Although a police report found no criminality, workers were said to have accepted gifts including alcohol and a night out to a strip club from contractors.
More complaints have been lodged with the council after the police report was made public.
Labour councillor Ewan Aitken said no-one should be billed until all the cases are investigated and concluded.
He added: "What we saw in the police report suggests serious issues and you cannot go about bringing debt collectors in when people have had injustices brought against them."
In a separate report, also to be considered tomorrow, Mr Turley says the council faces pressure to make a Deloitte probe public.
Seventeen people are facing charges in the separate property care service department, which is responsible for the repair of publicly owned buildings.
The council said action had been taken against staff over the hospitality claims.
So far four of those investigated have gone back to work, two were dismissed, one retired, one resigned and two are still under investigation.
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