Track-laying work due to begin at two sites in the capital at the beginning of last month has been put on hold pending negotiations between council-owned company Transport Initiatives Edinburgh (Tie) and BSC, the consortium comprising Bilfinger, Siemens and CAF, carrying out the work. The work is said to be “at least a month” from resuming.

Richard Jeffrey, Tie’s chief executive, conceded that talks with the consortium over additional costs and work not included in the original contract had yet to make any progress.

Mr Jeffrey also revealed formal dispute proceedings initiated against the consortium last month had since escalated and that utility diversion works had suffered further delays.

Preparatory work to divert underground pipes, cables and sewers in the city centre, already running nearly a year behind schedule, was last month said to be due to be completed by November. But the work will only be “largely complete” by then with a section of work at the top of Broughton Street proving more difficult than anticipated, Mr Jeffrey said. Both Tie and the consortium have raised fresh issues in the dispute procedure and negotiations are going “more slowly rather than more quickly,” he added.

Informal negotiations aimed at restarting on-street works are continuing but could also yet escalate to a formal dispute.

Mr Jeffrey said: “While it’s possible to resolve round the table, it would be premature to push it into the formal dispute resolution process.

“But ultimately that option exists for both parties if either party believes we have got to the point where we can’t move forward.”.

In August, after months of wrangling with the consortium, Tie announced that it would be “very difficult” to construct line 1a, from Leith to Edinburgh Airport via the city centre, on budget. A separate line, 1b, which would have seen trams running between Haymarket and Granton, was shelved in April.

The same report to the council revealed Tie had escalated its dispute with the consortium to a formal level after having failed to reach agreement over the summer on how to estimate the cost of delays and design changes to the original contract.

Many of the difficulties centre on the knock-on impact of preparatory work to shift underground cables and pipes by a separate firm, Carillion, which the consortium claimed added to its costs.

“I understand people’s frustration that I can’t say ‘this will be the price’. But it would be foolish of me to do that whilst we’re still in these discussions with the contractors.

“Because any sum I come up with then becomes the starting point for any negotiations,” Mr

Jeffrey said.

Most serious, however, is the stand-off that has emerged over the next major section of on-street track-laying work, now “on hold” until a deal can be thrashed out between Tie and the consortium.

Track-laying due to start at the end of last month at Leith Walk and Shandwick Place will not start for at least a month from the point of reaching a deal, though there appears to be little sign of that happening, with negotiations described merely as “ongoing”.

On the off-street section, there are more encouraging signs, with work ongoing or due to commence at six sites, including Gogar Burn and Edinburgh bridges, with steelwork getting under way on the long delayed depot at Gogar.

Mr Jeffrey insists disputed elements of the project represent a “small chunk” of its overall scope. He said: “The reality is that a very large chunk of this project we have a high degree of certainty of.

“I still believe that this project is deliverable within a sensible timescale. By that I mean 2012 and I still believe it’s deliverable within the realms of what’s normal for a project of this scale and complexity and nature.”

Once the trams are up and running, history may prove him correct. But there seems a long way to go before the pain involved can be judged worth the result.

Shirley-Anne Somerville, the SNP Lothians MSP, said comments showed that Tie was further behind in resolving the dispute than had been admitted. She said: “It’s now very hard to see how they’re going to fulfil their promise of giving the council greater clarity over the cost and timescale of the project by January.”