Edinburgh City Council's transport convener has told the firm their contract will be terminated if a solution is not found, however terminating the contract could lead to a legal battle and further delays to the project.
The council is furious at the overspend and delays which have resulted in the project being at least seven months behind schedule.
Gordon Mackenzie, Edinburgh City Council's Transport Convener, said: "This city will not be held to ransom by this contractor any longer. There needs to be a move to settle the project's contractual dispute within the month.
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"There would be worse things for the project than for this contract to be terminated.The management team at Edinburgh Trams have done what they can to find a reasonable way through this dispute, but now it's time for action.
"Week after week I'm told of excessive claims, month after month progress falls behind schedule, time after time they've been told a cost plus deal is not on. The people of Edinburgh deserve better."
David Mackay, Chairman of Edinburgh Trams, said: "I totally understand Councillor Mackenzie's position.We have been hugely frustrated by the lack of progress in settling this dispute and the subsequent lack of progress on the ground."
The Scottish Government is refusing to increase it's £500m contribution to the project.
(GK/BMcC)
