A disputed, delayed and over-budget Poole school extension now looks to be heading for a further massive overspend.

Old Town First School and Nursery’s £3.5m extension with children’s centre in Green Road was originally planned for 2006, with a budget of £1.8m.

Now the Borough of Poole and the contractor are said to be in dispute over a further sum of hundreds of thousands of pounds for delays and work on the beleaguered project – which the Echo understands may never have been subject to a written contract.

Borough of Poole has resolved “robustly to challenge, based on legal advice, the financial claims made by the contractor”.

A public minute of a confidential item discussed by councillors at a cabinet meeting goes on to say: “This action may result in arbitration or even litigation.”

However contractor Raymond Brown Construction of Ringwood has denied there is a problem between the company and the council.

“There is on-going dialogue and we are happy with the way things are progressing,” said managing director Kelvin White. “There is no legal action anticipated.”

The Echo believes there were merely Letters of Intent between the council and contractor and when asked about a contract the council would only say there is a “contractual position”.

Jim Bright, strategic director, Borough of Poole said: “When we undertook the procurement process, there was an urgency to carry out the work to ensure that we could provide the required school places in the town centre for September 2008.

“There is currently a difference of opinion between the council and the contractor about the amount to be paid for the work undertaken, and we are looking to resolve this dispute.”

Over-budget and over-time, Old Town First School’s extension to double the size of the school was officially opened in a blaze of glory by the Earl of Wessex in early December.

But behind the smiles on the day there lies a long history of problems after costs spiralled and the original design was abandoned, deadlines came and went and children went back to school in September with work still being carried out.

Confidential reports have been discussed in secret by councillors, and Liberal Democrats tried unsuccessfully to get the matter before an open council meeting.