Dublin City Council expects an extra charge of some €100 million to be added to the cost of the Dublin Port Tunnel by the contractor.
The contractor has also warned the council about significant delays which may emerge with the project.
The council yesterday confirmed that Nishimatsu Mowlem Irishenco had formally notified it of its wish to "preserve its contractual position to seek recompense" for additional costs and delays in the port tunnel contract.
A figure of "not hundreds but about 100 million would probably be sought", deputy city engineer Mr Tim Brick said yesterday.
The contract was initially signed for €448 million, a figure which covered construction.
To date the tunnel has cost €680 million for land and other costs.
The new charge would bring this to €780 million. In addition, the Minister for Transport, Mr Brennan, has asked for a specific price for raising the clearance height of the tunnel, variously priced at €20 million to €120 million.
The Minister said last week that it was still not too late to increase the clearance levels to allow large lorries and car transporters to use the tunnel. With this modification the total cost could rise to almost €900 million.
The figures also included a payment of €32.5 million plus costs to Dublin Port Company for land required by the port tunnel.
The notification from the contractor, an Irish/British/Japanese consortium, also warns of additional delays with the project, the completion date for which has already changed from early 2005 to the end of July 2005.
Dublin City Council has launched an investigation into the disappearance of monthly management reports on the construction of the tunnel. These contained details of the potential claims and the council's response.
Mr Brick said the council was prepared to defend strenuously all claims but said: "We expect blue bloody murder before it is over."
However, he maintained that such negotiations were normal in contracts of this size and described the notice of intent as the "opening gambit" which the contractor must perform if it wanted additional costs.
He said he was not suggesting the contractor was "blackguarding or acting the maggot" but nor was he saying that the council was going to accept such claims.
"About 1,001" claims would usually be made but no amount had been agreed and there is "no reason to imagine that we are going to pay any sum".
The additional costs incurred by the contractor are understood to relate to restrictions on the number of hours the tunnelling machine could work.
The council restricted these hours, with a few exceptions, to appease residents in the Marino and Fairview areas, who had complained of vibration and damage to their homes.
The council has undertaken to put right any damage which occurs to the homes in the area, which is mainly superficial.
It has also paid local residents up to €6,126 for ownership of the land below their homes through which the tunnel passes.
However, a number of community groups have claimed the money is not enough and local Independent TD Mr Finian McGrath said it was a disgrace that 140 households had now suffered damage.
When complete in 2005 the Dublin Port Tunnel is expected to remove about 9,000 lorries from the city centre quays each weekday, improving safety levels and the urban environment.
