The stand-off between Bernard McNam­ara and Dublin City Council over St Michael's Estate in Inchicore hinges on a compensation claim of €20m by the property developer, the Sunday Tribune has learned.

Allowances were made in contract negotiations for a €12m pay-out if design changes were made to the reconstruction of the estate but the builder is claiming a further €8m for recently discovered soil contamination.

The rundown estate near the Royal Hospital in Kilmainham and Heuston Station, whose residents have been waiting 10 years for a promised overhaul, is one of two projects Dublin City Council asked the builder to withdraw from last week.

The compensation payment at the centre of the dispute arises in four parts. An estimated €6.3m of it is payable on 31 apartments potentially lost due to the new regulatory requirement to increase the size of units by 20%.

Another €4.7m is the calculated loss of 2,876sq m of building space on the 14-acre site, at a rate of €1,634 per sq m. The final €1m is allowable under the PPP (public-private partnership) model ordained by the Department of the Environment to make up for interest-rate increases.

The two sides are deadlocked over a further claim of between €6m and €8m for soil damage on the site of phase two of the project, believ­ed to have been caused by the proximity of CIE works. McNam­ara is arguing that he was not allowed access to carry out soil tests on the site until last February, after submitting his bid. His spokesman has confirmed the size of his compensation claim.

Dublin City Council declined to confirm it, however, on the grounds the information is "commercially sensitive to both sides".

A spokesman said, "The law agent is looking at the legal aspects of the file and so we wouldn't comment."

He added: "We're still involved with Bernard McNamara on projects and it would not be at all helpful to go down the road of thrashing it out in public. Nor is it fair to the residents who are scared stiff by what has been in the media."

Planning permission for the first phase on four acres of the 14-acre site was granted in July 2006. The McNamara/Castlethorn tender was given preferred-bid status for the PPP project in August 2007 and the St Michael's regeneration board, headed by former Labour Court chairman Finbarr Flood, signed off on the agreement last January.

The plan was for 720 dwellings, of which 480 would be privately owned; 165 would be priced in the social bracket and 75 would be retained by the local authority. From an original list of 51 issues that needed to be agreed, four have proved intractable, causing the builders to withhold signing on the dotted line.

Meanwhile, a decision was taken to remove the community health centre from the site, thus freeing up another three acres. Sources claim this extra space would compensate for the tight squeeze necessitated by the regulatory increase in the size of residential units.

"If Mr McNamara doesn't want to be at our table we want him to let the land go to the next bidder as soon as possible," said Rita Fagan of St Michael's Estate.

"We had €6m agreed for the social agenda to address inequality, in addition to the budget for construction, and all that is frozen now too. The human story in all this of people's hopes and dreams is not coming out. McNamara is blaming Dublin City Council. Dublin City Council is blaming McNamara.

"They're all into the blame game but they're not the victims. The victims are the people in the middle whose hopes have been shattered for the third time."

A busy partnership

After Dublin City Council announced last month that their agreement with a McNamara/ Castlethorn consortium for five regeneration housing projects had run aground, residents of some of the affected estates called on the government not to give McNamara the contract to build the €200m prison at Thornton Hall.

Next Tuesday, the Dáil will debate a resolution to approve planning permission for the controversial prison, thus circumventing the normal planning procedure. Prisons are exempt by law for security reasons.

McNamara Construction has enjoyed a busy partnership with the state. Since the beginning of the millennium, the company has worked on contracts worth almost €90m from the Office of Public Works. These included the decentralised Department of the Marine offices in Clonakilty (€20m), a garda station and the Department of Social Welfare in Buncrana (€17.5m), Longford courthouse (€6m) and Kilkenny courthouse (€12m).

Among the company's other state jobs were the extension to Leinster House (€35m), the new wing of the National Gallery (€25m), the extension of Dublin airport (€120m) and county council offices in Galway (€10m) and Clare €30m).

Affected residents will stage a "Bloomsday Doomsday" protest tomorrow when they will deliver a letter demanding intervention to environment minister John Gormley.