Carillion issued the writ after the council cancelled a £1.2bn deal to hand over its property assets to the private company in a 20year management deal.
 
Carillion was named as preferred bidder for the authority's Asset Management Project, which aimed to bring in a private firm to run the council's key buildings including offices, libraries, theatres, swimming pools and sports centres.

However following political controversy over both the tender process itself and the way in which the council had prepared the groundwork for the deal, the scheme was abandoned early this year. 

Suzan Hemingway, Bradford council's assistant director Corporate Services (City Solicitor), said: "Carillion continues to pursue its claim for compensation from the council which the council continues to defend. Both parties are considering arbitration/mediation as an option to resolve these issues."

In 2006 a report issued by district auditor Ivan McConnell heavily criticised Bradford council officers for the management of the project.

The auditor found a raft of problems including internal resources being stretched beyond their capacity and "no effective control over the records database" which "resulted in an inaccessible and probably incomplete record of the project activities and decisions".

If Carillion fails in its legal action it is expected to issue further proceedings to recover the £2m it claims it spent preparing the bid.