Fife Council is suing the firm behind the Dunfermline flood prevention scheme for nearly £10 million.
The local authority said it wanted residents to know it was taking “significant action” against project designers Atkins Ltd due to the huge over-run in timescale and increase in costs.
Construction started in May 2007 and was estimated to take around two years to complete. But the project is still not finished.
So far most of it has been carried out apart from the works at Rex Park and Forth Street, which are now expected to extend until May 2014.
The council has raised an action in the Court of Session for £9.8m against Atkins Ltd and is applying for liquidated damages of more than £4,000 per day from contractor Byzak Ltd for each day they go over the agreed contract deadline of November 4.
Depute council leader David Ross said: “I share the frustration of Dunfermline residents over the length of time this project is taking.”
Earlier this year a series of drop-in sessions were held in Dunfermline to allow residents to discuss the beleaguered flood prevention scheme with council officers and staff responsible for the project.
It followed a public meeting in the Dell Farquharson Centre, where council head of transport, Dr Bob McLellan, was grilled by the public.
During the meeting in February, Dr McLellan apologised for the £24.6m scheme, admitting it had failed on budget and timescale.
Work to bolster Dunfermline’s flood defences should have been completed in 2009. It is aimed at protecting 175 properties from the effects of a one-in-200 years storm.
The Scottish Government agreed to pay 80% of the original cost, but the Fife taxpayer will have to cover any extra, depending on how much the council can claw back.
A spokesman for Atkins said: “We are unable to discuss any detail at this stage in relation to this action.”