Birmingham City Council may have over-paid one of its major contractors by up to £19 million.
The cash-strapped council said it was talking to the publicly-listed out-sourcing company MITIE over fears it was incorrectly charged for repair works the firm carried out on its buildings, including schools.
MITIE has strongly refuted any suggestion it over-charged the council, saying all its invoices were signed-off by the local authority.
However, following an audit, the city council is investigating whether it ended up paying more for services because of what it believes could be differences in how contractually-agreed work prices were applied by MITIE.
The invoices being scrutinised date back to 2006.
A city council spokesman said an audit had “identified that there may be differences in the method of charging for works compared with the terms of the contract.”
The issues were “often highly technical and not simple and obvious” he said.
“Where agreement cannot be reached, the council will be taking legal advice on how to proceed further. In all instances where differences have been found so far dialogue with the contractors is still continuing and therefore it would be inappropriate to comment further at this stage.
"However, the council is clear that it expects its partners and contractors to comply with the terms of contracts at all times and will not hesitate to take action where this is not happening.”
The council is in the midst of a six-year programme of cuts to shave £600 million from its budget.
A spokesman for MITIE said: “MITIE strongly refutes the libellous allegation that we overcharged Birmingham City Council on contracts carried out between 2006 and the present.
“MITIE was awarded this work through a competitive tender process and we have a full and robust audit trail for all work delivered and costs charged through this contract, all of which was approved by the council.
“We have not seen any detailed information to support these false and damaging claims.
“If the council felt it had a case to claim compensation, we would expect that they take this process through the appropriate channels.”