Bath's council have told Mowlem to leave the centre
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The Bath Spa contractor Mowlem has had its contract cancelled by Bath and North East Somerset Council (BANES).
The two have been locked in a bitter dispute over the project, which is nearly three years behind schedule after a series of technical problems.
Bath Council has instructed the contractor the leave the site and has appointed a new project manager - Capita Symonds.
Mowlem says the council has exposed itself to a "substantial claim".
Capita Symonds is now due to carry out an audit on the physical state of the building.
The original project was due to cost £13m, but that has rocketed to £35m.
The project has been blighted with problems, including peeling paint in the pools and leaking floors.
BANES says the "final straw" came this week. It says Mowlem refused to replace the floor in the steam room.
The council statement adds that the architect Grimshaw issued instructions for the floor - which had been pulled up to investigate a leaking problem - to be re-laid.
Workers from Mowlem packed up at the Spa on Friday
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The statement continues: "The architect states the problem is poor workmanship, the builder says it is poor design. Stalemate. Again.
"The council believes that this catalogue of errors, omissions and events represents a breach of the contract by Mowlem."
Councillor Nicole O'Flaherty, whose council responsibility includes the spa, said: "This certainly wasn't an easy decision. The time had clearly come when the council needed to intervene and take positive action.
"I see this as the end of a nightmare and the start of a new beginning. The past two years have been a very difficult chapter."
Mowlem said in a statement: "Our preliminary legal advice is that the council's action itself constitutes a repudiation of the contract. We will decide shortly whether we will accept the council's repudiation."
The company said the council's action was "incomprehensible".
In several strongly worded statements from the firm, they said they were considering legal action.
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We are keeping our options open and will decide on a course of action over the next few days
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"This is a bizarre thing to have done in the circumstances and exposes the council, and thereby the taxpayers, to a substantial claim.
"We remain certain of our position and confident in the knowledge that we will ultimately prevail in the series of legal arguments that BANES has now rendered inevitable.
"We are keeping our options open and will decide on a course of action over the next few days."
They add: "We believe that their latest ill-conceived decision.. represents a clear breach of contract on the Council's part which can only lead to further delay and will ultimately cost the people of Bath a fortune in claims and legal costs."
Architect Grimshaw released a short statement which read: "This a significant development in the course of the project and we are confident that it will help to progress the completion of this important building in accordance with the design."