MULTI-MILLION-POUND plans to expand Edinburgh's flagship conference centre are set to get back on track – months after developers pulled the plug on the long-awaited scheme.

City council leaders have unveiled plans to kick-start the creation of a major underground extension to the 12-year-old complex below a new office block next door to the existing centre.

The council and the company it set up to run the Edinburgh International Conference Centre are to join forces to deliver the development, rather than put it out to tender again.

However the new facility for the centre – which will give it vital extra banqueting, exhibition and function space – will now not be ready until 2012 at the earliest, three years later than envisaged.

Work is not likely to start for another couple of years because the council needs to put together a £28 million funding package.

City council leader Jenny Dawe said: "It is absolutely essential that this additional function space is provided at the EICC.

"There's no doubt Edinburgh is missing out on big events because of restrictions on the space that is available, particularly in relation to the big medical conferences.

"The delay is very unfortunate but there was nothing we could do to prevent the developers pulling out. It does seem better now to carry out the development ourselves, and that is how the EICC was built in the 1990s."

Building work on the EICC extension had originally been envisaged to start in 2004,the plans having been put out to tender two years previously.

However the scheme suffered a major setback after the council admitted it had mishandled the tendering of the contract.

There were also claims of a conflict of interest when it emerged that the city's design champion, Sir Terry Farrell, was part of the winning bid consortium.

By last August, planning permission had been secured and building work on the scheme was supposed to get underway in the spring.

However, at the 11th hour, Cala-AWG walked away from the scheme after the council refused to up an agreed subsidy of £5 million to £15m. The council had told the consortium that such a move would have been a clear breach of procurement laws.

Andrew Holmes, director of city development with the council, said in his report to the authority that the development was crucial.

"The EICC has experienced a small decline in revenue over the last year.

"A significant contributory factor is the lack of exhibition space. Without additional space, this decline is expected to worsen in future years, leading to further losses.

"The provision of the additional function space is critical to the retention of the prominent position of the EICC in the market and is projected to contribute significantly to the economy of Edinburgh and beyond."

One possible funding option is taking out a long-term loan against income expected to be generated by the complex, tapping into a cash pot generated by the sale of land by the council in the financial district over the years.