THE troubled £130m upgrade of Scotland's supreme courts has suffered a fresh setback after failing to find a company willing to take on the construction work.

The Parliament House project on Edinburgh's Royal Mile was snubbed for being too complex, risky and time-consuming.

With plenty of alternative jobs to choose from, building firms had no interest in a complex five-year project in an A-listed building on a cramped site, even though the construction element would be worth about £35m.

Although the Scottish Courts Service has this month decided to re-run the tendering exercise, there are fears the project could again fail to attract any bidders.

"It's the reversal of a few years ago when we could almost dictate terms because firms were so hungry for work," said one source.

The concern is that the longer the project drags on, the more likely it is that builders will turn away and look ahead to the prospect of the 2012 Olympics in London, or the 2014 Commonwealth Games in Glasgow, if the city wins that.

MSPs last night warned the result could also be a spiralling budget. Kenny MacAskill, the SNP justice spokesman, said: "At the present moment the costs are mounting and the delays are rising. This must be driven forward faster."

Derek Brownlee, the Tory finance spokesman, added: "If there's one lesson we should take from Holyrood and other public building projects it's that if you don't manage it tightly from day one, costs can spiral out of control."

The hub of the Scottish justice system since 1632, the supreme courts are squeezed between the Royal Mile and the Cowgate.

The complex includes the Court of Session, the Court of Criminal Appeal, the Advocates Library, Faculty of Advocates and the National Law Library as well as Parliament House itself, home of the Scottish Parliament until 1707. There are 15 courts in a warren of corridors over several floors.

The redevelopment should improve security, courtroom IT, disabled access, heating and ventilation systems, the canteen, and facilities for witnesses. When the project was announced in 1999 it was costed at £105m, but by 2004 the price had risen to £133m.

Worried by delays and cost, the Scottish Courts Service (SCS) froze the scheme in December 2004 for a re- evaluation, which took 16 months to complete.

Last June, the SCS issued a Europe-wide tender for the £35m construction element of the project, but none of the three initial expressions of interest translated into a formal bid.

Earlier this month, SCS abandoned the original tender and began a new one, reducing the potential risk to the contractor to make the job more attractive.

If this is successful it is possible the new courts will be ready by the 2013 target; failure would see deadlines being missed.

A spokesman for SCS said: "We are currently devising a way of contracting that will be more attractive to potential contractors."