Mr Kunath said in a report to the Wanaka Community Board the council had been withholding a defects liability certificate from United Group New Zealand Ltd and its designers, AWT Ltd, for several months while defects were remedied.
The plant received its certificate of completion on November 6 last year and malfunctions occurred in January, causing fears sewage would escape to neighbouring land.
The council's refusal to issue the defects liability certificate meant the contractor could not claim back $225,000 that had been retained by the council.
Nor would the council issue operational payments of $50,000 a month.
Operational payments commenced when the defects liability certificate was issued on October 14.
Mr Kunath signalled a dispute over costs was likely.
The contractor had given notice of its intention to claim a variation for the work they believed to be outside the scope of the contract.
"The format for processing these claims is that the engineer to the contract makes a determination on the validity or otherwise of the claim, in his opinion. If this is not accepted by either party, there is a dispute process in the contract that will be followed... and it could be quite some time before a determination is made. In the meantime, the current engineer to the contract, John Dunn, is being retained to minimise the risk to the council in resolving these issues," Mr Kunath said.
Areas of concern were septage (material brought from septic tanks to the treatment ponds), noise, odour, reliability of plant equipment and systems, operator housing and sludge volumes.
Mr Kunath said significant progress had been made by the project team to resolve the concerns.
Regarding odour, 16 complaints had been received, with the latest on November 2.
However, staff and the project team were satisfied the plan complied with the air-discharge consent.
The Otago Regional Council had checked and found odour did not breached consent terms.
"It [odour] is not something we ourselves have experienced when we go out to the plant... Odour is a fickle thing. Some people are really sensitive to it. I'm personally not," Mr Kunath said.
Another problem was that the plant was producing twice the amount of sludge predicted, which had to be taken to the Queenstown landfill.
Mr Kunath said some farmers had indicated they were keen to receive the organic material and that the ORC was willing to issue resource consent to enable that.
The QLDC would pay for delivery of the material to the farmers. It had to take it to the landfill anyway, Mr Kunath said.
Councillor John S. Wilson said there had been some preliminary discussions about using the sludge to irrigate paddocks of council-owned land at Wanaka Airport. The council could grow lucerne to make money, he suggested.
Mr Kunath said the project team was keen to hold an open day at Project Pure soon so the public could see what was involved in what was the council's largest single capital project to date.
Board chairman Lyal Cocks suggested a date be scheduled for next month.
