Dundee City Council dropped the bombshell after several months of detailed negotiations with BAM Construction.

When BAM was named preferred bidder for the flagship project in September the project was expected to cost £45m.

Now the City Council has revealed that the costs have ballooned to £80.1m. It is now drawing up plans to attract extra funding with a target of getting construction underway in March.

Councillor Ken Guild, Dundee City Council leader, said: “Building the V&A Museum of Design Dundee will help attract further investment into Dundee and we expect to see new hotels, retail housing, office and commercial developments coming to the city.

“The council and its partners believe that the time is right to press ahead and deliver for Dundee. We have seen the results of similar projects across Scotland and the world and I want to see those benefits come to our city.”

The Scottish government on Monday pledged to provide an extra £10m, bringing the total contribution to £25m.

An extra £6.5m could be drawn from the city council’s capital programme for 2015-18 without impacting on council services.

Further private fundraising is anticipated to secure an additional £6.6m while a further £4.5m is being sought from the Heritage Lottery Fund.

A crucial meeting on 26 January will see the council’s policy and resources committee asked to authorise the finalisation of a funding strategy to enable construction to proceed.

The committee will also be asked to delegate authority to the city council’s director of city development, in consultation with the chief executive and other council officers, to accept BAM’s fixed-price bid.