What went wrong?

So how did the biggest name in British architecture end up being so publicly sacked from such a high-profile, but relatively small, project? Could Rogers' firm really be to blame? Or was the it, as Rogers claimed at the time, being made a scapegoat for Welsh politicians' inability to manage the project properly?

Since July, a veil of silence has descended on the project as lawyers representing the parties lock horns to resolve the dispute – although a court case has so far been ruled out.

But it appears the problems centre on a fundamental misunderstanding over the terms of the contract: the architect thought the stated construction budget did not include fees and fit-out costs, whereas the client thought it did. A source close to the project says: "Building costs are the real question here, not the overall budget."

RRP was contracted to manage the building costs of the assembly, which were estimated at £13.8m of the total £27m budget. It seems the architect thought that consultants' fees and the fit-out costs of the assembly were not included in this sum. It was therefore assumed that the project was progressing within budget. However, when the costs of the preliminary works packages were reported to the assembly alarm bells started to ring.

The assembly commissioned a report by quantity surveyor Symonds Group, which found that the project was likely to cost upwards of £40m.

Acting on the advice of her financial officers, Hart sacked Rogers, although the assembly's four-strong steering committee is thought to have been divided on this decision.

In a statement issued at the time, the assembly said: "A review of project costs had highlighted significant underestimates in the cost plan prepared by the Richard Rogers Partnership." It added that it intended to proceed with Rogers' design, but to build it "in a way that keeps costs to a minimum and gives as much cost certainty as possible."

Rogers responded: "RRP rejects being made a political scapegoat for a catastrophic failure properly to manage the project." RIBA president Paul Hyett attempted to mediate between the parties, but later attacked the sacking as a "stupid decision".

Last month, the assembly put out an Official Journal tender for a developer or architect to take the project forward either at a fixed price or on a 22-year lease-back.

But the dispute over who is to blame continues. A spokesman for the Welsh assembly admitted that the terms of RRP's contract are the essence of the dispute, but would not go into detail. RRP and its QS, Hanscomb, refuse to comment. Daffyd Elis-Thomas, the assembly's presiding officer, who is part of its project steering team, confirms that there has been confusion over RRP's costing responsibilities. He says: "There certainly was a disagreement over costs, which includes items such as fees and fit-outs."

How can it be anything but a loss to have anyone but the original architect finish the work off?

Paul Hyett, president, RIBA

A source close to the assembly adds: "There was a misunderstanding about what was originally included [in the building costs]." Building spoke to one bidder that had been invited to tender for a future package, who said that he, too, was unclear whether fit-out costs should have been included in its bid.

But Liberal Democrat assembly leader Mike German, who sits on the steering team, defends Hart's decision. He says: "I can't go into the details of the contract, but all the discrepancies lie in the estimates we were given [by RRP]."

It was when the first three of 32 works packages came in over budget earlier this year that the assembly's concerns began. The piling package came in at £495,000, almost three times its original budget. A 2-3 m thick lump of cement had to be cored out of the ground, adding to the cost. Whether RRP could have accounted for what a project member describes as notoriously poor-quality ground at Cardiff Bay is open to debate. But bidders' cost estimates for the reinforced concrete frame were also overbudget, albeit marginally.

RRP claims that it would have made this up on later packages. A spokesperson said at the time: "RRP is in discussions with the tenderers to develop detailed solutions that fall in line with the pre-tender estimate."

Despite the assembly's assurances, it seems likely Rogers' design will be bastardised. Symonds Group's report is believed to suggest that the roof – a lightweight canopy with a plastic membrane held up by slender steel columns – will cost at least three times its initial budget of £500,000, and may have to be re-engineered to keep costs down. The assembly spokesperson says: "There is scope for tweaking [RRP's design]."

Other tensions on the project are emerging. One bidder says the budget was extremely tight. On top of this, there was political pressure to use local firms and materials, which may have been more costly than other suppliers. He says: "We were asked to use a Welsh crane company – there was a certain pressure."

German says that European Union law would not allow the assembly to make the use of Welsh firms and materials compulsory, but admits: "There was an aspiration to help local people."

Some observers doubt whether the project can now be completed satisfactorily. "How can it be anything but a loss to have anyone but the original architect finish the work off?" asks the RIBA's Hyett. "It seems to me appalling that the people of Wales and future generations should be delivered a project of this importance that will inevitably be of compromised quality."

Local architects are also sceptical. One senior designer says: "Everyone in the architecture fraternity is sticking together and backing RRP. If RRP cannot deliver the project at that cost, then nobody else is going to be able to without hacking to pieces the original design."