The City of Winnipeg says former Winnipeg CAO Phil Sheegl signed the controversial contract to build the Downtown police headquarters.

"I don't think that the contract was in the best interests of Winnipeggers or Winnipeg taxpayer." said Mayor Brian Bowman.

Earlier this week, Bowman announced the city is unable to sue Caspian Construction over deficiencies with the building because of a stipulation in the construction contract that prevents the city from filing a lawsuit.

READ MORE: Lawsuit can't be filed over downtown police headquarters: Bowman

Under the contract, arbitration is the only option. The project has been plagued with cost overruns worth around $85 million.

The city confirmed Friday former CAO Phil Sheegl's signature is on the construction contract. The RCMP alleges in court documents Sheegl received a $200,000 payment from Caspian.

Sheegl's lawyer has said the money had nothing to do with the police station; instead, it was payment for a land sale in Arizona. No charges have been filed and none of the allegations have been tested in court.

Also revealed Friday, the outside law firm used to draw up the contract was paid $49,000. And city councillor Brian Mayes believes the deficiencies could be worth more than $10 million.

"That is my memory of it, yeah," said Mayes.

And there was a clarification about one of the other firms involved with the project. The city now says a separate contract with engineering design consultants AAR was a standard city deal which does allow for a lawsuit. The city says it chose to go to arbitration instead. But now it appears a lawsuit is imminent, because Mayor Bowman says AAR turned down the arbitration request.

"The city is well within its rights to file a statement of claim and you should expect to see one," said Bowman.

CTV News was unable to reach Phil Sheegl or a representative from AAR for comment.

Councillors are set to be briefed more about the file in a closed door meeting next week. They will have to sign a non-disclosure agreement to attend the meeting. CAO Doug McNeil says the city has to be careful.

“There will be information that we are not able to release, simply because we don't want to risk jeopardizing the legal process. We want to see resolve on this matter just as much as everyone else,” said McNeil.