West Gate Tunnel in chaos as legal dispute causes huge cost blowout

The state government says it will probe all options to save the West Gate Tunnel but pushed back against a call for taxpayers to help pay a $3.3b cost blowout.

Taxpayers are facing a mammoth bill to revive the disastrous West Gate Tunnel project.

Transurban on Monday reported it would cost at least $3.3bn to resolve the protracted dispute that has plagued the project and delayed digging for two years.

Builders John Holland and CPB have now estimated cost overruns at $5.2bn.

Mediation over the feud, which now involves the state government, is focused on who pays the massive bill for the blowouts.

With all parties digging in, failure to find a solution could lead to more delays amid court battles and further cost ­increases.

Five new major hospitals or about 200 new schools could be built for $5bn.

Originally costed by the government at $5.5bn, the project was re-budgeted at $6.7bn before it began.

Transurban told investors on Monday there was now “no reliable time frame” for completion of the project and has called on all parties to stump up more cash.

Giant tunnel-boring machines are sitting idle in the ground at Yarraville because there is no site in Victoria that can currently handle the soil they will dig up.

The dirt is contaminated with PFAS and asbestos that must be handled at a purpose-built facility.

The trouble-plagued West Gate Tunnel project in Yarraville. Picture: Aaron Francis

Digging was expected to begin in 2019 and delays have led to massive cost overruns, staff lay-offs and a threat from the builders that they would tear up the contract.

Transurban was scheduled to finish the project in 2022 but has pushed that completion date back to 2023, then 2024, as it waits for a soil site to be prepared.

On Monday, chief executive Scott Charlton costed the delays and project complications at $3.3bn.

“We had an independent third party analyse the cost overruns and that’s the number they’ve come up with, the DandC contractor has made more claims at a higher amount,” he said.

“They are obviously trying to put their position in the strongest light.”

Transurban says the only way to settle the dispute over blowouts is for a “meaningful financial contribution” which includes money from the state.

It believes it has a strong legal case because rules that have delayed digging up toxic soil were altered after it took on the project.

Mr Charlton said changes came after the contract was signed. “It was a reclassification of PFAS soil and how it should be treated and disposed of,” he said. 

He maintained the project, to take 9000 trucks off inner west streets and save 20 minutes’ travel time for drivers, would be a huge benefit. 

“It will be one of those projects when it is completed that in 10 years’ time – like CityLink – people will go ‘I don’t know how the city functioned without it’, he said.

Jacinta Allan tours the West Gate Tunnel construction site in Yarraville. Picture: AAP

“We think the project certainly can be built, should be built, and the parties have the ability to complete the project, whether it’s through commercial mediation or through the legal pathways. Now that we’ve removed the spoil site issue there’s no reason why the project can’t be completed.”

Sites at Bulla, Maddingley and Ravenhall all have environmental and planning ­approval to take the soil.

The company has provided cash for Hi-Quality to build a site at Bulla to handle the soil and this is expected to be completed later this year.

Motorists are already forking out cash to pay for the project, with CityLink tolls increased and Transurban’s deed over the existing tollway extended.

Premier Daniel Andrews has previously suggested this deed could be reviewed as the dispute has raged on.

Transport Infrastructure Minister Jacinta Allan said the government would hold the company to its contract and look at what “legislative” options were available. But she did not rule out having to pay some of the costs as part of the mediation process.

Ms Allan said the tolling giant would be bleeding cash until its fight with its builders ended.

“Transurban are already losing millions of dollars in revenue for every week, for every month, that this project is not completed,” she said.

The minister said the aim was for major tunnelling to start early next year once the soil disposal site was operational – something likely to take about six months.

The consortium tasked with delivering the West Gate Tunnel has tried to tear up the contract and rule it invalid because of the soil contamination issue. Picture: Alex Coppel

But Ms Allan said they wanted to resolve the issue without going to court.

“We’ve seen other examples in other states where heading down a pathway to court doesn’t get those projects delivered,” she said.

“Transurban brought this project to government, it selected the builders, it identified the presence of PFAS and then signed a contract to deliver the project.”

Opposition Transport Infrastructure spokesman David Davis said the West Gate Tunnel was a “special deal”.

It was “very different from what was put to people in 2014 and very different in any profile from what the community had expected prior to the 2014 election”, he said.

“When you drive on an existing CityLink road you will pay an extra toll, an increasing toll, to pay for this project where the tunnelling hasn’t commenced.

“You may never use the new road, whenever it’s built, whenever its finished and whatever decade it’s in if it is finished. It’s time to pause these tolls.”

In another surprise, Transurban has expressed an interest in operating the tolls on the North East Link project despite the state government having already committed to collecting the revenue to pay down the $15.8bn road itself.

Originally published as West Gate Tunnel in chaos as legal dispute causes huge cost blowout