Bipartisan support for a major redevelopment of the Australian War Memorial has frayed, with Labor MPs on a key parliamentary committee calling for cost savings and for an award-winning building to be spared from demolition.

Parliament’s public works committee signed off on the $500 million, nine-year redevelopment of the historic Canberra memorial on Monday, but deputy chairman Tony Zappia and Bean MP David Smith issued a dissenting report calling for changes to the plan.