Fresh $1.5bn cost blow out on West Gate Tunnel set to take toll road’s final price to $12bn

New cost blowouts on the West Gate Tunnel are set to top $1.5bn, taking the problem-plagued toll road’s final price to almost twice its original $6.3bn.

The West Gate Tunnel is set to cost almost double its initial $6.3bn budget, with Transurban officially informing the Allan government of fresh blowouts its builders expect to top $1.5bn.

The Herald Sun can reveal the tolling giant has notified the government of a major funding shortfall as they race to finish the problem-plagued project, in a letter expected to spark another ugly dispute over who foots the bill.

But the looming financial and legal battle won’t halt progress on the mega toll road, which is contracted to be built by November and insiders say should still open to motorists this year – even if some minor features aren’t finished.

The West Gate Tunnel Project is set to cost almost double its initial $6.3bn budget. Picture: David Caird

Builders CPB and John Holland have told Transurban they have haemorrhaged money on the tunnel, which was bogged down early by a dispute over toxic soil and has recently been hit hard by material and labour shortages and costs.

The project is already almost $4bn over its $6.3bn budget, and running three years late.

In March, the Herald Sun revealed the builders were again running short on cash, with at least an extra $1bn required to get the job done.

Any formal cost claim would likely take the road’s total price tag towards $12bn – far in excess of the benefits modelled in a business case.

As it prepares for another bitter dispute with its builders, Transurban has written to Transport Infrastructure Minister Gabrielle Williams to warn her of likely legal action, which would embroil the state.

Under the complicated web of West Gate Tunnel contracts, cost claims made by the builder against Transurban can trigger a “linked claim” against the state.

It is understood the government is planning to dig in against more taxpayer handouts, given Victoria already forked out $1.9bn in late 2021 to settle issues linked to toxic soil disposal.

At that time, Transurban contributed about $2.2bn, while CPB and John Holland were supposed to “forego revenue and profit margins on the project” – but this was never quantified.

Transurban has written to Transport Infrastructure Minister Gabrielle Williams to warn her of likely legal action. Picture: David Caird

Senior figures aware of the fresh dispute have described it as an “ambit” set of claims from builders, meaning they are yet to be tested and challenged.

Some say the bill for overruns could actually run into the billions of dollars, but passing it on to Transurban or taxpayers in full was unlikely.

A spokeswoman for Transurban said all project partners were working on getting the road finished.

“Major infrastructure projects are naturally complex and the ongoing collaboration between the project parties has meant we continue achieving construction milestones that bring West Gate Tunnel closer to opening for Melbourne’s west,” she said.

A government spokesman said the project was “on track to open later this year – transforming the way people move across Melbourne’s west and taking 9,000 trucks off local roads”.

“The project is on track to be delivered in line with the settlement agreed with Transurban and its builders in 2021, with no further cost increases to taxpayers,” he said.

Costs on site are already being cut where possible, with teams “demobilising” in some areas and redundancies dished out where work can wrap up early.

Asked about the cost blowout on Wednesday, Industry Minister Colin Brooks said it was his “expectation” that no additional taxpayer money would be put into the project.

“I haven’t heard anything from the consortium about asking for further money,” he said.

“There’s no more taxpayers’ money for this project.”

He added that he was confident the toll-road was “on track” to open later this year, but also admitted he had not seen legal letters from the consortium and was not “briefed” on whether the government was seeking legal clarification.

Project bosses believe the road could still open this year. Picture: Supplied

While there are delays on individual sites, it’s understood project bosses believe the road could still open this year even if some superficial elements of the project aren’t finished.

Transurban put forward the project in 2015 to the Andrews government at a cost of $5.5bn, before the route was refined and a contract struck for $6.3bn.

This year the tolling giant, which is set to make tens of billions of dollars from a combination of the new road and an extension of its CityLink tolling contract, slashed 300 jobs in a major cost cutting exercise.

Once the project is open, the West Gate Freeway will be connected to CityLink via tunnels and elevated roads, providing a tolled alternative to the West Gate Bridge.

There will also be a new truck access point to the Port of Melbourne, taking thousands of trucks off local roads in the inner west.

Critics of the project say it will not solve traffic woes long-term, and that its costs now outweigh expected benefits.

The construction of the toll road has been plagued by controversy, and in 2020 the builders tried to walk away from their contract due to delays in the disposal of soil contaminated with chemicals including PFAS.

A lengthy legal dispute over about $4bn was settled in 2021, when a contract alteration included a new completion date of November 17 this year.

Originally published as Fresh $1.5bn cost blow out on West Gate Tunnel set to take toll road’s final price to $12bn