Melbourne’s Metro Tunnel project cost to increase by almost $1bn

Transport Infrastructure Minister Danny Pearson has revealed an almost $1bn cost blowout for the Metro Tunnel after reaching a deal to change contracts with builders — and he refused to guarantee there won’t be further blowouts.

The Allan government has announced an extra $837m in taxpayer cash will be splurged on the Metro Tunnel project after agreeing a deal to alter contracts with builders.

The government had been in negotiations with tunnel and station builders Cross Yarra Partnerships – which includes John Holland, Lendlease and Bouygues – over who would foot the bill for cost overruns.

Under the deal, builders and taxpayers will share the cost of blowouts, but Transport Infrastructure Minister Danny Pearson on Thursday refused to say how much the construction companies would pay.

He also refused to guarantee the trouble-plagued project wouldn’t be hit by further blowouts. The extra $837m to prop it up brings the total taxpayer-funded portion of the project to $13.48bn, well above the initial $10.9bn forecast.

The Allan government has been in ongoing negotiations with tunnel and station builders Cross Yarra Partnerships. Picture: David Crosling

Under the deal builders and taxpayers will share the cost of blowouts, with taxpayers set to be slugged about $800m. Picture: Andrew Henshaw

The total cost of the 9km Metro Tunnel will hurtle past $15.5bn.

“Since 2017, nobody could have predicted a one-in-100 year global pandemic.

“Nobody could have predicted conflict in Gaza and in Ukraine, and nobody could have predicted interest rate spikes,” Mr Pearson said.

“These are just realities of what we’ve had to deal with. What we’ve seen across the world is that there’s been that pressure on budgets.”

Transport Infrastructure minister Danny Pearson refuses to guarantee the trouble-plagued project won’t be hit by further blowouts. Picture: Nicki Connolly

The cost of the Metro Tunnel is set to hurtle past $15.5bn. Picture: Vic Gov

Mr Pearson said the project would open in 2025, but refused to state which month passengers would start using it.

“I cannot guarantee that there won’t be another pandemic next year. I can’t guarantee those things,” he said. “Here and now we’ve got an investment into this project which will ensure that the project has the resources it needs to get on with this project.”

Opposition transport infrastructure minister David Southwick said once again Victorian taxpayers were paying the price for the Labor government’s financial mismanagement. “To blame everybody else but themselves for this blowout is simply irresponsible,” he said. “Nobody trusts the Allan Labor government to be able to manage projects on time or on budget.”

Mr Southwick said the government’s decision to time the announcement of the blowout, ahead of the grand final eve public holiday, was “absolutely appalling”.

Mr Southwick said a decade of financial mismanagement under Labor had led to major projects blowing out by more than $40bn, contributing to forecast record state debt of $187.8bn by 2027-28.

“Labor’s major project cost blowout mean more debt, higher taxes and less money for urgent priorities across health, housing, roads maintenance, education and community safety services,” he said.

It is the second time contracts have been altered on the tunnel project.

Senior government sources said the government’s expenditure review committee this week agreed to up to $1bn being spent as part of the deal.

Further compensation is anticipated for hospitals affected by electromagnetic interference, which has yet to be resolved. 

Originally published as Melbourne’s Metro Tunnel project cost to increase by almost $1bn