Concern grows as Melbourne’s Metro Tunnel faces major delays and cost blowouts

Pressure is piling up on Melbourne’s Metro Tunnel project as it is revealed delays and cost increases has led to cut backs to some of the cutting-edge upgrade.

Melbourne’s Metro Tunnel is at risk of further blowouts as delays and cost increases continue to put pressure on the project, the Victorian Auditor-General’s Office has warned.

It has also been revealed that the government has wound back parts of the tunnel’s cutting-edge signalling upgrade, which will now be built as part of other projects.

VAGO on Wednesday released its audit of the Metro Tunnel’s second phase, which relates to the main tunnel and underground stations.

It found this section of the tunnel was forecast to be $364m more than budgeted, although much of this had already been covered by contract negotiations which raised the project’s total cost by $2.7 billion.

It is now forecast to be $12.58bn, which includes extra funds provided because of disruptions related to Covid restrictions.

The Metro Tunnel is forecast to cost $12.58bn.

But VAGO warned the project had nearly used up all of its contingency funds, which existed to cover unexpected costs.

“Some work has been descoped from the project, almost all risk contingency funds have been used or allocated, and many potential project risks remain,” the report said.

“To stay within the project’s approved budget of $12.58 billion and meet the September 2024 internal target opening date, Rail Projects Victoria needs to diligently manage the project’s emerging risks.”

RPV, the government agency who oversee the project, anticipate they will need more of this risk funding over the next two financial years but is yet to request it.

“According to RPV’s latest final cost forecast it has spent or allocated almost all (98 per cent) of its risk contingency funds ($727 million of $740 million) due to a sequence of unplanned costs and unexpected risk events since the project started,” VAGO said.

“In light of the complex and risky works to come, the absence of any further risk contingency funds is a significant budget risk for RPV.”

The builders working on the main part of the project also estimate Covid restrictions led to 52 days of delay and are now trying to catch this up with a new schedule.

Metro Tunnel Tunnel Boring Machine.

Transport Infrastructure Minister Jacinta Allan said the government akcnolwedged there were cost pressures on major projects.

She said there was “heat” in the market across the east coast.

“We’re not insulated from that here in Victoria,” Ms Allan said.

“But what we work through as a as a government is we make a choice to work through these challenges that are presented andnot walk away from projects.”

The Auditor-General’s office revealed part of the major works had been moved on to other projects and money reallocated to other areas.

High-capacity signalling works, which allows modern trains to be used in the tunnel to run very close together, have been reduced by a third.

This 27km worth of upgrades will instead be built as part of other upcoming projects to prevent doubling up on the complex work involved.

This hi-tech upgrade was originally expected to run from Watergardens to Dandenong but will now run from West Footscrayto Westall.

Melbourne’s Airport Rail will run with high capacity signalling, meaning this project will fill the gaps between West Footscray out to Ginifer when it is built.

The government will also extend the high capacity network out to Dandenong as part of other planned upgrades on the line.

This change meant $91 million will be spent on other parts of the project, although RPV estimates the actual costs of these works could actually be between $300m and $500m.

VAGO has recommended the government reassess the current emergency funds available for the project and reducing delays in the current schedule.

It has also called for the state to formalise its agreement with health centres in Parkville about how to stop trains disrupting sensitive EMI machines with electromagnetic interference.