Melbourne’s Metro Tunnel cost to blow out to $15.5bn

The cost of Melbourne’s Metro Tunnel is set to hurtle past $15.5bn under a deal for builders and taxpayers to share the pain of fresh blowouts — and sources say the project’s final price tag could rise even further.

The cost of the 9km Metro Tunnel is set to hurtle past $15.5bn – more than $1.72m per metre – under a deal for builders and taxpayers to share the pain of fresh blowouts.

Negotiations to alter the underground rail line’s contract for a second time have included an offer from the Allan government for taxpayers to fork out $745m to get the project finished, on the condition that builders stump up the same amount.

The combined payments would mean the tunnel, which is already $3bn over its initial $11bn budget, would cost at least $15.5bn.

But senior sources familiar with the project say its final price tag could still rise, due to ongoing cost disputes and the fact current legal claims relate to the tunnels and station package and do not include train testing issues.

The cost of the 9km Metro Tunnel is set to hurtle past $15.5bn.

But senior sources familiar with the project say its final price tag may still rise. Picture: Victorian Government

Premier Jacinta Allan concedes there will be extra pain for taxpayers due to the pandemic hitting global supply chains. Picture: David Crosling

The deal on contract variations, which is close to being inked, will include extra taxpayer-funded incentives for builders if passengers board trains in 2025 as promised.

The 9km underground Metro Tunnel between South Yarra and Kensington will reshape the city’s public transport once opened, allowing for more services across the network, plus five new stations at the Shrine, Town Hall, State Library, Parkville, and Arden.

In response to leaked documents this week that showed some extra payments put on the negotiating table in June, Premier Jacinta Allan conceded there would be extra pain for taxpayers due to the pandemic hitting global supply chains, and workforce shortages.

“It’s a challenge that’s being experienced around the country and around the world. Just last week, we saw the Sydney Metro project open up … massively over budget,” she said.

“We are in sensitive commercial discussions with our contract partners, and we are focused through those discussions and negotiations on getting the best value for Victorians.”

The 9km underground Metro Tunnel between South Yarra and Kensington will reshape the city’s public transport. Picture: David Crosling

Opposition Leader John Pesutto has slammed the government’s secrecy over the project. Picture: David Geraghty

The section of the Sydney Metro project that opened last week was part of a 30km line through the CBD and city’s southwest, budgeted at $12.5bn and now set to cost $21bn.

Opposition Leader John Pesutto slammed the government’s secrecy over the project, saying the premier should come clean on “the true cost of the Metro Tunnel”.

The cost overrun claims submitted by tunnel and station builders Cross Yarra Partnerships – which includes John Holland, Lendlease and Bouygues – early this year are their second in four years.

In late 2020, CYP and the state signed a deal to split $2.74bn in blowouts.

Victorian Auditor-General Andrew Greaves later explained that those contract amendments set a September 2024 finish date for builders and “required the state to pay up to an extra $1.37bn towards the construction phase costs on condition that CYP meets contractual milestones”.

A government spokesman declined to say whether any penalties were enforced due to milestones missed, but said the project would transform the way people travel on public transport.

A government spokesman declined to say whether any penalties were enforced due to milestones missed. Picture: Victorian Government

The government insists passengers will board trains next year. Picture: David Geraghty

“The project is currently at its most complex phase – as we continue testing advanced technology that has never been used on the Victorian rail network,” he said.

As revealed by the Herald Sun early this year, the two central CBD stations continue to cause problems for builders due to their depth, location, and the supply of labour and materials.

Problems with electromagnetic interference on sensitive hospital equipment in the Parkville medical precinct and University of Melbourne are also causing ongoing headaches, and are yet to be fully resolved.

This could add further to the project’s budget.

The current contract variations would set a fresh finish date for the project, and the government insists passengers will board trains next year.