North East Link cost blows out to $26bn which Premier Jacinta Allan brands “extra investment”.

The North East Link will now cost at least $26bn to build — well ahead of its initial $10bn price tag — in a fresh Big Build overrun explained away as an “extra investment” by Premier Jacinta Allan.

The cost of building the North East Link — already Victoria’s most expensive road project — has blown out again to now weigh in at $26bn.

The project was first spruiked in 2016 to cost just $10bn but was later revised to $15.8bn when designs were locked in.

On Friday, Premier Jacinta Allan — formally the Minister responsible for the project — revealed that its cost had blown out even further.

The announcement was made just hours before Treasurer Tim Pallas is due to hand down his budget update.

Ms Allan said the North East Link cost overrun — which she branded an “extra investment” — would add to the state’s already hefty debt levels.

“The extra investment that comes with this … will add to those debt levels,” she said.

The North East Link is Victoria’s most expensive road project. Picture: Supplied

Jacinta Allan now says the project will cost at least $26bn. Picture: David Crosling

Ms Allan also sought to blame the Covid pandemic and the war in Ukraine as key factors for a “massive escalation” in building and material costs.

“The business case that was put together back in 2017 for this project was put together before the pandemic and before the war in Ukraine,” she said.

“The consequences of those global events have seen additional investment and costs being added across a whole range of things and this project is no different.”

Inflation and external factors, however, only contributed to about one third – $3.1bn – of the $10.3bn blowout, according to the government’s own cost break down.

The main contributor — $6.4bn — to the increased cost has been driven by the government’s decision to expand the project including longer tunnels, improved interchanges and a rail tunnel extension.

Taxpayers will also be slugged an extra $780m to pay for compliance notices from the environment effects statement which sets out noise and air-quality requirements.

“As we added scope to the project, we needed to invest more in the project,” Ms Allan said.

The latest designs for the North East Link upgrade Valda wetlands. Picture: Supplied

Design for the North East Link’s Macorna St Bridge. Picture: Supplied

Opposition transport infrastructure spokesman David Southwick said “things have gone from bad to worse” under Ms Allan’s leadership.

“She is renowned for her cost blowouts, but the scale of this latest blowout should shock all Victorians,” he said.

“This project has blown out by more than $1 billion a month since a cost update was provided in the May budget. The scale of this blowout demonstrates that Labor’s major project budget figures can no longer be believed.

“Every Victorian is paying the price for Jacinta Allan’s gross mismanagement which has sent Victoria broke and means more debt and higher taxes for years to come.”

The North East Link project will connect the M80 Ring Rd with the Eastern Freeway.

Ms Allan also announced the awarding of two key contracts, which had previously been delayed due to wrangling over the soaring costs, on Friday.

The contract for a package of works to upgrade the Eastern Freeway, which includes connections to the North East Link road and a spaghetti junction interchange, will cost $5.7bn.

Industry briefings in late-2018 put the estimate for that section of works, which had its designs altered since then, at $2-3bn.

A contract for the M80 Ring Rd connection, which includes an interchange at the Greensborough Bypass, was signed for $3.8bn.

When first put to the market, the northern section package was estimated at between $600m and $1.1bn.

The project is still expected to open in 2028.