SRL bombshell: Lawyers brought in to explore rejigging rail loop

Jacinta Allan insists the first stage of the train line will be operational by 2035, despite a leading law firm now exploring scenarios around rephasing the project.

Lawyers have begun re-examining contracts connected to the controversial Suburban Rail Loop project, as the Allan government faces increased pressure over the $34.5bn project.

Sources with knowledge of the high level work say a leading law firm – which provided commercial and transaction advice in 2020-21 for the project – is now exploring scenarios around rephasing the project, despite Jacinta Allan on Thursday insisting the first stage of the train line would be operational by 2035.

Sources inside the Suburban Rail Loop Authority said there was now a realisation internally that change was coming and necessary.

At least one major construction firm that had expressed interest in the project is understood to be now considering backing away from it.

Multiple contracts have been signed for the 26km project, including a $3.6bn deal to tunnel from Glen Waverley to Cheltenham.

A second major contract is set to be inked within months, after a preferred bidder was announced for tunnelling from Glen Waverley to Box Hill.

Ms Allan has repeatedly committed to pushing ahead with the project, despite warnings that doing so without further federal funding would seriously jeopardise the state’s AA credit rating.

Lawyers have been engaged to weigh up pausing the controversial project. Picture: Supplied

A further downgrade, to AA-, would increase borrowing costs and make it significantly harder to start paying down the state’s project $188bn debt.

Industry sources connected to the project said they were continuing on a “business as usual” basis despite increasing uncertainty around the project.

Ms Allan yesterday rejected any suggestion the government would back away from the project.

“Our government will absolutely honour our commitment to the Victorian community to deliver the Suburban Rail Loop,” she said.

Government sources said calculating the cost of cancelling or significantly amending the project’s contracts would be a useful way to quell a deepening divide within the Premier’s cabinet room over the project, particularly if it showed it would cost too much to back away from the work.

But a government spokesperson insisted it had not “not sought advice on cancelling or pausing the Suburban Rail Project and we are not changing or altering any contracts in place.”

A housing high rise in Highett is being built on top of the $35bn Suburban Rail Loop. The planning shemozzle threatens to derail the development. Picture: David Caird

A number of senior ministers are opposed to the project at this time because of its cost.

Pollster Kos Samaras, who was the ALP assistant secretary and deputy campaign director from 2005-19, told the Herald Sun last week focus groups in the eastern suburbs, where people would directly benefit from the first stage of the 90km SRL, did not think it was essential.

At the same time the project risked an electoral backlash, with focus groups showing voters in the western suburbs felt abandoned by the state government.

Transport Infrastructure Minister Danny Pearson on Thursday said he was confident that stage one would be delivered by 2035 within the $30 to $34.5 billion price range, despite soaring construction costs blowing out every other major project.

He said the government was banking on the growth of construction costs slowing over the next decade.

“What we’ve seen is construction has increased across the eastern seaboard by 22 per cent since 2021 but when you take that long term horizon, there’s peaks and troughs,” he said.

The price point for stage one of the loop was set before recent price hikes.

Mr Pearson also refused to confirm whether the government had provided Infrastructure Australia with information that has been touted as the key to unlocking much-needed Commonwealth funding for the project.

“We’ve provided 1000 pages worth of documentation today to Infrastructure Australia, both the business case as well as the attached appendices to that documentation,” he said.