Vic’s massive road toll: North East Link hurtling towards mega budget blowout

The state’s most costly road project — which has been with contract delays — is on track for a multi-billion dollar budget blowout, that will see it cost almost $20bn by the time it’s finished.

The total taxpayer-funded blowout on the huge project could be as much as $4bn.

Victoria’s most expensive road project, the North East Link, is hurtling towards a budget blowout that will send its price tag close to $20 billion.

Two contracts for major packages of works — to connect the mega tunnel to the Eastern Freeway via a spaghetti junction of lanes and to connect the link to the M80 in Greensborough — have been delayed due to wrangling over soaring costs.

Deals were supposed to be signed mid-year after preferred bidders were announced in October last year, but insiders say details may not be finalised until early next year and two further packages are also facing delays.

Several industry and public sector figures have told the Herald Sun the total taxpayer-funded blowout on the project, which will run from the Eastern Fwy to the M80 via a 6.5km tunnel, could be as much as $4bn.

A render of the North East Link. Picture: Supplied

The financial drama comes after a report by Auditor-General Andrew Greaves released on Friday revealed $11bn in cost overruns on major projects over the past three years, as well as forecasts of gross debt hitting $212bn within four years.

The North East Link, which was first spruiked as a $10bn toll road in 2016 by former premier Daniel Andrews, was revised to $15.8bn in 2019 when designs were locked in.

It is scheduled to open in 2028 and will save motorists up to 35 minutes, while taking thousands of trucks off local streets.

The project price pressures follow eye-watering overruns on other government projects such as the West Gate Tunnel — $4.1bn over budget — and on the Metro Tunnel, which is $3bn above contracted cost.

Opposition transport infrastructure spokesman David Southwick said Labor’s “continued waste and mismanagement” was also adding to inflationary pressures.

“Under Labor, Victoria is broke and major transport projects are in disarray,” he said.

“The North East Link is an important project for Victoria’s future but now faces further delays and massive extra costs due to Jacinta Allan’s mismanagement.”

Major Road Projects Victoria chief executive Duncan Elliot said negotiations on the next North East Link contracts were ongoing to “get the best possible outcome for Victorians.”

He said the primary road contract, signed for $11.1bn with a consortium including WeBuild, GS Engineering, CPB and China Construction Oceania in 2021, was higher than expected due to major changes to the design, including a tunnel that is 1.9km longer than initially scoped.

“We’ve been clear that the $11.1 billion tunnelling contract was more than what we initially forecast because we added longer tunnels to the project’s scope after listening to the community,” he said.

The project is on track for a multi-billion dollar budget blowout. Picture: Supplied

“We’ve also added a major upgrade of the M80 Ring Road and the first major overhaul of the Eastern Freeway in almost 50 years – these are massive projects in their own right.”

Major tunnelling for the North East Link is expected to begin next year, with Bulleen Rd currently closed for 11 days to prepare, while sections of the Hurstbridge line will be closed from December 1-18 to upgrade power and signalling required for the toll road to be built over the rail line.

Along the Eastern Freeway, overnight lane closures and reduced speed limits are also in place while work zones are set up.

Construction for the toll road has been broken into multiple packages; the two stalled contracts are referred to as secondary package North and secondary package South.

The South package includes a complex array of overpasses and road lanes to allow for multiple entry and exit points from the Eastern Fwy, as well as a major overhaul of the Eastern Fwy to add new technology and express lanes, including a 7km busway.

It was flagged as a $3bn project late last decade.

It’s understood government negotiations with preferred bidders — a group that includes Laing O’Rourke and Symal Infrastructure — have been desperately trying to rein in costs, but one senior industry figure said the deal was still likely to be worth more than $4bn.

The northern section is cheaper, but an initial estimate of up to $1.1bn will be blown out of the water due to industry price pressures and scope changes.

Expressions of interest for two final contracts, which would upgrade sections of the Eastern Fwy from Hoddle Street to Springvale Rd in Donvale, have also been delayed.

One industry figure said it now appeared there would be a “rebrand” the final two packages for Eastern Fwy upgrades as discrete projects, rather than as part of the North East Link, in a bid to reduce the headline figure.

“That would mean they (the works) are not associated directly with the North East Link, it won’t get accounted for in their numbers,” they said.

The Auditor-General report released on Friday showed repayments on gross debt will hit $8bn a year within four years, with tough decisions likely if blowouts on major projects continue.

“If these adverse cost outcomes persist, more unplanned debt will be required unless the announced capital program is curtailed,” he writes.