Victoria’s financial watchdog reveals budget blow out for $11b Metro Tunnel

Despite being in just the early stages of construction, the Andrews Government’s $11 billion Metro Tunnel has already been hit with a massive budget blow out. Here’s why.

The Andrews Government’s $11 billion Metro Tunnel is almost $100 million over budget in just the early stages of construction, the state auditor says.

A report today revealed that the early works package had racked up $95.3 million in cost overruns, due to unexpected redesigns of the twin nine kilometre tunnels and it five underground stations.

Building costs for the early works package blew out more than $150 million, adding an extra 30 per cent to construction budget.

But this blow out was somewhat offset by saving in land acquisitions, which at $728.1 million was about $53 million under budget.

Premier Daniel Andrews visits the Metro Tunnel site in North Melbourne on Wednesday. Picture: David Crosling

This stage of construction was to cost $1.25 billion but will now cost $1.35 billion, the state auditor general has found.

A Victorian Auditor General report said the government’s decision to move up the completion date from 2026 to 2025 had led to unexpected costs and “delays triggered by redesigns.”

He also said the increase in construction costs was due to “risks that have materialised for the state of Victoria, as the owner of the project.”

Auditor General Andrew Greaves found issues at the State Library station precinct had caused most of the cost blowouts, and needed an access shaft redesign that added more than $68 million.

Alarmingly the early construction works package has seen delays in some parts of more than 10 months.

Victoria's financial watchdog reveals cost blow outs on the $11b Metro Tunnel project #springst pic.twitter.com/y67qv3zlwj

— Monique Hore (@moniquehore) June 6, 2019

But Mr Greaves said these delays should not impact the next stage of construction, which will focus on the use of the tunnel boring machines to excavate the underground line and fit out of the five new stations.

Mr Greaves warned there were “flags” that the project was dipping into its contingency funds at such an early stage “particularly as there are at least five more years of complex and risky construction works ahead.”

He said Rail Project Victoria, which manages the project, had already raided a substantial amount of the project’s contingency budget.

Early works on the Sandringham line to make way for the tunnel. Picture: Stuart McEvoy

“Due to the early stage and challenging risk profile of this large and complex transport infrastructure program, it is not yet possible for us to make conclusions about overall time and cost outcomes for the whole project,” he said.

He recommended the government review its contingency funds for the project “taking into consideration the construction risks experienced to date and the likely time and complexity pressures expected for the remaining works.”

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Transport Infrastructure Minister Jacinta Allan said the auditor general validated the government’s plans to complete the project a year earlier.

She said that while the early works package had a cost blow out, the overall project was still on budget.

“There was scope added to the early works package and the reason why we took that approach was to get a fast track and get ahead of time.”

But opposition transport infrastructure spokesman David Davis said Labor “always struggled to manage large projects and costs”.

“This project is seem to be off the tracks with huge additional costs, confusion, delays triggered by redesigns and underestimation of likely costs and technical challenges,” he said.

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