West Gate Tunnel chaos looms as builder reveals bid to tear up contract
The West Gate Tunnel dispute has deepened with the premier declaring he ‘wouldn’t rule out’ revisiting the controversial CityLink toll deed awarded to Transurban, which could see the company’s profits from the toll road slashed.
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Transurban’s toll revenue could be threatened as the premier flagged changes to a controversial CityLink toll deed may be revisited as a result of the West Gate Tunnel dispute.
Premier Daniel Andrews said “I won’t rule that out,” when asked this morning whether the concession deed would be revisited as a result of the current dispute.
However, he declined to discuss the matter further.
His comments mean the deed could be changed to reduce the amount of tolls paid to Transurban as a punishment for the dispute.
Transurban were given a 10-year extension on the CityLink toll deed that allowed them to toll drivers until 2045 to recoup costs for building the $6.7 billion project.
To make changes to the concession deed the matter will need to be put to parliament.
The latest revelation comes as Mr Andrews reiterated that the embattled project would be delivered on time despite claims by the company the contract would be terminated.
Construction giants John Holland and CPB Contractors have told Transurban they are trying to walk away completely from the government’s signature road project, which would torpedo its 2022 deadline.
This is due to tunnelling on Melbourne’s second river crossing being delayed when the companies have been unable to manage issues with the industrial chemical PFAS and asbestos in soil on site.
Mr Andrews said he “expects” the terms of the contract to be honoured and denied the project would be derailed as a result.
The premier also sent a clear message to companies looking to work with the state that “playing games” would not be tolerated.
“There will be from time-to-time legitimate issues that arise and we are happy to work with all parties to try and deal with that.
“But, ultimately there is a contract in place, a time frame and a budget, there is a pretty significant contingency as well and we expect that it will be honoured,” Mr Andrews said.
“Work is actually continuing, there are 4000 workers on this project and it is continuing at pace.
“What do I think of those tactics (threats to terminate the contract)? Well, don’t think that they will work and I want to be clear about this, we have a very big infrastructure agenda and when it comes to tendering new work we look to people with a track work of delivering, not a track record of playing games.”
WEST GATE TUNNEL BUILDER FLAGGED CONTRACT ISSUES MONTHS AGO
The builder of the West Gate Tunnel has vowed to rip up the contract for the $6.7 billion project unless taxpayers dig them out of a financial hole, paving the way for a bruising legal battle.
Construction giants John Holland and CPB Contractors are trying to walk away completely from the government’s signature road project, which would torpedo its 2022 deadline.
The bombshell “nuclear option”, ignited after months of crisis meetings over soil contamination issues blindsided the government on Tuesday night and is now to set to spark an expensive legal fight.
The fallout could also spill over into other major projects, as construction companies try to squeeze the government on rising costs.
Tunnelling on Melbourne’s second river crossing was due to begin last July, but digging still has not started because of an impasse over how to manage industrial chemical PFAS and asbestos in soil on site.
The Herald Sun understands the government is hopeful it can fast-track new quarry sites to take thousands of tonnes of toxic dirt in coming weeks.
But sources close to the project warned a deal could take months, as the construction consortium, the government and toll road giant Transurban fight over who should pay for cost overruns which could total as much as $1 billion.
The construction companies warned six months ago that they wanted to rip up their contract because of “unforeseen circumstances” in moving the soil, and they pulled the trigger this week, with one source saying they were “bleeding money”.
“It’s a very big intervention … they’re playing poker now,” a senior Labor figure said last night.
The Environment Protection Authority on Wednesday denied it had changed the rules on PFAS, amid confusion over whether it had already dictated how the soil needed to be dealt with.
“As was the case in 2017, EPA is still required to classify the soil to ensure appropriate disposal or approve any proposal for its re-use,” a spokesman said.
Transport Infrastructure Minister Jacinta Allan had a “robust conversation” with Transurban boss Scott Charlton on Wednesday morning, and maintained that it was up to the toll road giant and the construction companies to resolve the dispute.
“I made it very, very clear to the head of Transurban that it was my and the government’s expectation that the three parties knuckle down and get these matters sorted out,” she said.
Asked if the government would contribute more money to get the project back on track, Ms Allan said: “The government has made it clear time and again … that we have a contract to deliver this project and it’s our expectation that contract is delivered.”
She said a “huge amount of work” was continuing on the project, but with the longer 4km tunnel expected to take 18 months to complete, sources involved in the construction questioned whether it could be delivered before 2022.
Morgan Stanley analyst Rob Koh said even if the project were delayed by a year, there was “low risk” for Transurban shareholders, given the company’s deal with the government to build the project included generous toll concessions on CityLink which would not be impacted.
Transurban on Wednesday informed the share market that the construction companies were ready to terminate their contract because of a “force majeure” event tied to the PFAS problems.
But the toll road giant said it considered that its contract with the companies “remains valid”.
Australian Workers’ Union state secretary Ben Davis said the move was a surprising escalation after more than 100 tunnelling workers were laid off last week.
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“It is unconscionable that this project is being held to ransom in the middle of a legal battle between two private companies,” he said.
“They’ve gone from sabre rattling to using the nuclear option.”
If the construction companies do walk away, Transurban would be forced to find a new contractor to partner with, delaying the project even further.
But as a source close to the project warned last night: “If these guys won’t do it, who the f*** would?”
Opposition Leader Michael O’Brien said: “Daniel Andrews’ big build has become a big bust.”