Dispute threatens $2.2 billion cost blowout, major delay to Sydney’s new metro line

Construction of a metro rail line to Sydney’s new international airport is at risk of a $2.2 billion cost blowout and opening a year late, amid an escalating dispute between a private consortium and the state government over delays, scope creep and disruptions.

Confidential documents obtained by the Herald reveal a high-stakes stoush playing out behind closed doors between the consortium delivering the 23-kilometre rail line and government agency Sydney Metro.

Giant boring machines have been used to excavate twin tunnels for the metro rail line to Western Sydney Airport. Credit: Janie Barrett

The consortium known as Parklife Metro has made claims for soaring costs and an extra eight months to finish the project. It would delay the line’s completion to December 2027, a year later than promised by successive state and federal governments.

The documents reveal the consortium is demanding a $2.2 billion payment from Sydney Metro, up from the $2.03 billion outlined in claims handed to the agency in December.

They warn that the project has suffered “unforseen disruption, delay and increased scope of work”, citing the installation of elevated walkways in tunnels for passenger evacuations which is now estimated to cost $726 million and has added to the delays.

The consortium has told Sydney Metro that it is impossible to finish the line by the “original completion date or for the original contract price”, and has cast its offer as the “only viable approach” for the project.

In what it labelled a project “reset”, in December the consortium demanded a $1.59 billion payment from the agency to plug a huge funding gap in the cost of construction. It offered for contractors to chip in about $432 million to close the $2.03 billion gap by drawing on existing contingency funding and an “escalation allowance”.

Western Sydney Airport is due to open to passenger flights late next year.Credit: Wolter Peeters

The amount it was seeking from the agency included more than $300 million to settle other disputes over a litany of problems including a delayed handover of work to contractors.

In a dramatic escalation last month, the consortium increased the total claimed amount to $2.22 billion, which included almost half a billion for disruptions from industrial action and “higher escalation”.

In a sign that expenses could blow out further, it also warned the agency that more industrial action by workers could add $250 million to the project’s cost.

Even if the agency accepts the demands, which include an “incentivisation regime” and the resolution of all claims, the metro rail project would not be finished until the end of December 2027 under the consortium’s offer.

That is later than an opening in April that same year, which was recently revealed by the Herald. Successive governments had repeatedly vowed to open the line at the same time as Western Sydney Airport in late 2026.

The new airport rail line had been budgeted to cost $11 billion, to be jointly funded by the state and federal governments.

The dispute raises questions about the extent to which the contractors should accept responsibility for the cost overruns, and whether Sydney Metro will seek an independent legal review of the claims.

The consortium, which has told Sydney Metro that the contractor “expects to be properly compensated”, has also been pushing for a two-year extension to the 15-year contract to operate and maintain the rail line between St Marys and the new city of Bradfield via Western Sydney Airport.

Sydney Metro did not answer specific questions about the dispute, saying that delivery contractors on construction projects could put forward “a variety of claims under their specific contracts”, and that it was working with the consortium to ensure the airport rail project was “delivered in a timely manner”.

“Sydney Metro assesses the validity of claims made by delivery contractors across its program to ensure value for money for taxpayers,” it said.

Opposition transport spokeswoman Natalie Ward said the biggest investment in western Sydney’s economy was quickly becoming a story of delay and disappointment. “In March, the airport metro was on time and on budget – now it could be more than a year behind,” she said.

Parklife Metro, which declined to comment, comprises Italian construction company Webuild, German multinational Siemens, the international arm of French rail operator RATP and Australian investor Plenary. Previously named Salini Impregilo, Webuild is also part of a joint venture building the federal government’s troubled Snowy 2.0 hydro energy project.

A confidential report on Sydney’s metro rail projects in late 2023 warned of the “magnitude of design and delivery works needing to be completed in a short time frame” for the airport rail line.

The prospect of a major cost blowout in the project follows a near-doubling to $21.6 billion of the price tag for the M1 metro line between Chatswood and Bankstown over the past decade.

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