By Clay Lucas and Rachel Eddie
Premier Jacinta Allan says the latest financial blowout on Melbourne’s Metro Tunnel rail project is typical of the cost escalations seen on projects of its type all over the country.
As tens of thousands of construction workers marched on city centres around Australia on Tuesday in protest at the Albanese government’s decision to put their construction union into administration, Allan confirmed her government was in “sensitive commercial discussions” to pay more to the builders of the new rail line under central Melbourne.
On Tuesday, The Age revealed the government had secretly offered the Cross Yarra Partnership consortium building the project an additional $888 million to ensure passengers could catch a train on the new rail line in 2025.
A leaked legal letter, marked “strictly confidential” and obtained by The Age, outlined hundreds of millions of dollars of incentives offered to the consortium to get the rail line built by the end of 2025 – as promised by Allan and her ministers.
The Metro Tunnel is a nine-kilometre line that began construction in 2018. It will add five new underground stations to the city’s rail network, allowing train access to Parkville for the first time and linking South Yarra to North Melbourne in just 11 minutes.
Allan was unapologetic about negotiations with the Cross Yarra Partnership.
In parliamentary question time, she and other MPs delivered ministerial statements spruiking the benefits the rail line would bring to Melbourne while deflecting questions from the opposition about the latest cost blowout.
Earlier, under questioning from reporters about the cost escalations being negotiated with the tunnel’s builders, Allan said such negotiations were part of any large project.
“When you’re delivering big and complex projects over a multi-year period of time, yes, there will be challenges,” the premier said, listing three other major Australian projects – Sydney’s new Metro system, the federal government’s inland rail project and the Snowy Hydro electricity generation project – that had been over budget and behind schedule.
“When you’re faced with considering some of these challenges, you’re faced with a choice: do you abandon projects like the Liberal Party do? Or do you roll your sleeves up and get them done? And that’s what we are doing with the Metro Tunnel.”
Planning for the Metro Tunnel began in 2008 under Labor premier John Brumby. But in 2014, Liberal premier Denis Napthine dumped it in favour of a different route – only to see Labor resume planning on the original tunnel design when it won back government in late 2014.
In 2017, the government signed a contract with the Cross Yarra Partnership to build the tunnel for $11 billion. In 2019, the builders downed tools when the project began to cost far more than they had forecast. Labor bailed them out with a new financial deal, with the tunnel now to cost about $14 billion.
Since then, new disputes on the project have arisen – leading to the latest demand by the builders for more money. Asked in parliament what those disputes were over, Transport Infrastructure Minister Danny Pearson declined to say.
On Tuesday, Opposition Leader John Pesutto said the latest financial offer by Allan to get the Metro Tunnel finished highlighted “the total lack of financial transparency surrounding major projects under the Allan Labor government”.
Pesutto demanded that Allan explain “why this secret deal was offered, why it has been kept from Victorians and what the true cost of the Metro Tunnel now is”.
Allan and Pearson said repeatedly last week that the new rail line would open next year – despite an earlier document leaked to The Age showing several major problems remain with the project.
The new legal document leaked to The Age was dated June 22 this year – two days after an auditor-general’s report tabled in state parliament found the Metro project was running over budget and behind its originally contracted opening date of September 2024.
Pearson, responding on Tuesday morning to journalists’ questions about the government’s settlement offer, declined to say how much money was now at stake in the negotiation with the consortium and its subcontractors.
“It’s not for me to turn around now and cut across those discussions and negotiations,” he said, adding that construction continued on the project.
“No agreement has been reached. I don’t want to say anything that’s going to jeopardise our negotiating position.”
The legal document obtained by The Age, marked a “state settlement offer”, showed the government had in June offered companies building the tunnel “up to $745 million of additional payments attached to the completion of milestones” and an additional $143.5 million if the companies achieve “Day One Train Operations” (the day passengers can first ride the new line) by June 29, 2025.
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