Victoria locked into Suburban Rail Loop’s $35 billion first stage by new contract

Victoria has signed a second tunnelling contract for the Suburban Rail Loop, locking the state into completing stage 1 of Australia’s biggest and most expensive infrastructure project.

Premier Jacinta Allan announced on Sunday the $1.7 billion contract to build 10-kilometre twin tunnels between Glen Waverley and Box Hill had been awarded to global construction consortium Terra Verde, with construction giant WeBuild leading the project.

Premier Jacinta Allan has announced the final tunnelling contract for the first stage of the SRL project has been awarded to a global construction consortium at a cost of $1.7 billion.Credit: Penny Stephens

The inking of the final contract for the $35 billion first stage of the rail line effectively locks the Coalition in to complete the project after Opposition Leader John Pesutto previously vowed to honour any existing contracts should he win the election in 2026.

While the state government insists it remains committed to completing the entire 90-kilometre Suburban Rail Loop from Cheltenham to Werribee, the opposition again called for the project to be paused, reserving its right not to complete the entire orbital rail line if its impact on other funding priorities was deemed to be too significant.

Allan said the final contract had been “locked in” and promised that tunnel boring would commence in 2026.

“We are not wasting a moment,” she said. “Early works are powering ahead, and two tunnelling contracts have been signed.

The proposed Suburban Rail Loop.Credit: Supplied

“This is a project that has been strongly backed by Victorians who have told us that this is a project that they want and need.”

Pesutto described the latest contract as the “height of financial recklessness”, and questioned how the state government would finance the rail loop given the Albanese government had committed just $2 billion to stage 1 of the project, and a third – or up to $12 billion – was expected to come from “value capture” from new taxes that had yet to be unveiled.

Pesutto also wrote to Prime Minister Anthony Albanese on Sunday, urging him to clarify whether the federal government would provide any more funding for the rail loop, to address the current funding shortfall.

“This is financial delinquency on a grand scale,” Pesutto told reporters.

“No Victorian would go and buy a house without securing the funding ... and yet this is what Premier Allan is doing.”

“For the government to simply say it’s going to proceed with this project as if it cannot be stopped is just a lie – it can be stopped, it should be stopped.”

Italian engineering group Webuild will lead the consortium, which also includes South Korea’s largest engineering and construction firm, GS Engineering, and Construction Australia, which is also working on the North East Link, and Bouygues Construction Australia, which is part of the consortium building Melbourne’s Metro Tunnel.

Allan insisted the $1.7 billion contract was “under the initial benchmark” that was set for the tunnelling, but refused to reveal how much taxpayers had saved on the deal, describing it as an “internal measure”.

“You don’t want to reveal your hand to the market in a competitive process,” Allan said.

“We have set the range of the project for $30 to $34.5 billion ... and the project is tracking very well against time and budget.”

In September, Labor revealed the cost of its Metro Tunnel rail project had blown out by another $837 million, pushing the total bill beyond $15 billion. In May, the Commonwealth agreed to chip in an extra $3.25 billion into Melbourne’s North East Link after its cost jumped by more than $10 billion to $26 billion.

Allan acknowledged recent challenges faced by the state’s infrastructure projects, blaming the COVID-19 pandemic, global unrest and supply chain issues for the cost blowouts.

“Pleasingly here, work that has been done with the authority to date has resulted in a strong outcome in terms of the contract that’s been locked in,” she said. “But more importantly, it means tunnel-boring machines working their way from 2026, and the 4000 workers that will be supported by the project.”

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