West Gate Tunnel is already $4bn over budget, and now needs an extra $1bn to get the job finished on time

The trouble-plagued West Gate Tunnel is running out of cash and an extra $1bn is now likely to be required to get the job finished on time.

The trouble-plagued West Gate Tunnel is running out of cash, with an extra $1bn likely to be required to get the job finished on time.

Project builders have warned that their costs have soared following years of sustained construction price pressures which have ­battered mega-projects across the country.

The tunnel, which will link the West Gate Freeway to CityLink, had a budget of $6.3bn when contracts were signed, but the bill hurtled to $10.2bn by 2021 and is now set to crash past $11bn.

The fresh financial turmoil comes as the Allan government prepares to shift gears and focus on the benefits to motorists when the long-awaited toll road opens later this year.

Project builders West Gate Tunnel have warned that their costs have soared following years of sustained construction price pressures.

Senior industry sources said there had been alarm bells ringing about builders’ rising bills for months, and that legal disputes about who pays for overruns were inevitable given tight timelines.

The government and tolling giant Transurban are desperate to avoid legal action that could bog down the build, and insist that construction milestones are still being met.

Between 2019 and 2021 the project stalled due to a bitter court battle over costs and the disposal of toxic soil discovered on construction sites, and builders CPB and John Holland threatened to walk away from their contract.

Eventually a $4bn settlement was reached, with the bill split between Victorian taxpayers and Transurban, and the builders foregoing profit margins.

A Transurban spokesman said the builders had a contract in place to deliver the project, “including from a time and cost perspective”.

West Gate Tunnel builders have warned they need extra cash.

The mammoth project has been riddled with issues.

“Projects of this scale are naturally complex and we continue to work with our builder and the state to deliver this transformational project by the end of the year, so that Melbourne’s growing west can benefit from reduced travel times, new connections and more open spaces,” he said.

A spokesman for the Allan government said on Tuesday no ­additional claims on the state had been made by Transurban.

“The project is on track to be delivered by the end of 2025 — in line with the settlement agreed in 2021,” he said.

Premier Jacinta Allan on Thursday could not guarantee that taxpayers would be spared another budget blowout on the tunnelling project.

Ms Allan said she expected Transurban and its builders to foot the bill for any additional costs.

“These are contractual matters that need to be sorted out between Transurban and its builders,” she said.

“They’ve signed this contract with the Victorian community.

“They’ve said they can deliver it consistent with the contract that has been signed.

“And it’s my expectation that they do.”

Once open, the road will take tens of thousands of cars off the West Gate Bridge and thousands of trucks off local roads in the west.

Westgate Tunnel portal towers in November 2024. Picture: Jake Nowakowski

Jacinta Allan singing as she tours the West Gate Tunnel Project. Picture: Facebook

On Monday, John Holland released financial results from a “difficult” past year showing a pre-tax loss of about $61m, which it put down to rising costs, labour shortages and supply-chain and “project delivery” issues.

It singled out the West Gate Tunnel and Metro Tunnel in the report, both of which have had massive blowouts and are now “loss-making projects” for it.

Last year a settlement on the $15bn Metro Tunnel was reached to deal with new cost blowouts, with taxpayers forking out almost $840m to get it back on track.

The West Gate Tunnel has been plagued by controversy since it was proposed in 2015 by Transurban, shortly after the Andrews government ripped up contracts for the first stage of an East West Link.

The East West Link would have connected the Western Ring Rd to the Eastern Fwy.

Opposition major projects spokesman Evan Mulholland said after overseeing tens of billions of dollars of blowouts across the Big Build it was time for Jacinta Allan to guarantee no more taxpayer pain.

“As night follows day Jacinta Allan has failed to ensure cost control on our major projects that has seen further cost blowouts and it’s all Victorians that are paying the price during a cost of living crisis.”

TUNNEL TIMELINE

2014: Daniel Andrews leads Labor to election victory, promising to rip up a contract for the East West Link, and to build a $500m Western Distributor to take trucks off West Gate Bridge.

2015: Tolling giant Transurban provides an unsolicited proposal to the Andrews government to build a $5.5bn toll road between West Gate Freeway and CityLink (to be called West Gate Tunnel), including a truck route to Port of Melbourne.

2017: Contract inked between Transurban and state for $6.3bn West Gate Tunnel project.

2019: Soil contamination at site of tunnel includes industrial chemical PFAS, which unions say is a health issue. Builder CPB and John Holland halt works and open a dispute with Transurban over costs and removal of soil.

2021: A settlement on the dispute is reached, with Transurban and Victorian taxpayers sharing about $4bn in extra costs, with builders to forgo profits.

2022: Work starts again on the project, with a new finish date of 2025.

2023: Concerns about rising costs in construction sector hit WGT, but government promises no further pain for taxpayers.

2025: Funding is running out on project, with about $1bn likely needed to finish job by end of year as scheduled, taking cost to $11bn-plus.

Originally published as West Gate Tunnel is already $4bn over budget, and now needs an extra $1bn to get the job finished on time