'I am sorry': Minister concedes metro line will blow out by $3 billion

The Berejiklian government concedes the cost of its signature metro rail project under Sydney Harbour and the central city is set to blow out by up to $3 billion, laying blame primarily on an "overheated" market for contractors.

An extra $3 billion to complete the 30-kilometre metro rail line from Chatswood to Bankstown via Sydney's CBD within the next four years will drive up the final cost to $15.5 billion.

The government's first public admission about the problems besetting the Metro City and Southwest rail project comes two weeks after the Herald revealed that an internal budget review in mid 2018 had warned it would cost $16.8 billion to finish – $4.3 billion above the original forecast.

Premier Gladys Berejiklian and Transport Minister Andrew Constance at a metro site in August.Credit: Ben Rushton

While rejecting that it will blow out by that much, Transport Minister Andrew Constance said he expected it to cost $2 billion to $3 billion more than original forecasts.

"It won't be $4 [billion extra] but I would expect it to come in at $2 to $3 [billion] ... but again we still have another four years of build here of this project," he told the Herald.

"I am sorry it happened this way but it is very much market forces at play in terms of the build. We are not denying there hasn't been significant cost pressures on the project."

The government forecast in 2015 that the City and Southwest rail line, which form part of Australia's largest transport project, would cost $11.5 billion to $12.5 billion to build by 2024.

"If you go back five years ago, I think it's fair to say that not even Treasury could predict the escalation increases in the infrastructure market. And it's not just in Sydney," Mr Constance said, citing blowouts in transport projects in Melbourne.

"There has been an overheated infrastructure market for contractors and, of course, that means that ... it has been very much an uplift for suppliers as opposed to procurers. [But] I am not trying to pass off the buck here. Ultimately we take responsibility ... for where things are at."

While pinning the blame for the forecast cost increases squarely on a "red-hot" market, Mr Constance said a major underground walkway beneath Central Station and an enhanced temporary transport plan had been added since the government forecast in 2015.

He also said "three different waves in the property market" had affected the cost of the project, because land needed to be acquired for it.

But Labor leader Jodi McKay said the admission was the latest confirmation of the government's incompetence in carrying out big infrastructure projects, adding that the cost of the metro rail line – just like that for Sydney's new light rail line – would continue to blow out.

"Are they going to keep lying about it when that happens or will they commit to publicly admitting when they’ve blown through their new estimate of $2 billion to $3 billion over the original $12.5 billion budget?" she asked.

Ms McKay said it "flies in the face of any kind of propriety" that the Transport Minister was not aware of this massive problem before the state election in March last year, if the state's transport department knew about it more than 18 months ago.

But Mr Constance rejected the Opposition's claims, saying he was "absolutely not" aware of the forecast cost increases before the election.

"That only came to light after the election to Gladys [Berejiklian] and I. I can point to the pre-election budget update ... to show evidence of that," he said.

The internal budget review by Sydney Metro that forecast the $4.3 billion cost increase was completed about 18 months ago.

But Mr Constance said there was a difference between the government being alerted to the extent of problems with a project versus "the workings of bureaucracy".

Asked how he could be confident that the final cost will be limited to an extra $2 billion to $3 billion, he cited the Metro Northwest rail line, which was built for $1 billion less than forecast, and the fact that "we are only halfway through the build" of City and Southwest.

"I am not happy about it. My expectation with the [Sydney] Metro team is that they are constantly looking at every best way they can to put downward pressure on prices," he said.

He also sought to cast blame on Labor for "raising sovereign risk" during the last state election when it vowed, if it won government, to scrap a part of the metro project which involves converting an existing rail line between Sydenham and Bankstown to carry single-deck metro trains.

"Labor can point the finger but they also need to recognise that political risk ties into sovereign risk, which can have an effect in the market," he said.