The government will chip in just under $2 billion more, while Transurban will pay an extra $2.2 billion and the builders will forego $1 billion. The road project was originally set to cost $5.5 billion, but the final contract for the toll road was $6.7 billion. The price tag now looks set to rise to about $10 billion.
The tunnel linking the West Gate Freeway in Yarraville with CityLink at Docklands was set to open this year but is running years behind schedule due to the soil crisis.
This is the second deal the Andrews government has reached in a year on the payment of a multibillion-dollar blowout on a major transport project. In December last year, the government agreed to pay half of the Metro Tunnel’s $2.7 billion overrun, with the other half paid by the project’s building consortium.
The government allowed Transurban to run the tunnel project after it proposed the idea to the government under what is known as an “unsolicited bid” process which allows companies to pitch unique ideas to the government. Mr Pallas said it was “naive” to think the project could ever have been controlled by the government alone given Transurban’s ownership of connecting roads.
Under this model, Transurban assessed the bids of builders and picked the offer of the companies that claimed they could build the project at the lowest cost. “It was massively underbid by Transurban and their joint venture partners and we’re now bringing to book that underbid,” he said.
Big projects including Melbourne’s West Gate Tunnel have powered Victoria’s construction sector.Credit:Jason South
“Well, it wasn’t me that got my figures wrong. This was subject to a bid, a competitive bid that Transurban ran … The fact that it was an underbid, and a substantial underbid, has become increasingly apparent.”
Mr Pallas said the government could have insisted upon contractual arrangements to run the dispute through the courts for years, but that would have caused the project to lie dormant. “It’s one thing to have legal rights, it’s entirely another thing to prioritise the interests and well-being of this industry and the Victorian people to get on and deliver this vital project,” he said.
“If Transburban were not basically responsible for its delivery, the enormity of the cost and the risk the state would had to have worn would have been profoundly higher.”
“I would do it all – differently – again … There are learnings from this. None of us are infallible. I think we need to recognise there are learnings to be taken from this including a requirement for better cooperation with our contractors.”
Over-budget infrastructure projects are contributing to Victoria’s worsening financial position. Last week, Victoria’s budget deficit was forecast to rise by more than $8 billion to blow out to $19.5 billion this financial year. It also predicted net debt would increase more than initially predicted to $162 billion by 2025 compared with NSW’s $104 billion in the same year.
Victoria’s bulging infrastructure spending has been cited by rating agencies as a reason for Victoria’s downgraded credit rating.
Treasurer ‘not happy’ with Transurban, but future projects not off table
Source: Philippines Alive
