The federal government is backing a Victorian plan to build a purpose-built coronavirus quarantine facility in the state.
It has handed the state government a memorandum of understanding (MOU) for the project.
The Andrews government has proposed a 500-bed facility at Mickleham in Melbourne's north, next to an existing quarantine facility for plants and animals.
It had asked the Commonwealth to cough up all $200 million.
The Morrison government is understood to prefer a site next to Avalon Airport, about 30 kilometres south-west of Melbourne CBD, which the Victorian government is open to.
Both the Mickleham site and Avalon Airport are on federal government land.
Senior department officials from Victoria and the Commonwealth have been in talks for weeks about the plan.
There has been some back and forth over what the purpose of the site would be, with Victoria wanting it to be used for returned Australians from high-risk countries, rather than increased capacity.
The state is yet to sign the MOU.
It wants the Commonwealth to pay for the construction, while it plans to wear the costs of running the centre.
The proposal was for the state's COVID-19 Quarantine Victoria (CQV) body to run the operations at the site.
Victoria first announced it was investigating potential sites for a quarantine facility in February.
At the time, Premier Daniel Andrews said the state was doing more than just scoping and would "get on and build a facility".
The state identified the Mickleham site in April — with Avalon as the second preference — and requested the Commonwealth pay for, "and ultimately take ownership" of the facility.
The state is already spending $15 million on planning and designing the facility.
There has been renewed focus on Australia's quarantine arrangements after genomic testing confirmed the latest COVID-19 outbreak in Melbourne stemmed from a breach in an Adelaide hotel.
Acting Premier James Merlino has repeatedly said the outbreak would not have occurred if more people were vaccinated, and if returned Australians were housed in purpose-built facilities.
"Hotels are built for tourists. We need a purpose-built facility for our highest-risk travellers," he said on Thursday.
