The Victorian government has accused tolling giant Transurban of "over-egging" claims of toxic soil to compensate for underbidding on Melbourne's West Gate Tunnel project.
A settlement to the long-running dispute has been signed off by cabinet after months of negotiations with project manager Transurban, as well as builders John Holland and CPB Contractors.
Under the terms of the deal, Transurban will pay an extra $2.22 billion and the building sub-contractors have agreed to go without $1 billion in revenue and possibly more.
The government will chip in another $1.9 billion of taxpayers' money to restart the stalled project, now set to cost $10.2 billion in total.
It estimated that ripping up the contract and finding another builder would have cost $6.8 billion, while pushing out the completion date to the second half of 2027.
The major project, which will offer motorists a second crossing to and from the city's west over the Yarra River, was originally scheduled to be finished in 2022 but has been plagued by problems after contaminated soil was discovered at the site.
It is now estimated to be completed in late 2025.
Treasurer Tim Pallas described the negotiations as "fractious" and insisted the deal was the government's best option, limiting costs and delays.
He blamed the cost blowout on Transurban "massively" underbidding its original $6.7 billion contract, rather than the discovery of harmful per- and poly-fluoroalkyl substances (PFAS) in soil.
"The construction partners and Transurban realised that they had a problem," Mr Pallas told reporters on Friday.
"If they had been a little more co-operative with the state in declaring what the problem was, rather than pretend and try (to) dupe the community .. then we could have moved efficiently to resolve the issue."
The Environment Protection Authority has advised Mr Pallas there is between zero and 0.7 micrograms of PFAS in soil extracted from the digging site.
"To put that into context, that is safe enough to swim in on a regular basis," Mr Pallas said.
He expressed irritation at Transurban allegedly playing up the dangerousness of the soil to compensate for the project's spiralling costs.
"This was well and truly always an issue that was over-egged by people who were pushing an agenda and not prepared to, effectively, recognise the true nature of the problem," Mr Pallas said.
He apologised for the inconvenience of the dispute delaying the project's completion date, but noted the extra costs would not further burden the state's $19.5 billion budget deficit and rising debt.
Despite his displeasure with Transurban's behaviour, Mr Pallas would not rule out the Victorian government working with it on future projects.
John Holland and CPB Contractors are set to restart tunnel boring in March 2022, subject to the Hi-Quality site at Bulla being approved as a dumping ground for the spoil.
In a statement to the Australian Stock Exchange, Transurban confirmed to shareholders the deal would not impact its tolling arrangements with the state.
Motorists will be tolled for using the tunnel once completed.
