The cost of the Victorian Government's signature rail project has blown out by $2.74 billion, with half the cost to be borne by taxpayers, after a year of protracted negotiations between the Government and builders.
The consortium building the Metro Tunnel Project, Cross Yarra Partnership (CYP), had been seeking additional funding from the State Government since late 2019.
The negotiations saw work temporarily grind to a halt last December.
When completed, the Metro Tunnel will connect South Kensington to South Yarra through five underground stations.
It was initially costed at $11 billion and had blown out by $100 million by June last year.
Transport Infrastructure Minister Jacinta Allan said an "in-principle" agreement had been reached with CYP overnight, with both parties agreeing to spend an extra $1.37 billion on the project.
Ms Allan said the agreement would keep the build on track to be completed by the target date of 2025, with the opportunity for works to be finished by as early as 2024.
Rail Projects Victoria chief executive Evan Tattersall defended the cost of the new deal, saying "very challenging conditions" meant the construction had become "more difficult" than originally anticipated.
"Our view is that we could have fought for several years in the courts … or we could approach it in a different way," he said.
He said the extra costs were spread "right across the project", including additional materials, labour and equipment.
"Complex projects, complex contracts, different views on liability that comes with things that would change, and the best way through this was to agree a settlement, move on, continue the project and get the works open on time," Mr Tattersall said.
'Botched, late or over budget'
The CYP consortium includes Lendlease, John Holland Group and Bouygues Construction.
The extra $1.37 billion will be added to the budget papers next year, Ms Allan said.
Opposition spokesman for transport infrastructure David Davis said the blowout was "a massive hit to the state budget".
"It's clear that the Government has settled and admitted that it has blundered in this process. This was not about the contractors fundamentally, this was fundamentally about the State Government and their failure," he said.
The state is already seeing record high debt as it spends big in the wake of months of coronavirus lockdowns.
Mr Davis took particular aim at his Labor counterpart and Mr Tattersall for the increased spend.
"Jacinta Allan, every project she touches … is either botched, late, over budget or sometimes all of the above," he said.
