Melbourne Tunnel costs jump by half

Transurban estimates A$3.3bn cost increase for PPP project as work remains stalled by disputes; no completion date estimated; firm warns of potential for legal action

Developer Transurban has issued an update on its West Gate Tunnel PPP project in Melbourne, warning that continued disruption has caused costs to soar.

In its latest company update, the firm sets out its position on the project in detail, underlining that while construction is underway in “the majority of zones”, disputes between the project parties “relating to changes in the requirements for disposal of [contaminated] soil” mean that tunnelling has still not commenced.

Transurban said that this and other disputed matters – including related to “relocation of utilities and impacts associated with Covid-19 restrictions” – have resulted in a number of cost increases.

“Based on preliminary independent analysis and subject to a number of assumptions including risk profile, commencement of tunnelling in early 2022 and completion timing, the group estimates the [design & construction] subcontractor’s construction costs could increase in the order of $3.3bn,” the firm said. “The D&C subcontractor’s claims are higher.

“In order to reach a commercial settlement, the group believes all project parties would be required to make a meaningful financial contribution. As part of this, the group would balance the interests of its broad group of stakeholders.”

It warned that if matters are not resolved commercially, “legal pathways can be pursued by the project parties”.

Transurban also said that the project, which had originally due to be opened to traffic in 2022, can no longer have a clear completion date while these issues remain unresolved.