Derailed: Metro Tunnel cost to blow out beyond $12.8b

Victorian taxpayers' ticket to ride Melbourne's long-awaited second rail tunnel will be even steeper than $12.8 billion, in yet another major project cost blowout.

There is insufficient contingency funding remaining to finish the Metro Tunnel because of a nine-month delay to its completion, a report tabled in state parliament on Thursday by Victorian Auditor-General Andrew Greaves reveals.

It will mean the mega rail project costs the state more than its current budget, he said.

The tunnel was originally costed at $10.9 billion when announced in 2016 but has blown out to $12.8 billion.

"In March 2024, RPV (Rail Projects Victoria) confirmed the project will not meet its contracted completion date, which will add costs," the Victorian Auditor-General's Office report said.

"RPV told us it will update its forecast after negotiating additional costs with the contractors based on its revised internal project schedule."

Metro Tunnel below St Kilda Road, Melbourne
The Metro Tunnel will not meet its contracted completion date, an auditor-general's report says. (Scott McNaughton/AAP PHOTOS)

As a result, an exact figure for cost blowout was not provided.

The Metro Tunnel will connect the busy Sunbury, Cranbourne and Pakenham lines through a new tunnel under the city.

Five new underground stations at Anzac, Town Hall, State Library, Parkville and Arden are being built as part of the tunnel.

The report noted tunnel and stations works were forecast to cost $430 million more than budgeted, but stated the overrun had been offset from savings from the project's rail infrastructure budget and scrapping $236 million of wider network enhancements.

The project had been contracted to be completed by September 2024 but RPV's revised internal project schedule shows it will now finished in June 2025.

Department of Transport and Planning secretary Paul Younis said the agency and Victorian Health Building Authority did not agree the project had been delayed.

"In 2018, the government approved a completion date for the project of end 2025, which was a year ahead of the original 2026 completion date envisaged by the Metro Tunnel project business case," he wrote in an official response.

"While delivery program and milestones have shifted throughout the course of the project, the project is on track to being operational by the end of 2025, in line with the government's commitment."

Transport Infrastructure Minister Danny Pearson also contradicted the independent auditor, declaring there was enough contingency in the budget to cover the delay.

Mr Pearson said any changes to be project's budget would be disclosed after discussion with the construction partners.

"There are unknown unknowns when you're dealing with a project like this," he told reporters at state parliament.

Parkville station Metro Tunnel site
Melbourne's Metro Tunnel will feature five new underground stations such as Parkville. (HANDOUT/VICMIN)

Opposition transport infrastructure spokesman David Southwick seized on the report, saying it was the latest instance of delays and cost blowouts plaguing major projects.

"Victorians have had enough in having to foot the bill because Labor can't manage these projects," he said.

In December, the forecast budget for North East Link - a major road project in Melbourne's northeast - skyrocketed from its 2017 estimate of $15.8 billion to $26.1 billion.

Another road project, the West Gate Tunnel, was initially priced at about $5.5 billion and rose to $6.7 billion in 2017 after the twin tunnels were extended.

But the discovery of toxic soil pushed the total bill for taxpayers to $10.2 billion and moved back its completion date from 2023 to late 2025.

The auditor-general made three recommendations in his latest report, including for the agencies to review and apply lessons from Metro Tunnel to other Big Build projects.

Mr Greaves called for them to find a solution for electromagnetic interference on equipment at hospitals and universities near to the Parkville and State Library stations.

All recommendations were accepted.