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The cost of the Victorian government's flagship $11 billion infrastructure project, the Melbourne Metro rail tunnel, may have blown out by as much as $2 billion.
Well-placed sources from a variety of stakeholders involved in the mega project are warning of delays and major cost blowouts amid claims contractors have encountered unexpected problems including geological issues.
The costs are expected to be worn by the consortium Cross Yarra Partnership (CYP), led by listed construction giant Lendlease, John Holland Group and Bouygues Construction Australia, not the state government.
“They (representatives of the consortium) are openly telling staff on site that the project is not on budget,” said one source who had recently visited the project.
Predictions of the massive cost blow out on the $11 billion project come as the state’s auditor general released a report on Thursday which found the cost of early construction works is set to blow out by $150 million and warned there were bad signs for the rest of the project.
"[The] overall project is within project budget," Transport Infrastructure Minister Jacinta Allan said following the release of the watchdog's report.
There is a lack of experienced supervision. They‘ve got ‘kids’ on site doing big jobs.
Sources involved in the project - which will see nine kilometres of tunnel carved beneath the CBD for a new rail line - said the density of the soil was continuing to cause digging delays while another construction specialist blamed a lack of senior engineering staff for the issues.
"There is a lack of experienced supervision. They've got ‘kids’ on site doing big jobs," said a source close to the project.
Recent research by a leading analyst Rob Freeman from Macquarie Group estimates the delays and cost overruns will result in Lendlease booking a $300 million provision to cover its additional costs on the project. Lendlease’s share of the project's $6 billion first major stage is worth $1.7 billion, he said. Assuming the other partners also incur the same costs, as sources predict, the total cost blow out could be more than $1bn.
This article first appeared on www.theage.com.au
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