Tim Pallas blames Transurban for West Gate Tunnel blowout
Victorian Treasurer Tim Pallas and Minister for Transport Infrastructure Jacinta Allan hold a doorstop to discuss the cost blowout on the West Gate tunnel project. Picture: NCA NewsWire / David Crosling
Victoria’s opposition has called for Tim Pallas to be sacked and the Greens have called for an inquiry into the West Gate Tunnel after the Treasurer sought to blame the “underbid” he accepted from toll road company Transurban for blowouts which will cost taxpayers almost $2bn.
Victorian taxpayers will contribute $1.94bn — adding to the $19.5bn deficit in the state budget revealed by Mr Pallas last week. Transurban is up for an extra $2.2bn and the building consortium $1bn.
Initially touted by Labor as the $500m “shovel-ready West Gate Distributor” ahead of the 2014 state election, the revised project was first given a $5.5bn price tag, before Transurban was contracted to build a “bigger and better” version at a cost of $6.7bn. It is now set to cost at least $10.6bn.
Transurban brought the market-led proposal to the Andrews government in 2015, addressing the government’s need for an alternative major project after it paid the consortium contracted to build the previous Coalition government’s East West Link $1.2bn to scrap that proposal.
Originally set to open ahead of the November 2022 state election, the West Gate Tunnel is now expected to be completed in “late 2025”.
On Friday, Mr Pallas said the dispute between the government, Transurban and its builders had been less about the disposal of toxic soil, and more due to the companies’ “underbid” for the project.
“The costs principally around this project relate to an underbid that the construction partners and Transurban realised that they had a problem,” he said.
“If they’d been a little more cooperative with the state in declaring what that problem was, rather than pretend, and try and dupe the community that this was something more than an underbid on a project, then we could have moved a lot more efficiently to resolve this issue.
Asked what responsibility he should take for accepting the “underbid” on behalf of the government in 2015, Mr Pallas said the government had “of course” gone through an exhaustive due diligence process.
“In the contract itself, for example, Transurban and their joint venture partners assumes all risk associated with soil remediation.
But nonetheless, in circumstances where there are no perfect options, the state has to work through how can we best get this project reset and done, and ultimately we’ve taken the view that the best way to do that is to reach a cooperative arrangement.
“I’m not happy about the fact that we had to live with a process where effectively the delays on this project have been structured in a way to try and put pressure on the state.
“But at the end of the day, this project needs to be reset and it needs to deliver quality infrastructure for Victorians.”
The Treasurer accused the companies of wilfully using delays and obstructions as a negotiation tactic.
“I believe that has been part of the approach that they’ve adopted,” he said.
Mr Pallas said he was sorry for the impact to the community.
“Ultimately, I have to take responsibility for the costs of projects going forward and that is exactly what I’m doing,” he said.
“If you’re asking me if we are prepared to acknowledge that the community has been inconvenienced by a longer term delivery of this project, I do acknowledge that.
“For that inconvenience, we are so sorry.”
The deal comes after Mr Pallas, Transport Infrastructure Minister Jacinta Allan and Premier Daniel Andrews have insisted for more than a year that taxpayers would not bail out Transurban and its builders because there was a contract in place.
Mr Pallas divested himself of shares in Transurban in 2019, soon after The Australian revealed held them.
Opposition calls for Pallas to be sacked
Opposition Leader Matthew Guy said Mr Pallas should lose his job.
“If a CEO of a company allowed a project to blow out by this amount, they’d be sacked. so why is the Treasurer any different?” he said.
“The government’s “big build” is turning into a great big bill, a bill we can’t afford.
“The extent of the blowout on this project is bigger than the entirety of the government’s mental health budget for one year.
“If the government can’t get contracts like this right, they shouldn’t engage in them.
“The incompetence of the Treasurer, to mismanage five or so billion dollars in one project, the Melbourne Metro which has blown out, the North East Link that has blown out, level crossing removals that have all blown out. When does this government actually take responsibility?”
Greens call for parliamentary inquiry
Greens transport spokesman Sam Hibbins called for a parliamentary inquiry into the West Gate Tunnel project.
“With revelations from the Treasurer that the Victorian Labor government knew early on that there'd been a massive underbid on the project, the public deserves to know the truth behind the secretive project,” Mr Hibbins said.
“The West Gate Tunnel has been a scandal from go to woe.
“At the same time the Victorian Labor government was assessing the West Gate Tunnel in 2015, they were also telling Victorians to avoid scams by advising ‘if it sounds too good to be true, it probably is’.
“Instead of following their own advice on scams, the government rushed into this project as a political fix.
“Victorians are now left with yet another traffic-inducing toll road in the middle of a climate crisis, to hell with pollution, cost or congestion. The public deserves to know the truth behind this secretive project.”
Victorians to pay through tolls as wells as taxes
The delays will mean Transurban has to wait an extra three years to begin receiving toll revenue from road users.
However, courtesy of legislation that passed the Victorian parliament in early 2019, motorists using the Kennett-era CityLink toll road from Melbourne’s east to the airport are already being charged extra to pay for the tunnel to the western suburbs that some of them may never use.
Around the time the legislation passed, Parliamentary Budget Office analysis found Transurban would reap a nominal $37.3bn in extra tolls over the next 25 years in return for investing $4bn to build the tunnel, with tolls allowed to increase by 4.25 per cent each year over a decade.
The West Gate Tunnel cost blowout comes after Ms Allan confirmed late last year that Victorian taxpayers would pay for half of a $2.74bn cost blowout on the Metro rail tunnel, and after the government revealed in October that Victorians will not know the full cost of the North East Link road project when they go to the polls in just over a year.
The cost of North East Link is certain to exceed the $15.8bn cited by the government ahead of the 2018 election, after Italian-headquartered global consortium Spark was awarded an $11.1bn contract to build, operate and maintain the 6.5km of tunnels in the 26km project, which will be tolled for at least 50 years.
