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Melbourne Metro Tunnel costs set to blowout by $150M

Unexpected cost increases for the Metro Tunnel Project’s early works have put pressure on internal budgets and wider project funds, according to the Victorian Auditor General.

Unexpected cost increases for the Metro Tunnel Project’s early works have put pressure on internal budgets and wider project funds, according to the Victorian Auditor General.

Construction activities in the early works phase have exceeded the original budget, with a final forecast of $62.5.5 million, an almost $150 million increase, the Auditor general found.

In addition, the final forecast cost of the early works phase is now $1.353 billion, a 7.62 per cent increase of around $95.8 million.

Rail Projects Victoria has used project-wide contingency funds to meet the extra costs, but because of unexpected expenditures so far, there is a substantial decrease in the amount of project-wide contingency available.

“With at least five years of complex and risky construction to go, this raises some risk that the project may exceed the publicly announced $11 billion budget,” the Victorian Auditor General said in its report.

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The Metro Tunnel aims to increase capacity across Melbourne’s metropolitan train system through five new underground stations and twin nine-kilometre tunnels. It aims to deliver this by 2025.

The Auditor General found the Department of Transport (DOT) did not consider any alternative options apart from a tunnel to address the city’s growing capacity challenges and said in its report it should have presented a comparative analysis of other options, such as more investment into the existing overland rail corridor.

It also found that recently announced rail projects, such as the Suburban Rail Loop and Melbourne Airport Rail Link, have not been accounted for and DOT will need to advise the state government of any subsequent changes.

The accuracy of the forecasting models was found to have low sensitivity to change, placing their accuracy into question and may not be able to accurately predict the future rate of patronage growth.

The State Library precinct experience the most scope changes, with the design, type of strutting supports, and shaft depths all changed since the contracts were signed, according to the report.

Interface works were originally budgeted at $75.7 million, however as of March 2019, the final cost was forecast to be $201 million, a 165.5 per cent increase.

Image: Metro Tunnel/Rail Projects Victoria

The Auditor General has said in the report that the early works approach has effectively re-risked some key elements of the overall project, with land acquisitions, site clearance and demolition, and utility relocations delivered effectively.

“The project has been adequately prepared for its next phase, but it will be delivered at greater cost and over a longer time frame than originally expected,” the report said.

“The delays we observed in early works should not directly affect the contracted target dates for the next phase of the project, which focuses on the excavation and fit-out of the tunnel and stations.

“Due to the early stage and challenging risk profile of this large and complex transport infrastructure program, it is not yet possible for us to make conclusions about overall time and cost outcomes for the whole project.”

The Auditor General has mode 11 recommendations including six for the Department of Transport and three for the Department of Premier and Cabinet.

Report recommendations:

  1. Ensure project proponents have undertaken sufficient and comprehensive analysis of all sensible and realistic strategic interventions and project options in business cases.
  2. Review the remaining Melbourne Metro Tunnel Project contingency funds, taking into consideration the construction risks experienced to date and the likely time and complexity pressures expected for the remaining works.
  3. Review and revise the original assumptions contained in the Melbourne Metro Tunnel Project business case, considering the impacts of new rail system projects, and republish the refreshed assumptions in an updated project benefits management plan.
  4. Prior to commencing the next major transport infrastructure project with an early works stage, review the impact of technical interface risks between early and main works packages with the Office of Projects Victoria.
  5. Improve governance and visibility of the calibration and validation processes used for Victorian transport modelling and do more frequent and timely updates.
  6. Implement the recommended improvements from recently completed strategic modelling reviews for the various transport demand and simulation models used in the transport portfolio, and explore opportunities to better align and integrate transport service demand forecasting approaches.
  7. Further develop the various transport demand forecasting models so they can include a range of scenarios testing key areas of uncertainty, and provide a high/medium/low-growth range when supporting key investment decisions.
  8. Provide more disclosure and transparency around demand forecasting model assumptions and likely error and uncertainty bands when these modelling outputs are used as evidence by key decision-makers to support an investment decision.
  9. Analyse and explicitly determine passenger load trigger points for the introduction of 10-car High Capacity Metropolitan Trains in the Melbourne Metro Tunnel and allow sufficient timeframes for consequential activities such as any necessary rail network upgrade projects and platform extensions.
  10. Transmit to the Planning Minister and, if there are no specific legal impediments or restrictions, publish summaries of key findings and recommended actions from past and future Independent Environmental Auditor reports produced for the Melbourne Metro Tunnel Project on the project’s official website.
  11. Require proponents of public infrastructure projects subject to an Environment Effects Statement process to publicly publish any environmental audit reports that an independent environmental auditor or equivalent undertakes and delivers as part of the environment management framework for the project.

 

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