Cost blow out for Transurban

Transurban announced on Friday that it has reached an agreement with the Victorian Government and the CPB John Holland Joint Venture on revised terms for the delivery of the West Gate Tunnel Project, including a new completion date in late 2025.

Transurban had been working actively with the State and the D&C subcontractor to seek a commercial resolution to disputes between the project parties relating to changes in the requirements for the disposal of soil potentially contaminated with PFAS.

While Transurban said it remains confident in its legal position, the company has reached an agreement in order to facilitate the most efficient and timely completion of the project, which they believe is in the interest of all parties, Victorian road users and the broader community. Under the agreement, the D&C subcontractor has committed to commence tunnelling in early 2022.

The total cost of the D&C contract will be increased by $3.4 billion, with Transurban and the State each contributing $1.7 billion. Additional costs to Transurban of approximately $300 million include the company’s share of site activation and insurance costs as well as Transurban’s direct project management costs. Transurban will also incur revenue impacts due to the delays up to the new completion date.

The D&C subcontractor withdrew their claims to additional construction costs which were significantly higher than the agreed contract sum adjustment, and will also forgo profit margin and overheads.

Chief Executive Officer Scott Charlton said the West Gate Tunnel Project is a critical infrastructure project for Melbourne which will end the city’s reliance on the West Gate Bridge and create new links to facilitate the movement of people and goods between the port and city. “We recognise this situation has been disappointing, however we believe this agreement represents the best path forward to deliver the West Gate Tunnel Project in the interests of all stakeholders, particularly the millions of Victorian motorists who will benefit from a vital alternative to the West Gate Bridge and a second river crossing.”