Lendlease Responds to Melbourne Metro Blow Out

Lendlease has responded to leaked documents of cost overruns and construction delays on the $11 billion Melbourne Metro Rail project.

The announcement comes as confidential government reports leaked to The Age reveal the dispute between the builders of Melbourne’s Metro Tunnel—the Lendlease-led Cross Yarra Partnership Consortium (CYP)—and state government over the proposed $3.3 billion cost blowout and significant delays.

The leaked documents reveal an internal review of CYP’s cost estimate by Rail Projects Victoria (RPV), which at the time of forecasting show the Metro Tunnel was only 10 to 15 per cent finished, but already struggling with a 15 per cent cost blowout, The Age reports.

RPV is the state government agency overseeing the Metro Tunnel.

The Lendlease-led consortium is building the $11 billion Melbourne Metro Tunnel project.

The newly-leaked documents, from October 2019, show that Melbourne's major infrastructure project's cost blowouts were due to changes at State Library station and increasing labour costs.

CYP famously stopped tunnelling work in December last year as the dispute between the consortium and government escalated.

In its Friday response, Lendlease said that confidential negotiations between the parties to formalise amending documents “are continuing and expected to be finalised in the coming weeks”.

“The Cross Yarra Partnership and the D&C Subcontractor joint venture between Lendlease, John Holland and Bouygues Construction (together CYP), has been working with the Victorian Government on a confidential basis to resolve issues in relation to the scope and costs on the Melbourne Metro project,” Lendlease said in a statement.

▲ The tunnel boring machine which has started between the Parkville Station site towards the new State Library Station site. Melbourne Metro project
▲ The tunnel boring machine which has started between the Parkville Station site towards the new State Library Station site.

Lendlease said CYP signed a Commercial Principles Deed with the Victorian government in June this year which agreed to a set of non-binding principles to resolve the issues on the project.

While the $11 billion Melbourne Metro project continues to progress, the state government is yet to confirm the current cost of the project.

Lendlease said the tunnels and stations package is now more than 30 per cent complete with major tunnelling works and station construction continuing.

The Victorian government signed contracts with CYP to deliver the Melbourne Metro Tunnel, one of Victoria's biggest contracts on a public transport project, in early 2018.

Lendlease completed the sale of its engineering operations to Acciona in September this year for $160 million, but kept three engineering projects, which includes the Melbourne Metro project. The other two projects, Kingsford Smith Drive and NorthConnex, have since completed.

Lendlease has maintained the expected costs of exiting its troubled engineering and services businesses at between $450 million and $550 million.

In its financial results this year, Lendlease advised it expects the cost hit to be approximately $550 million pre-tax.

Construction on the Metro Tunnel Project has continued throughout coronavirus restrictions. The Victorian government has maintained the transport project is earmarked to be completed by 2025.

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Article originally posted at: https://www.theurbandeveloper.com/articles/lendlease-responds-to-melbourne-metro-blow-out


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