Shima Asnaashari, six months pregnant, is resigned to not being offered a seat on the train on her way to the city for her job as an office administrator. Her sentiment echoes one voter in the recent state election who said "whoever can get me a seat on the train, gets my vote".

Asnaashari, whose husband is French, says Victoria's public transport system is woefully behind Europe's and the politicians are playing catch-up. "In Europe you don't need a car. I'm happy for the government to spend on public transport," she says.

Williams Landing - now a rapidly expanding suburb in Melbourne's inner west thanks to an ongoing residential development by ASX-listed Cedar Woods Properties - is symptomatic of Victoria's infrastructure dilemma where supply still can't meet demand in Australia's fastest-growing state.

Huge pipeline of projects

All across the city, the skyline is jammed with cranes and construction, with more than $90 billion in major road, rail and transport projects under way.

Shima Asnaashari wants Australia to emulate Europe's public transport networks. Josh Robenstone

Melbourne's rapidly growing population - set to pass 8 million by 2050 to become Australia’s largest city - means politicians of all persuasion have struck on infrastructure as the winning formula for electoral success.

Victorian Premier Daniel Andrews rode an unprecedented infrastructure boom to a landslide re-election last November.


Observers claim Prime Minister Scott Morrison followed the same blueprint in May with billions for road upgrades and car parks to ensure success in Melbourne suburbs where no one expected the Coalition to win.

But in the race by politicians to announce more projects, what gets built when and how has become increasingly problematic as major developers, contractors and investors try to make sense of the plan.

A key project exemplifying how political winds blow billions from one major project to another is the $3 billion promised by Morrison for the East West Link motorway, which Andrews refuses to build.

Also on the table is Andrews' $50 billion suburban rail loop to be built by 2050, but it remains unstarted after federal Labor’s financial support fell by the wayside after its shock election loss.

The Andrews government has more than doubled infrastructure spending - committing $47 billion since coming to office and more than $10 billion promised over each of the next four years.

Handing down his budget last month, Treasurer Tim Pallas told Parliament that "$107 billion of state capital projects are commencing or under way. Now remarkably, we are currently investing more in Victoria than the Commonwealth intends to spend across the entire nation over the next decade".

Major projects detailed in the Victorian budget include $15.8 billion for the North East Link motorway, $6.6 billion for level crossing removals (29 level crossings have already been removed across Melbourne and 75 crossings are scheduled to be gone by 2025) and $3.4 billion for suburban rail.


Cost blowouts

There is also the Andrews government's signature $11 billion Melbourne Metro Tunnel project - which is already speculated to have blown out by as much as $2 billion - and $6.7 billion for the West Gate Tunnel, which has also overshot its cost projections.

Morrison is supporting the $13 billion proposed Airport Rail Link and there is $2 billion for a fast train from Geelong promised as part of the push to hang on to the marginal seat of Corangamite in the recent federal election.

Victoria's public transport minister, Jacinta Allan, says the state is in the midst of undertaking the biggest build in its history.

“In four years we’ve got on with removing our most dangerous and congested level crossings, building the Metro Tunnel, delivering the West Gate Tunnel, extending the train line to Mernda and upgrading suburban roads and every regional rail line in the state,” Ms Allan says.

“But as our city and state continues to grow, we know this pace must become our new normal – that’s why, with this year’s budget, we’re undertaking a massive suburban transport blitz.”

The Andrews government wants to spend $50 billion on a new suburban rail loop but doesn't know where it will get the money. Josh Robenstone


The state government says it has invested $46.7 billion to improve Victoria’s transport network over the past four years, including overhauling the train network and bringing in 65 "high capacity" trains by 2023 that can take up to 1100 passengers each, which it claims is 20 per cent more than any other trains on the network.

It argues that the new Metro Tunnel will allow more than half a million extra passengers to use Melbourne’s rail network during peak periods every week, and save people up to 50 minutes each day during their commutes.

It says the North East Link will cut travel times by up to 30 minutes and take 15,000 trucks off local roads and will return $1.30 back to the Victorian economy for every dollar invested.

As our city and state continues to grow, we know this pace must become our new normal. — Jacinta Allan, Victoria's public transport minister

And it predicts the West Gate Tunnel, which is being built by tollroad group Transurban, will cut travel times from the west, Ballarat and Geelong by up to 20 minutes, with tunnels connecting the West Gate Freeway to the port, city and Transurban's Citylink tollroad.

But the infrastructure spending has not been without criticism – Victoria's opposition claims that under the Andrews government there has been more than $24.5 billion in waste and cost blowouts.

'Backbone for the city'

Still, contractors have welcomed Melbourne's infrastructure boom.


Todd Battley, chief executive of AECOM's Australian business, says contractors are excited about all the infrastructure projects under way.

"Overall the governments on both sides have committed to projects that are going to address the congestion and the liveability of Melbourne and provide a backbone for the city for years to come," he says.

"We sometimes tend to judge their success and failure on opening day but these are all things that are going to be in place and help the city for 50-100 years.

But he cautioned that Melbourne was not "an island" and that it was competing with Brisbane and Sydney for resources to build projects.

"We would love to see the states have a stronger dialogue about the pipeline because there is a finite resource in Australia to deliver these projects across Brisbane, Sydney and Melbourne.

The cost of early construction work on the $11 billion Metro Tunnel is set to blow out by at least $150 million. Joe Armao

"We have the people to deliver but those people don’t all live in Melbourne."

John Holland chief executive Joe Barr says Melbourne has been underspending on infrastructure for years.


But he warns that the infrastructure boom is putting pressure on the construction industry to supply people and materials at the same time that it is working on billions of new projects in other cities.

"The challenge you’ve got is that Melbourne and Sydney are concurrently looking at these infrastructure projects and in an ideal world you want them phased," Mr Barr says.

AECOM, which is headquartered in the US, abides by state laws requiring people to be hired locally but is using international expertise where it can to help meet demand.

"While these projects are excellent in Victoria and broadly for Australia, it’s not the first time that projects have been built anywhere in the world so if we can leverage those experiences from elsewhere, then I think we should," Mr Battley says.

While politicians from both sides are eager to announce new projects, the rush to deliver is already hurting project budgets.

Victoria's auditor-general said in early June that costs on the early stage of the $11 billion Metro Tunnel, which is building twin nine‐kilometre rail tunnels through the central business district from South Kensington to South Yarra and five new underground stations, was over budget and that it could not predict the final cost or date of completion.

Unexpected cost increases

Construction work to date has exceeded the original approved budget of $476.6 million by 31 per cent, with a final forecast cost of $625.5 million due to "added scope and risks," the auditor-general said.


"Unexpected cost increases for the early works phase have put some pressure on internal budgets and wider project contingency funds," the auditor-general said.

"The heavy use of project‐wide contingency funds is an early warning flag for the project, particularly as there are at least five more years of complex and risky construction works ahead."

Industry sources have reported that cost blowouts on the project could reach as much as $2 billion.

"We need to deal with the uncertainties in a mature way." — John Holland CEO Joe Barr

The project is being built by Lendlease Engineering, John Holland and Bouygues Construction. Lendlease and Bouygues have also run into construction problems on a $3 billion motorway project for Transurban in Sydney, NorthConnex. The motorway was supposed to open by the end of 2019 but now is not due to open until an unspecified date in 2020.

Things are further complicated by the fact Lendlease is trying to sell its engineering business after taking a $350 million write-down in November due to losses on projects, including NorthConnex. So another company could be forced to take over the task of finishing Lendlease's job on the Metro Tunnel.

Victoria's eagerness to finish the Metro rail project by 2025 instead of the original date of 2026 and take on the risk of constructing deep access shafts in the CBD is one of the causes of the unexpected costs, as well as Rail Projects Victoria underestimating the technical difficulty of building the shafts and geological conditions, according to the auditor-general.

Cost blowouts were also caused by a redesign of the strutting system used in the State Library station access shafts after excavation works had started, which reduced the capacity and type of excavation equipment that could be used.


The auditor-general also raised questions about the models used to forecast passenger demand for the rail project.

Construction risks

It has recommended that government departments review the remaining 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, and advise whether there are enough funds to cover the rest of the project.

It has recommended that the original assumptions in the business case be reviewed and that Victoria review the impact of technical interface risks between early and main works packages, and share lessons with the public sector before its next big transport infrastructure project.

Barr says industry and government need to recognise that big projects are complex, and that risks cannot be neatly compartmentalised.

While governments are starting to accept that they need to take on more of the risks, they still have a temptation to push as much work as possible on to the private sector, while contractors tend to take risk "without really pricing it appropriately," Barr says.

Government and industry need to work more closely together to discuss how to best scope and structure projects, and apportion risks.

"We need to deal with the uncertainties in a mature way," Barr says. "The one thing in this industry is that [projects] are complex and you do get unknowns, it's about how you deal with them."

With Michael Bleby