The state government should consider a smaller stadium at Moore Park if it is unable to build its desired 45,000-seat venue within its budget, the opposition says.

Sports Minister John Sidoti revealed last month that contractor Lendlease had not met "the government’s expectations" for its offer to build a stadium to replace the demolished Allianz Stadium at Moore Park.

Although the government said before the March election that it had signed one contract with Lendlease to demolish the old stadium and build a new one in its place, it now says the contract was always split in two. The contract allows the government to select another builder.

The remains of Allianz Stadium in Moore Park. Credit:Brook Mitchell

Labor’s sports spokeswoman, Lynda Volz, said Premier Gladys Berejiklian should be open to the idea of building a smaller stadium on the site, given the former Allianz Stadium so rarely sold out its 45,000-seat capacity.