17 Apr 2019

Billion-dollar increase in cost of Auckland's City Rail Link

5:31 pm on 17 April 2019

The cost of building Auckland's City Rail Link project has risen from $3.4 billion to $4.4b, it has been confirmed this afternoon

An artist's impression of the proposed mid-town Aotea Station

An artist's impression of the proposed mid-town Aotea Station Photo: Supplied

City Rail Link chief executive Dr Sean Sweeney said a revised cost envelope for the 3.45 kilometre-long train line has been submitted to the Crown and Auckland Council for approval.

"The $1 billion cost increase on the previous $3.4 billion estimate made in 2014 reflects significant changes impacting the project in the past five years," said Dr Sweeney.

"No-one could have foreseen the competitive pressures that have occurred in the construction industry over the past few years and the impact that has on costs, particularly for a project the scale and complexity of the City Rail Link.

"Eighteen months ago, the value of work in the infrastructure pipeline on both sides of the Tasman was $80 billion - the value of that work is now estimated at $230 billion.

"Last year, a decision was made to increase the scope of the project to accommodate longer, nine-car trains at stations. Planning today for a city that will be much bigger in the future reinforces the benefits the City Rail Link City will deliver to the way people travel, work and live in Auckland.

"Other factors contributing to the revised cost envelope are higher escalation, or construction inflation costs, and an increase in the contingency risk allowance for any future unplanned events."

Last month the company assured the government it was on track for completion by 2024, despite having to find new contractors in a "stretched" market.

The $3.4bn railway construction project has had difficulty retaining contractors.

Fletchers pulled out in February last year, and in December Australian-based engineering firm RCR Tomlinson also went into administration forcing City Rail Link to pull its $500m contract with RCR's New Zealand-based subsidiary.

City Rail Link chair Sir Brian Roche admitted it had been difficult for the company to find contractors.

"We are under some pressure, there is pressure of availability of contractors. We compete in the international market, which is with Australia - Australia in Melbourne, Sydney and Brisbane has a significant volume of work ... the market is stretched," he told RNZ in March.

City Rail Link is now being constructed by the so-called Link Alliance - a group of six companies including Tonkin + Taylor and Downer NZ.

It said the revised higher cost came from four areas:

  • Contingency and escalation costs ($310m)
  • Construction costs ($327m)
  • Accomodating longer, nine-car trains ($250m)
  • Non-direct cost ($152m)

Auckland Mayor Phil Goff said tighter financial management will help fund the additional $500 million requested by City Rail Link Limited.

"The City Rail Link is a critical part of the changes we are making to reduce congestion and ensure we can move around our city.

"The cost of the tunnels and underground stations, two of the biggest parts of the project, was determined by a competitive tender process. The increased cost estimate reflects the increase in demand and costs for major construction projects across Australasia.

"A significant part of the cost increase, some $250 million, reflects the need to future proof the tunnels and stations. We won't repeat the mistake of the Harbour Bridge which was built at half of the size it needed to be, and had to have major additions made to it within eight years.

"The additional cost to Council will not involve higher rates for Aucklanders and it will be met without breaching the debt to revenue limit on Council borrowing."

Mr Goff said it was unfair for Aucklanders to meet half the cost of the CRL when no other part of the country had to do so

"The government has refused to revisit the deal saying that was what was agreed between the previous Auckland Council and National Government.

"However, government has agreed to phase the timing of Council's contribution to enable it to work within the constraints of its budget.

"Council will make changes in financial management that will enable it to keep under its debt to revenue ratio. It will benefit from current lower market interest rates. Council will also dispose of some non-strategic assets including some parking buildings."

City Rail Link: works at corner of Albert and Victoria Street.

Inside the City Rail Link project Photo: RNZ / Claire Eastham-Farrelly