BENDIGO'S biggest project, a $630 million new hospital, will start construction at least four months late because the Baillieu government's crackdown on union-friendly deals has become mired in a complex legal and political battle.
The delays at the Bendigo Hospital come as the government has been criticised by builders and industry groups for a lack of action on major projects.
Central to the Bendigo delay is the government's decision late last year to ban building giant Lend Lease from all publicly funded work for up to four years, because of a workplace deal the company struck with the Construction, Forestry, Mining and Energy Union.
That ban came despite Lend Lease being heavily involved at a late stage of the tender for the Bendigo Hospital.
It is the builder for one of the two consortiums bidding for the work.
Now, after a court challenge by the CFMEU, the state government has been forced to give undertakings not to exclude Lend Lease before at least April 15 - adding an extra fortnight to earlier court undertakings. Construction of the hospital was meant to start last December.
Bendigo East Labor MP Jacinta Allan said the government's handling of the hospital tender created a risk to business confidence, and ''every week it's delayed is another week we don't get that new hospital''.
Documents released to Ms Allan under freedom-of-information laws point to the tender process having been complicated as early as last April by the government's new building rules, which are aimed at changing work practices and cutting costs in the industry.
Emails between the office of Finance Minister Robert Clark and his department from last April make it clear that the government had been discussing the application of its new rules to the Bendigo project well in advance of its decision to ban Lend Lease.
An email notes that bidders for the Bendigo Hospital had to comply with the government's rules, even though they were not to take effect until July.
An internal government email on October 15 also reiterated that bidders had to comply. By that stage the tender process was well under way.
A spokesman for Mr Clark declined to comment on why Lend Lease was still in the tender despite being banned, saying it ''would not be appropriate … while the tender is under way''.
He said the government's rules, which require builders to comply or risk not getting government work, were ''fully consistent with the Fair Work Act''.
The spokesman said the government could apply to the court to bring forward its undertakings.
Ms Allan said the documents released under FOI - only three partial documents out of a possible 85 were released - pointed to the government as ''behind the scenes plotting and planning a course of action''.
''You've got a project that's been delayed because of the way they've badly handled the tender process,'' she said.
Lend Lease declined to respond directly to questions and a spokesman said it ''continued to work with the Victorian government''.
The CFMEU's case against the Victorian government will go to trial in the Federal Court on March 19.
Justice Mordy Bromberg has previously said in a related case that, prima facie, the union's legal arguments had a ''good prospect'' of success.
The government will use constitutional arguments in its bid to defeat the union case.
''It would be beyond the constitutional power of the Commonwealth to restrict the state's ability to undertake key public projects in the way being sought by the CFMEU,'' Mr Clark's spokesman said.