The Murray Basin Rail Project has failed to improve rural freight outcomes for Victoria despite a $440 million public spend, according to the state's auditor-general.

A report tabled to parliament on Wednesday found the project did not meet “scope, time, cost or quality outcomes”.

V/Line and the Department of Transport have delivered about half of the approved MBRP scope, using $381.5 million (86.7 per cent) of the original approved budget, according to the report.

Transport Infrastructure Minister Jacinta Allan said the government was “disappointed” with contractor V/Line, which is why Rail Projects Victoria is now responsible for finishing the project, working closely with the Department of Transport.

The management of the project was described as “sub-optimal” due to poor planning and inconsistent leadership.

Failures included:

* putting a project to market which the private sector could not deliver in time or on budget

* going ahead with the project as planned anyway, ignoring obvious potential risks

* Disputes and delays arising from V/Line not keeping to its own obligations, including late rail deliveries and failing to hand over instructions to assemble track turnouts

A large injection of cash will be required to properly complete the job, the report states.

Ms Allan said a new business plan was in progress and will be submitted to the federal government to secure more funds.

The MBRP was announced in 2014 as a once‐in‐a‐generation upgrade for much of the state’s regional rail freight network and was expected to be completed by 2018.

The auditor general handed down 13 recommendations, some of which included:

For V/Line:

* That it finish all V/Line work remaining in Stage 2 and advises relevant agencies on any actions that are outside of V/Lies ability to resolve

* Improves its contract management of all contracts related to major infrastructure projects

For Department of Transport:

* That it advise government on scope and cost options to progress as originally expected

For both V/Line and Department of Transport:

* Re‐engage with regional freight stakeholders and the Australian Government on identifying regional rail freight needs as well as future options to progress the incomplete stages of the Murray Basin Rail Project

In a response to the findings, Department of Transport secretary Paul Younis said the report failed to acknowledge the positive outcomes so far, including the Mildura line now being able to operate freight trains with larger wheels.

But he largely accepted the recommendations.

V/Line chief executive officer James Pinder said they accepted the findings and would continue to improve contract and project management.