Labor says the Victorian Government is holding the $630 million Bendigo Hospital project to ransom for the sake of ideology.
A stand-off between the Government and Lend Lease over the builder's deal with the Construction, Forestry, Mining and Energy Union (CFMEU) has put the company's bid for the project in doubt.
The deal is believed to breach the state's building code.
The uncertainty deepened over Christmas when the union launched Federal Court proceedings, potentially delaying a tender decision and the start of works for several months.
The member for Bendigo East, Jacinta Allan, says the Government could end the impasse by deciding the union deal does not affect the project.
"They've chosen to [hold] Bendigo's hospital project to ransom by applying this building code retrospectively," she said.
"They could change that situation right now by reverting back and not having this code apply to the Bendigo Hospital project.
"It appears that Bendigo's most important project in the hospital is being held to ransom by the Victorian Liberal-National Government for purely ideological reasons.
The Government has been contacted to respond.