The private builder of the $2.1 billion light rail line to run from Circular Quay to the eastern suburbs could face penalties if they are unable to construct it according to schedule.

Transport Minister Gladys Berejiklian announced late on Wednesday that the government had signed a contract with a consortium to build and operate the line, which should open to passengers in early 2019.

The contract is $500 million more than the original $1.6 billion first announced by the government, but Ms Berejiklian said that the price tag could come down if everything went according to plan.

"There is a chance we can come in under budget." Ms Berejiklian said. "If everything we think happens to schedule and as we expect the project will come in substantially under budget."

"We also have penalties on the private sector partner if they don't build something or get out of a particular location when they said they will," she said.

The consortium building the project, known as ALTRAC Light Rail, consists of Transdev, Alstom, Acciona and Capella Capital.

In a statement, a spokesman for the consortium, Malcolm Macintyre, said: "Construction work will be carried out in stages to minimise disruption along the alignment.  We are also proposing extra construction support staff along the route in the CBD, to better manage the impacts for commuters, businesses and visitors alike."

At the same time as signing the contract, the government has separately invited comments on a modified environmental impact statement for the project.

The modifications, which include 67-metre long trams instead of 45-metre long vehicles, have not yet received planning approval. But Ms Berejiklian said the designs could change.

"Signing the contract doesn't mean that you have worked out all the details," she said. "Certainly there's still a lot of detailed design issues we've got to go through, including things like construction timelines."

Opposition Leader John Robertson slammed the cost blow-out.

"For a Premier seeking re-election on his ability to deliver projects, this is simply embarrassing," Mr Robertson said.

"Mike Baird and Gladys Berejiklian need to explain how they've allowed a 30 per cent blowout in the cost of this project. How have they so grossly underestimated the real cost of tearing up George Street and building a light rail out to the South East?"