Companies bidding to build and operate Canberra's light rail line will be asked to include costs for a possible extension from the city to Russell, Capital Metro Minister Simon Corbell will announce on Saturday.
The 3.2 kilometre extension would run from the planned terminus at Northbourne Avenue and Alinga Street, around London Circuit and down Constitution Avenue.
With three passenger stops, government estimates forecast the extension would increase daily passengers trips by 5600 or as much as 30 per cent.
Under the plan, trams could service about 8,300 defence public servants and Defence Force personnel located at Russell, city offices and shopping areas, new housing developments in Reid, the convention centre and the Canberra Institute of Technology.
Mr Corbell said the government was not yet committing to building the extended route, but asking the four consortiums bidding for the project to include the additional cost in their proposals.
The current Constitution Avenue upgrade works include provisions for the light rail line and some engineering challenges and disruption around City Walk and Vernon Circle could be avoided through the route.
Any extension will see the estimated $800 million project cost and annual payments to private partners increase.
The existing business case for the 12 kilometre route offers a 1.2 to 1 benefit cost ratio – meaning for every dollar spent there will be $1.20 of benefits to the territory.
The Liberal opposition, who oppose the project, will be critical of the growing price tag for taxpayers.
If the government decides to extend the route when choosing its preferred bidder at the end of 2015, passengers could eventually travel more than 15 kilometres from Gungahlin to the defence precinct, along Flemington Road, the Federal Highway, Northbourne Avenue and Russell Drive.
Light rail construction is due to get under way next year with trams beginning services by 2019.
Building the extension would also see tram lines ready for future extensions into the parliamentary triangle and on to Canberra Airport.
Mr Corbell said a final decision on the viability of the extendeds route would be made based on cost.
"The government has had the option of a Russell extension under consideration for some time, and our preliminary analysis indicates that it is a highly viable route extension and we believe that using the current request for proposal process will allow us to get a detailed commercial costing of the extension to allow us to decide if it can be included in stage one Capital Metro.
"It does come down to its affordability and we will need to see that detail from the proponents," he said.
Officials are developing a city-wide light rail master plan to link trams with buses and provide improved transport across Canberra. The City to the Lake redevelopment could also be linked to light rail via City Hill.
Mr Corbell said the ACT business and property sector supported an extended tram link from Russell to the city.
"There is no doubt that extending to Russell would position the project very well for future extensions through to the airport and also across Kings Avenue and Lake Burley Griffin to the parliamentary triangle.
"We're putting it seriously on the agenda with this announcement and we look forward to seeing what the market says about its affordability," Mr Corbell said.
In December, the government announced four major consortiums, including the companies behind light rail projects in Sydney and the Gold Coast and the operator of Melbourne's historic tram network, would bid to build and operate Canberra's line.