The state government announced on Monday that it would seek private funding for the project to create the new space, opening the square up to the Yarra River and city views. A hotel, office and retail space could be likely sweeteners for investors.

Dr Napthine said work on the 3.3-hectare site would be an "expensive operation" as construction workers could set about covering the rail yards only when trains were not operating. This left just a few hours in the early morning, between the last and first trains.

Asked why this project - first flagged in 2008 - would go ahead when the government's Flinders Street design competition had "gone nowhere", he replied: "This has been through a proper process. We have been out to industry ... We have asked their views and we have a number of people that expressed a real interest. In the past that has never been done."

The expression-of-interest documents for Federation Square East will be available from September 15 until December 11, leaving any new government to decide on the project.

The state government said the successful developer would need to protect the Yarra River from overshadowing, but it could build high-rise buildings on its north-east corner, near the corner of Flinders Street and Batman Avenue.

Plans for the $500 million construction project, including a hotel, offices and retail space, were most recently revived by the Property Council last November, in a report compiling a list of Victoria's 20 best public investment sites.

Opposition spokesman for major projects Brian Tee said he favoured a development that promoted public use of the space rather than commercial interests.

"My concern has always been that you are going to get something that benefits the developer and no one else," Mr Tee said.

"This is a gateway to the river. You can have something that is a bit more people friendly where workers can go for their lunch on the river rather than being closed up by development," he said.

Associate Professor Ken Coghill, a former state MP and now director of the Monash Governance Research Unit, said governments could not stop functioning because of an impending election but the timing "highlighted the risks to democracy" if anyone involved in the Federation Square East site made a donation to a political party or candidate.

Former premiers John Brumby and Ted Baillieu both tried to develop the site while in office, but failed due to the technical difficulties involved and concerns about the height of buildings needed to make it feasible.