The state government has declared it will go ahead with plans to remove nine level crossings in Melbourne's south-east, despite the Coalition blocking the Port of Melbourne sale that would have funded the multi-billion dollar project.

The government wants to remove the level crossings between Caulfield and Dandenong, plus rebuild four stations, at Carnegie, Murrumbeena, Clayton and Hughesdale. It also includes power and signalling upgrades.

Labor has plans to remove 50 level crossings over the next eight years, including 20 over the next four years. The project is expected to cost up to $6 billion and is to be funded by the long-term lease of the Port of Melbourne.

The sale has become a key political issue for the new state government after the Coalition and the Greens vowed to block the Port of Melbourne sale bill in the upper house in parliament two weeks ago.

Acting Premier James Merlino said the government took the policy to last year's election and had a mandate to deliver the project.

"They voted against the legislation, that is a vote against every single removal of level crossings right across Melbourne.

"Let me be absolutely clear: We're going ahead with these projects. Every single commitment that the Andrews Government made, the government will deliver on," he said.

The government is continuing work on the project, despite the upper house setback. Treasurer Tim Pallas has not ruled out using special powers to bypass the parliament to sell the asset.

Under the Coalition government some of the level crossings along the Cranbourne-Pakenham rail corridor were to be removed as part of an unsolicited bid to upgrade the line.

On coming to office Labor reject the unsolicitied proposal. Opposition Leader Matthew Guy accused Mr Merlino of playing politics with the level crossing removals.

"For Labor to claim the parliament is denying it money after paying almost a billion dollars not to build the East West Link is breathtakingly arrogant," Mr Guy said.

On Wednesday, Mr Merlino and Public Transport Minister Jacinta Allan announced two consortiums were in the running to win the multi-million dollar government contract, with a decision to be made in the coming weeks.

Both consortiums will be required to agree to minimum local content targets, which includes a workforce of at least 10 per cent apprentices and using local steel.

The finalists are the Excelerate consortium, which includes John Holland, Kellogg Brown and Root, McConnell Dowell Constructors and Jacobs.

The second consortium includes Lend Lease Engineering, Leighton Contractors, Aurecon Australia and Parsons Brinckerhoff Australia.

Ms Allan said once the level crossings are removed, capacity on the Cranbourne Pakenham Line will almost double and be able to accommodate an extra 11,000 passengers in the morning peak daily.

"Removing every level crossing on our busiest line is critical for our train system and our economy – unlocking major economic centres in the south east and supporting thousands of local jobs," she said.