A parliamentary inquiry into the impact of the light rail on Monday unearthed a litany of issues that continue to hamstring the $2.1 billion project.

The inquiry heard the penalties for delays are capped in the contract between the project's builder Altrac and the NSW government.

Transport for NSW representatives admitted the liquidated damages clause is capped at 15 days and $7.5 million for each of the project's 31 zones.

This would amount to a maximum of $232.5 million being paid in compensation for overdue works - less than half of the current $500 million cost blowout.

Separately the consortium can seek damages from its subcontractors, the government noted.

Greens MP David Shoebridge labelled the contract "insane and incompetent".

"They're laughing at you, aren't they? With a 15-day capping out of liquidated damages they're laughing at you," he told the hearing.

The inquiry also heard a lack of portaloos along the project route meant workers were using the entrances to nearby apartment blocks to go to the toilet.

Randwick City Mayor Lindsay Shurey says other workers are walking onto people's private properties to access water.

"There weren't enough portaloos, so our council officers were going into flats in the morning where the workers had been using them as toilets, and continue to use the entrance hall to their flats as a toilet," Ms Shurey said.

"I couldn't live there and I know any of you would have difficulty."

Inquiry committee member and Labor MP Courtney Houssos says the issues show the project has been "mismanaged from the beginning".

"When most of the zones are in delay for hundreds of days, the idea that the contract was formed only providing for 15 is ridiculous," Ms Houssos told AAP.

Appearing before the inquiry, NSW Auditor-General Margaret Crawford said two oversights made by the government during the planning process contributed to the $500 million-blowout.

"They were two very important stages that were missed," Ms Crawford said.

Those two stages were a business case and a strategic assessment gateway review.

"The conclusion that I reached was that during that period Transport for NSW did not effectively manage the planning and procurement process to ensure that NSW had value for money for the project."

The light rail, linking the CBD to the city's eastern suburbs, was originally budgeted at $1.6 billion.

A series of delays and contractor disputes have pushed the estimated price to $2.1 billion.

Asked whether she was concerned about the inquiry, Premier Gladys Berejiklian described the light rail as an "amazing project".

"I'm not concerned at all ... it's going to positively change Greater Sydney forever for the better and I can't wait for it to open and we're working hard to make sure that happens," she told reporters.

Australian Associated Press