Sydney’s second airport will help propel the economic future of Western Sydney for the next 25 years.
Stage 1 is for a single runway and terminal, but more ambitious plans by 2050 envisage a transportation hub that will rightly challenge Sydney Airport. The great news is that the Commonwealth Government will be the principal client. There’s now a unique opportunity to imagine the wide-ranging legacies that could result.
The procurement of the initial build may facilitate a hub for modern construction enterprises in Western Sydney. Small to medium sized enterprises (SMEs) make up 70 per cent of the Western Sydney economy, with half of these being construction related. The global construction industry is increasingly turning to off-site manufacture (OSM). This is not a fad, it is part of the massive transformation now occurring globally with the digitisation of an industry now waking to become measurably smarter and more productive. Western Sydney construction SMEs could be major beneficiaries.
The construction industry must distinguish itself by efficiently delivering a high-quality, independently measurable value for money project while demonstrating how the modern transformations reshaping the industry can benefit the community long-term. So, what are the challenges needing to be addressed? How can these be played out? What is ‘value for money’ and how will it be measured? How should the procurement approach point to a positive legacy?
There are many aspects to this conversation, but here are four key areas that would make an immense positive difference:
- The traditional design, bid and build (DBB) project procurement model will be unable to capture the benefits that are now demonstrably available in modern construction.
- There are credible examples of alternatives to traditional construction industry organisation and performance in airport delivery to warrant consideration here.
- The cost of construction in Australia is too high (especially for infrastructure) to be sustainable, and most importantly it burdens the capital cost of assets for their life.
- There is little strategic momentum to define what today’s construction projects should be like and how the industry could organise to be more viable long term.
Projects of this scale are awarded to the largest contractors. It is likely that the engagement for Western Sydney Airport will be to a large managing constructor who would progressively coordinate the design, procurement and superintend the project using DBB. Traditionally, the successful contractor will be based on-site, provide the enabling attendant workforce and temporary infrastructure. This contractor would normally commit to an industrial enterprise bargaining agreement (EBA) that would affect all those companies who work on the project. Often, such agreements flow into those enterprises off-site. The contractor will be paid a fee and be entitled to recover the direct costs of tendered parts of the work and be reimbursed for its own an attendant workforce and infrastructure expense.
The traditional DBB process will ensure that the cost of the industry’s business as usual customs and practices dictate. There is no incentive to change when clients passively accept that ‘value for money’ is the product of procurement processes that remain unchallenged to do better…in this instance, some 20 per cent less expensive and 40 per cent faster. Add to this avoidable construction waste that results from on-site fabrication and an industry that tolerates workforce injury rates that could be reduced by 80 per cent if construction projects became more assembly orientated and less risky.
The construction of the UK’s Heathrow T2B terminal demonstrated a different design and procurement methodology. Using a ‘kit of parts’ strategy organised around what Grimshaw Architects describe as an ‘industrial shell + soft centre’ logic,’ the design and build team rethought the traditional procurement strategy to deliver the project 10 percent cheaper and 25 per cent faster than previous builds, on a site constrained by space and security.
Grimshaw said the next stage of strategic planning involved establishing a regular structure which considered the structure, services and skin as one integrated element. This logic then enabled rapid organisation of these industrial shell ‘pieces and parts’ to be procured using OSM, thus minimising on-site fabrication and workforce. The critical activities then became early supply chain engagement and on-site assembly logistics planning. The focus was on pre-finished components coming to site that enabled early enclosure and subsequently the incorporation of the ‘soft centre’ elements in a controlled and productive environment.
Airport terminal buildings are in many ways just the same as large industrial buildings, hospitals, schools, offices, houses and hotels. Their ‘soft centres’ are subjected to a lifetime of change and adaptation. The logic applied at T2B enabled this asset to be efficiently delivered in the first build phase of its lifecycle, but most importantly for a changing future.
This project demonstrates how mass-fabrication and mass-customisation in construction can be organised. Importantly, it demonstrates that a new type of construction eco-system can evolve off-site, with flow-on benefits to all types of projects that will be needed across Western Sydney in coming decades. Central to this step-change in the way traditional construction is performed was more mature dealings with the industry’s supply chain. The enterprises of modern construction will bring systemic capabilities that differ from the incremental constraints of traditional DBB models that commence engagement too late.
There has been substantial media attention given to the Australian economy’s flat wages growth over the last 10 years. This has not been the case in construction. Wages, conditions and the flow-on mirroring of those increases across construction salaries and projects has seen annual rises of upwards of five per cent, with little or no measurable productivity gain. The table below shows construction wages in Victoria compared to those of other professions. Construction costs in Australia are unsustainable without a massive productivity lift.
The relevance of these wage comparisons to the governance principles the client could apply to procuring Western Sydney airport is simply justified by the effects of a large head contractor signing a project-wide EBA which flows onto all contractors working on the subject site, and subsequently similar impositions that are made on off-site fabricators in their factories before their manufactures will be accepted on-site.
Eventually the material costs and working conditions imposed on large projects flow out across the whole construction industry. Moves to more OSM are inevitable, as this is the only path to improving on-site construction assembly productivity, delivering more assured quality, lowering construction waste and injury, and reducing embedded carbon.
This is a unique time to be fostering a vibrant and sustainable domestic OSM sector around the new airport build. Government has a major role to play when it is the initiator of a large influential project. The delivery of Western Sydney airport could be an important lever in enabling a ‘legacy hub’ of modern construction enterprises in the Western Sydney region. However, unless the industry can get its delivered cost down by lifting local productivity, the inevitable result will be much of the potential domestic OSM market moving off-shore, where it can avoid the direct flow-on effects of unsustainable work practices and conditions.
While the delivery of the Western Sydney airport has many other important issues to address, including transport links, environmental impacts and related social infrastructure, this is game-time for the construction industry. This is an opportunity to make a lasting strategic difference to how Australia’s future construction and engineering projects are performed. It may not re-present any time soon. It is the only credible opportunity for this government to ‘walk the talk’ and use this investment to re-set the game. Time is important in bringing an operational airport on line, but on this occasion the strategic legacy priority should prevail.
Here are some strategic principles for consideration:
- Reduce the current construction budget by 20 per cent and challenge the industry to propose how, through early supply chain engagement this could be achieved.
- Limit the engagement of the lead contractor to perform scope management, design co-ordination, schedule and logistics management, procurement and superintendence only, with no physical on-site workforce or dependency.
- Arrange for a master performance and contractor’s all risk insurance scheme.
- Break down the order and sequences of site possessions to make sure there is no single enterprise with a whole of project presence which overshadows another.
- Think of the project as an elemental progression of logical advanced work packages which limit on-site fabrication and optimise the potential for an on-site assembly preference, involving multi-skilled teams suited for each stage of the works.
- Make 20 per cent of the final fees paid to the lead constructor and lead designer dependent upon achieving at least 50 per cent of the physical components incorporated into the project to have been fabricated off-site.
- Make 20 per cent of the final fees paid to the lead constructor and lead designer dependent on a sliding scale of achieving an 80 per cent improvement to the industry’s national average on-site Lost Time Injury (LTI) record.
- Make it a clear breach of contract with immediate effect for any entity to impose wage or work conditions on another, either on or off the project.
- Engage a university with suitable CM standing to independently record on-site duration and workforce inputs for each construction element to identify how the future measurement of industry productivity performance may be improved by smarter pre-construction planning and on-site construction organisation.
Strategic direction setting by an informed and influential client for Western Sydney Airport (noting the Australia’s construction industry’s failure to self-reform) is critical to the modernisation of Australia’s construction industry. Such projects do not come along often. There are many contributing factors. These include differences between the states of the federation, the challenges of any single private enterprise (large or small) to make the principled decisions and ensure their adoption, and the fragmentation of the construction industry’s supply chain which results from the traditional DBB procurement model.
The above principles for this project step outside of soft ‘business as usual’ performance settings. In this instance, quantifiable and unavoidable targets combined with firm management protocols are proposed which cut across traditional silos of practice and custom. Reversing these can only be achieved by re-ordering the organisation of the industry’s whole eco-system. This can only be implemented by a smart, resilient client.
The legacy of delivering the new Western Sydney airport will be significant either way this project is performed and governed. It could further enshrine the industry’s past practices, waste and costs. These practices will not deliver a modernised or viable industry, especially at a time when new projects are increasingly put under the value-for-money microscope.
There is simply too much new investment in private and public infrastructure such as new schools, hospitals, housing, industrial buildings, offices, related transport and utility services not to imagine, that these could all be delivered ‘better for less’.
Exercising the potential of this 25-year project to be a fountainhead for a modern, viable, competitive, innovative and assured construction industry would be a very positive legacy.