Western Sydney Airport is likely to cost more than $10 billion and take nearly 20 years to complete.
In that time frame, things we take for granted today will bound forward in leaps that are unimaginable today. It is a once in a 50-year infrastructure project that will compete internationally as a major transport and business hub.
Western Sydney’s new airport should compete with Sydney Airport on every front. Envisioning the scope of this project should not be limited by its impact on Sydney airport. That is not a sensible decision making framework for any investment of this kind. Western Sydney airport should be a disruptor. It should become the aspirational legacy that drives Sydney’s western economy.
Just look at the connectivity framework presented by Transport Sydney to demonstrate the competitive potential of this new piece of public infrastructure. This is a bigger picture than would come from a seemingly reluctant investor who may internalise their thinking and look to defeat other potentially competing infrastructure. Mind you, this bigger picture would be used by any owner looking to generate investment capital and debt.
Forget Sydney’s east-west ‘latte-line.’ Focus on the NSW north-south corridor prospects.
The centre line of Sydney will run north-south through Campbelltown, Liverpool and Parramatta. It does not take much to see the potential of eventually linking this line to Newcastle in the north and Canberra in the south. Along the way, great new urban communities and employment hubs will arise. Call these rivers of gold. They will attract unsolicited innovative developments to build, for example, high speed rail along this axis. These may be resisted by a conflicted owner purely looking to protect passenger and freight movements.
If the scope and nature of Western Sydney Airport is locked in too early, future opportunities to shift direction and adapt to new airport organisation and uses may be lost.
Cities like Singapore, Dallas, Dubai, Songdo and Zhengzhoue show how new airport thinking involves the development of integrated master-planned cities and giant business hubs where just in-time services and goods can be delivered globally. These hubs will be where major corporates flock as they embrace the potential of connected trade and workforce co-location.
There is massive value to be created in and around Western Sydney airport. The government knows this, and they are only too aware of the public value leakage if it is given away too early. Let’s hope the Commonwealth and NSW avoids this prospect.
Western Sydney Airport has been the project that many have loved to hate, but the reality is that it is going to happen. It’s time to start loving this project and to stop treating it as a leper.
While the construction of the core airport may only cost $10 billion, it is possible that related aerotropolis developments and infrastructure could involve investment exceeding $100 billion. Early suggestions that this new airport would act more like a freight terminal and generate only a few thousand jobs as robots race around huge storage racks in black warehouses need to be put in perspective. Yes, that’s part of the picture, but there will be much more.
New service industries and value adding enterprises that will thrive across digitally connected economies can become the vital centre of new exports and jobs. Most exciting is the potential for new integrated residential communities and human service related businesses to offer valuable world class health and education facilities across our region.
The potential of a Western Sydney Aerotropolis will not be realised by a competitor. And frankly, if the experience at Mascot is to be the benchmark, then a wasted public investment opportunity will have occurred. For those who have watched development value being extracted by Sydney Airport’s owners since 2002, huge projects involving terminal upgrades, new hotels and parking structures have provided a development and fee pipeline that has often led to a dismal experience for most who use this facility.
Yes, the airport operates soundly, but there is no ‘there’ when you get there. There is no sense of place. When you think of the potential Sydney Airport had to engage at its edges, to embrace the standing infrastructure of rail, ports, canals and the nearby Wolli Creek precinct, one can see the lack of vision and public interest that this iconic site has been left with. Arguably, the airport it is just a meanly contrived inward looking experience that exists to take more than it gives.
Western Sydney’s new airport demands a far greater collaboration and governance than many have taken time to consider. One collaboration may be to invite an early co-development consortia involving New Zealand, Singapore, India, the UAE and the UK to establish a new economic and cultural trading platform that shares so many interests. All would bring energy and perspective to realising Western Sydney Airport’s full potential.
Sydney Airport has the first right option to undertake the development and operations of any new airport within 100 kilometres of the Sydney airport. This was the transaction sweetener when the Commonwealth government sold a 99-year lease to a Macquarie Bank backed consortium for $5.6 billion back in 2002. Since then, Sydney Airport has invested over $3 billion in expansions and new facilities and has another $1.3 billion planned for the next five years. Should Sydney Airport become the developer of Western Sydney airport, it will in effect become a de facto Public Private Partnership (PPP) without a fresh competitive or transparent process.
PPPs have evolved considerably in Australia since 2002. These days it is unusual for a PPP concession company to take ‘patronage’ risk. Most new PPPs only oblige the concession company to assume ‘availability’ risk – in effect, guaranteed rental returns based on cost.
If the current reluctance of Sydney Airport to take on the development of Western Sydney Airport was resolved by an ‘availability’ funded project, then the value for money and public interest give away would seem an outrageous mollification. The result may destroy value for NSW. One can imagine that every possible impact on Sydney Airport’s interest having to be compensated by the Commonwealth or external proponent for the next 99 years or more.
Apart from getting the envisioning and planning right for this new critical infrastructure project by a non-conflicted entity, there are other important factors to be considered.
Here are some key factors to take into account:
- The construction delivery model needs careful consideration. The modern construction industry is undergoing a massive period of transformation. While governments have diminished their ‘informed buyer’ capabilities over the last 20 years, this is a time to regather the necessary leadership to deliver this project,
- The modern construction era will involve achieving better construction outcomes for less. The transformations now occurring in construction are not about more of the same. At the heart of these transformations is measurably better productivity.
- Construction costs in Australia are at least 20 per cent higher than they should be. These costs not only affect the ‘value for money’ that is achieved for a project, they have the flow on effect of affecting the competitiveness of all who use them.
- The Commonwealth not only has a unique opportunity to lead the procurement for Western Sydney’s new airport that will save at least $2 billion from its initial capital cost, it can ensure that the flow on of unsustainable industrial agreements and costs do not pass to the many construction businesses that will contribute to this project, and thereafter be burdened by their unproductive consequences.
- The government can influence how a modern construction industry will unfold in Australia. The Western Sydney Economy comprises predominantly Small and Medium Sized Enterprises (SMEs). About 70 per cent of these businesses operate in the construction and transportation related sectors. These businesses are mostly led by innovative and energetic proprietors who will have the best potential to embrace modern construction processes and methodologies. The potential for thousands of new construction related enterprises to be enabled can result from this project.
- The economies listed as potential collaborators for the co-development of Western Sydney Airport are all at various stages of embracing the modern construction era. Each is focusing on the need to measurably lift construction productivity and to lower its costs. Each are well advanced in considering how new digitally enabled construction, supported by new advanced manufacturing capabilities will enable them to pursue better construction for less. The new Western Sydney Airport project offers a unique mutually beneficial opportunity to develop and demonstrate many of the aspects that will define a modern construction industry that spans the multi-jurisdictional supply chains of these regional economies.
The Commonwealth Government has already signalled that it is prepared to go it alone in delivering Western Sydney’s new airport, as noted in The Australian. There are many reasons of national and Western Sydney importance as to why the Commonwealth should step up on this occasion. Sydney Airport should have only one option to develop this project under existing terms, or not. Any other terms should pass the public interest and deal transparency test. A better result will be delivery via a capable Commonwealth Statutory Construction Authority.