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Sydney Harbour Tunnel view from Cahill Expressway
Research_

Sydney Harbour Tunnel, DIY protagonist

Specialist skills and ownership matter
The Better Infrastructure Initiative have created five case studies based on DIY infrastructure protagonists who have little tolerance in waiting for government. Sydney Harbour Tunnel is one of those examples.
Protagonist:                         Transfield Limited / Kumagai Gumi
Domain:    PPP roads
WHere:    Central Sydney
When:    Project awarded 1988, completed 1992   

The opportunity

Developing a second crossing of the Sydney Harbour for motor vehicles connecting the Sydney CBD with the northern suburbs of Sydney. It was an underground corridor to complement the Sydney Harbour Bridge, which was completed in 1932.

The Sydney Harbour Bridge was operating at capacity with few practical options to expand its capacity due to its iconic design and its immense value to the Sydney skyline and built environment.

The level of technical risks associated with developing an underground tunnel underwater in a densely populated harbour region was too great for government given its limited underwater engineering capability and technical delivery capacity.

Motivation

The proposal was developed by the partners to solve a vitally necessary expansion of the metropolitan road network that was beyond the government’s technical capabilities.

The partners’ principal insight in to the development of this proposal was they appreciated the fundamental risks associated with the project’s delivery and operation were engineering-based. However, the partners were confident they could build a complex underwater road tunnel that would be supported by traffic demand that could not be serviced by an expansion of the Sydney Harbour Bridge.

Source of capital

The Sydney Harbour Tunnel was an unsolicited proposal from partners Transfield and Kumigai Gumi (Japan) and privately funded under a 25-year buildown-operate-transfer (BOOT) contract awarded by the NSW Government.

The Sydney Harbour Tunnel was equity funded by Transfield and Kumagai Gumi, with debt financing provided by a syndicate of Australian and international banks with total capital costs of $750 million.

Impediments

The project was the first major private BOOT project PPP in Australia; significant technical, construction and patronage risk was underwritten by its project proponents.

The Sydney Harbour Tunnel was completed in 1992, and opened on time and within budget. It was successful from inception, with some 90,000 cars using the road daily.

The NSW Government did not have an established policy or organisational framework for dealing with PPP projects of this nature, with these assets usually being completed under design and construct contracts with engineers and contractors. The processes and policies developed by NSW for the Sydney Harbour Tunnel were highly influential in the creation of similar units in Australia and around the world.

Unexpected outcomes

NSW used the success of the Sydney Harbour Tunnel model and this model of PPPs to commission further BOOT road projects with mixed success, such as the M2 Hills Motorway, M7 Ring Road, Cross City Tunnel, Lane Cove Tunnel and NorthConnex.

Victoria also used this model to develop the Melbourne CityLink project. Its operating entity, Transurban, is now an ASX 20 company with assets in NSW, Victoria, Queensland and the USA. 

The surprise is that Transfield/Kumagai Gumi, the project partners, did not parlay its success into a broad expansion of its BOOT road project portfolio, but instead it remains their single, most well-known asset even with only five years of the original 25-year concession period remaining.

Read more case studies. 

DIY infrastructure protagonists empower communities to be centred on customers and services.
Garry Bowditch