An unsolicited proposal from property and construction giant Lendlease to build a toll road linking Sydney Airport and Port Botany to the WestConnex motorway has been rejected, leaving the state's roads agency with the task of finding a solution.
The state government is understood to have decided against progressing the bid by Lendlease for the so-called Sydney Gateway through the unsolicited proposals process because the project would have required a large equity contribution or high tolls.
Aside from the prospect of a backlash from motorists, a higher than usual toll on the gateway threatened to push up the costs of transporting thousands of containers each week to and from the port by trucking companies and logistics operators.
The rejection of Lendlease's proposal leaves it up to Roads and Maritime Services to push ahead with building the gateway link, in a process similar to that under way for a major interchange for WestConnex at Rozelle in Sydney's inner west.
The roads agency took control of the process last month to select a consortium to design and build the Rozelle interchange from Sydney Motorway Corporation, an entity the government set up to deliver WestConnex, after the only bid for that part of the motorway project was rejected.
Labor leader Luke Foley said better road access to the port and airport was the fundamental objective of WestConnex, yet five years into the project the government was "still clueless on how to deliver what they promised".
"After the farce of pretending the gateway was not part of WestConnex, the Premier should stand up and tell us how many more billions of dollars this is going to cost and how much more in tolls we are going to have to pay for this shemozzle," he said.
A spokesman for Roads Minister Melinda Pavey said the government continued to assess its options for the gateway project.
"The government is working closely with its stakeholders Sydney Airport, Qantas, port and rail authorities on all aspects of the project, including duplication of a three-kilometre section of the Port Botany freight line to streamline rail operations," he said.
Lendlease and the Department of Premier and Cabinet, which assesses unsolicited bids, both declined to comment. The latter said unsolicited proposals were confidential.
However, the Minister for WestConnex, Stuart Ayres, told a budget estimates hearing in September that Lendlease was "very much interested in working with the stakeholders around providing a solution to Sydney Gateway".
Mr Ayres, whose ministerial diary shows he met Lendlease and its infrastructure financier Capella Capital in May, has said a separate business case for the gateway will be developed.
Under the government's plans, the gateway will not form part of the distance-based tolling regime for WestConnex, which is capped at $8.60 for cars in today's dollars. Trucks will be charged three times more than cars to drive on WestConnex.
That means motorists and trucks driving to and from the airport or port face paying well above the cap if separate tolls are imposed on the gateway.
The project is complicated by the fact it will dovetail with the proposed duplication of the freight rail line from Port Botany to Sydney's west. That may require moving the line near the northern boundary of the airport about 500 metres north.
Adding to the complexity is the large number of federal and government agencies, and companies such as Sydney Airport, NSW Ports and Qube, which are affected by its development.
A Transport for NSW document obtained in August by Labor estimated that the cost of the link to the port and airport had more than doubled to as much as $1.8 billion.
The updated business case for WestConnex, released in late 2015, lists the gateway as part of stage two of the project and due to open "at the latest" by 2023.
Yet the government insists it is not part of WestConnex, and that the $800 million for the gateway included in the total cost of the $16.8 billion toll road project is an "allocation".