Delivery of health infrastructure in Queensland: the $9.78 billion question - Government Contracts, Procurement & PPP

The State Budget, handed down by Queensland Treasurer Cameron Dick in June 2022, included the largest health and hospital plan in Queensland history with a budget of $9.78 billion.

The plan includes the construction of three new hospitals, one cancer centre and the expansion of 11 existing facilities to provide 2,200 additional overnight beds over the next six years. This is timely given the projected growth in Queensland's population and increased burden on capacity caused by the pandemic in the past two years and which will continue to put strain on existing health infrastructure.

At the same time, the construction industry has also undergone change in the form of market capacity constraints and building contractor and subcontractor insolvencies, as well as constrained supply chains forcing proprietors to reconsider how they progress procurement for construction projects.

Given the importance and scale of the proposed projects, consideration should be given to how to optimise the delivery of these projects in light of the current infrastructure market conditions and the unique challenges involved in delivering health infrastructure.

Our recent experience on similar projects around Australia suggests that the key to overcoming the delivery challenges will be:

staging - mitigating market capacity and supply chain issues by carefully staging the works;
working together and interface management - the Government and construction sector and key stakeholders working together to effectively address key risk areas;
simplifying - centralising the public procurement process where possible;
scoping - ensuring accurate specification of medical equipment and Information and Communications Technology (ICT) and integration with the health facility;
construction methods - using modern construction methods such as BIM and modular construction; and
taking proper account of site-specific considerations.

Staging - construction industry

The pandemic has had a seismic effect on the construction industry. Staff shortages, social distancing restrictions and the extended time needed for materials to make their way through the supply chain have resulted in increased costs and delays on building projects. This has contributed to a number of recent high profile contractor collapses in the Australian market, which will exacerbate the already tight availability of contractors.

For new projects, this tighter market likely means higher costs and extended delivery times, particularly where there is a strong pipeline of projects to be delivered over a relatively short time frame, as is proposed in Queensland. We also expect the market will be reluctant to hold its prices for the typical time usually required to evaluate tenders submitted for a complex health project.

The impact of this on the delivery of new projects can be mitigated through careful sequencing of projects (including prioritising the most critical projects based on clinical demand) and creating efficiencies by streamlining project delivery where possible. To optimise the positive outcomes of new health infrastructure for our health system and the community, the planning of infrastructure delivery should be aligned with the broader planning and implementation for the training and mobilisation of health staff and the streamlining of operations in hospitals.

Working together

A potential way to leverage efficiencies during project procurement is for government and private sector tenderers to work together to develop a set of common building and operation specifications which can be relied on by tenderers in their bids for similar health infrastructure projects. This will minimise tendering costs for builders, which may also result in a higher number of competitive offers for government, as well as decrease the overall costs for government for the delivery of these health projects.

Further, the current capacity constraints in the construction industry and the compact target timeframe for delivery of the health projects will mean that efficiently reaching a mutually acceptable contractual outcome is a priority during the procurement process.

The form of contract issued by a government procurement entity to contractors should reflect current market conditions. For example, it may be appropriate to give contractual relief for supply chain impacts and delay caused by the ongoing global pandemic.

Such relief will need to be balanced through appropriate mitigation, such as contractual requirements for contractors to comply with management plans from the outset which mitigate the impacts of supply chain delays and pandemic restrictions. In addition, we are seeing many principals adopt a modified ECI\managing contractor model to achieve early contractor input into key parts of a project and enable accelerated procurement in circumstances where the design is not fully developed.

Other stakeholders should not be forgotten. These projects will be delivered in many cases in an existing operating environment and the requirements of these stakeholders (hospital operators, lessees and other providers who operate out of the hospital) must be identified early and baked into the specification to avoid costly reverse engineering at a later stage.

Simplifying - centralised procurement

Currently, procurement of health infrastructure in Queensland is delivered through the individual hospital and health service of the hospital. We understand that this procurement approach may change with the potential introduction of a central procurement agency in Queensland. This would be similar to the Victorian Health Building Authority, which undertakes procurement for all health facilities throughout Victoria.

There are significant benefits in having one central repository of knowledge and expertise, including the creation of efficiencies in procurement processes and during project delivery. Even if such an agency is not implemented, there is benefit in developing a base set of building and maintenance requirements that could be adjusted for specific projects.

Further, although hospitals and other health facilities may have complex functions, given the volume and timeframe for delivery, it may be appropriate to consider whether design and build requirements can be simplified or pared back whilst still delivering modern, state of the art facilities.

Scoping - medical equipment and ICT

Medical equipment and ICT is another area which has rapidly developed in its complexity and priority for integration with the health facility. It is critical to have a detailed ICT procurement, installation and commissioning strategy in place at the outset (with precise allocation of responsibility for each party). Further, that plan must integrate with the overall delivery program for the health facility. ICT and AV components of hospitals will also require additional interface arrangements with the parties delivering the health infrastructure.

Finally, given the evolving nature of technology including the increasing applicability of smart building technology to healthcare, consideration should be given to how facilities can be constructed (and how these requirements are documented during the procurement phase) to ensure they can be adapted for new technology in the future.

Developments in construction methods

The current conditions in the building industry discussed above mean that construction methods which enable high quality delivery in tight timelines are key to the successful delivery of Queensland's health infrastructure plan. Two relevant methods are building information modelling (BIM) and modular construction.

BIM is a form of layered design modelling which enables people to more clearly see the overall design. For a complex environment like a hospital, this technology will assist in the early identification of design and interface conflicts before they materialise during the building process.

Modular construction is based on manufacturing buildings away from the primary construction site (usually in a factory), transporting them to the site and then assembling them. The controlled nature of the construction environment reduces costs and can be faster than building on the site. Modular construction is already used throughout Australia's healthcare industry, such as at the facilities at Northern Hospital, Sunshine Hospital and The McKellar Centre as part of Victoria's Mental Health Beds Expansion Program, and will continue to be adapted for the current market climate.

Site specific considerations

Finally, the considerations inherent to delivering health infrastructure remain relevant. For new builds, these include:

challenges where brownfield sites are used, including procuring sufficient access for construction, dealing with unknown ground conditions and pre-existing contamination and minimising impacts to surrounding areas when undertaking demolition works; and
co-ordinating stakeholders and the start of a suite of new leases and subleases for the different operators on the hospital site such as pathology and radiology operators.

For expansions of existing health infrastructure, management of the interfaces between existing hospital operations and the new scope during both the construction and operations phases remains critical. Detailed planning and stakeholder engagement will mitigate the impacts on these interfaces.

The demand over the next decade for the delivery of high quality and timely healthcare infrastructure will present unique opportunities and challenges in the current construction climate. Detailed project planning, streamlined procurement and the use of contemporary construction methods will facilitate a successful delivery.

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