A joint venture involving a subsidiary of Australian construction giant Leighton Holdings and a local Tasmanian firm has won the contract to redevelop the Royal Hobart Hospital.

Earlier this week, Leighton subsidiary John Holland and Devonport based Fairbrother were awarded the $365 million contract, which involves building two new towers to accommodate operating theatres, women’s clinics, endoscopy, pediatrics, maternity and mental health functions together with the refurbishment of existing clinical areas and site-wide infrastructure upgrades.

While describing the project as complex, Leighton Group managing director Glenn Palin says an existing relationship between John Holland and Fairbrother – the two companies built the Medical Sciences 1 Building at the University of Tasmania – would help ensure a smooth transition toward project delivery.

“We are excited to be part of this important project, which will deliver lasting economic benefits to the state and a large number of new employment opportunities,” he said.

While the original project was a big win for Leighton and Fairbrother, cost overruns and delays have turned it into a political embarrassment for the government, which last month was forced to reveal a scaled-down version of the redevelopment with 2,552 square metres less floor space and five fewer operating theatres in order to avoid a massive budget blowout.

The government also had to acknowledge the project would not be finished until June 2017 – a year later than originally planned.

Along with the Royal Hobart, John Holland is also building the $1.2 billion New Children’s Hospital in Perth and a new four-level health campus in Albany. Within Tasmania, the company was involved in the first two stages of the Medical Science Precinct at the University of Tasmania (UTAS).

As well as partnering with John Holland on the UTAS 1 Building, Fairbrother, meanwhile, built the $260 million Integrated Care Centre at Launceston General Hospital and has been involved in aged care facilities at Cosgrove Park in Launceston and Emerton Park in Smithton on Tasmania’s North-West Coast.

The project will be completed in two stages, with work on stage one set to commence later this month.