A major hospital building program that was initiated by the former Labor Government in Queensland has been slammed in a new report.

Released last week, the report from an independent review has provided a damning assessment of the Capacity Expansion Program (CEP).

According to the report, the program represented a welcome effort to address previous deficits in funding for healthcare upgrades in Queensland.

However, poor execution has led to project delays and cost overruns.

“After a limited amount of new or expansion capital allocated to Health over prior years, CEP was a laudable effort to add clinical service delivery capacity across Queensland Health aligned with the Health and Hospitals Plan 2022-23,” the report said.

“However, the CEP’s execution has proven to be lacking on a range of fronts.”

Launched by former Labor premier Annastacia Palaszczuk in 2022, the then $9.78 billion Capacity Expansion Program aimed to deliver 2,200 extra hospital beds by 2028.

The plan included three new hospitals in Bundaberg, Toowoomba and Coomera on the Gold Coast along with a new Queensland Cancer Centre and 11 hospital expansions.

It was to be delivered by Health Infrastructure Queensland (HIQ), which was originally established as the Health Capital Division in 2022 but was renamed in June last year.

HIQ is a division within Queensland Health that is responsible for leading the planning, design, procurement and delivery of healthcare related capital infrastructure throughout Queensland.

Upon being announced in 2022, the CEP was costed at $9.785 billion.

However, the program has since been the subject of delays and cost blowouts.

Following its election last year, the Liberal National Party of Queensland (LNP) engaged Klok Advisory Managing Director Sam Sangster to conduct a review into the program.

Released last week, Sangster’s report found that in just three years, the program’s budget had almost doubled from $9.785 billion in 2022 to a current estimate $17.244 billion.

Moreover, the report uncovered poor execution across several areas.

This included:

• An inadequate timeframe of only six weeks that was allowed for initial program planning. This made it impossible to adequately plan notwithstanding that good people were engaged to undertake planning. It meant that there was no way to anticipate cost overruns which have arisen from additional scope items, site conditions and required infrastructure upgrades.
• The procurement strategy was deeply flawed and ignored market realities. Initial project budgets were inexplicably set in isolation of challenging market conditions.
• Despite the complexity of several larger projects, flawed project delivery strategies unrealistically attempted to deliver the entire project scope in a single stage of development and did not enable projects to proceed in multiple stages.
• In the case of two new hospital projects at Bundaberg and Toowoomba, neither the budget nor the project scope provided for the full relocation of the hospital onto the new sites. While the extra operating costs and staffing implications of requiring the local health service to run two sites in these locations were documented, they did not sway the decision to move to single sites.
• Neither the chosen contracting framework nor the risk allocations that were provided were appropriate with regard to the challenging market conditions.
• Approvals to proceed with projects were given before business cases were completed.
• There has been poor acceptance of chosen scopes on many projects on the part of clinicians and health service professionals. This was because these were developed without sufficient consultation and with high levels of standardisation.

(artist impression of the new Bundaberg Hospital. Image: Queensland Health)

Projects off track

According to the report, several projects have gone off track.

An upgrade and expansion of the Princes Alexandra Hospital (artist impression pictured top), for example, is expected to cost more than double its original $345 million budget and has been delayed by at least one year from its original completion date in the final quarter of 2027.

The project is now expected to cost $761 million and be completed in the final quarter of 2028 at the earliest.

Factors behind the cost blowouts include budgeted amounts for trade costs being well short of market reality and inadequate accounting for the complexity that is associated with decanting and temporary relocations that are needed in order to facilitate construction work.

There are also concerns about an absence of coordination with regard to furniture, fittings and equipment (FF&E) between the procurement team, the design team, the managing contractor and the health service.

This creates further risks that designs will need to be reworked or that the FF&E that is procured and used may not be appropriate to operational requirements.

Another project is the Bundaberg Hospital – a new hospital which is being constructed on a greenfield site about four kilometres inland from the existing hospital.

Funding for this project was complete in June 2022. Early works commenced last May.

Initially budgeted at $1.2 billion, the project is now expected to cost $2.3 billion.

Originally slated for completion in the second half of 2027, meanwhile, the project’s construction will now run until at least the first half of 2029.

Trade costs of $1.062 billion are nearly double the original estimate of $511.5 million. Costs associated with providing an accommodation camp for workers (and associated fringe benefits taxes) have blown out by more than four times from $25.5 million to $107 million.

When planning for the new site, HIQ failed to make adequate provision for critical infrastructure which is needed to support hospital operations. As a result, inadequate provisions were made for the costs of roads, potable water, sewerage, stormwater, electrical supply and telecommunications.

In addition to the blowout in construction costs, the review notes that this project also has a potential blowout of up to $200 million each year in annual operating costs.

This is because the scope to be delivered at the new hospital site does not allow for a full replacement hospital to be delivered at that site.

As a result, the existing facility will need to remain in operation even after the new hospital opens.

A changed approach

All up, the report made 42 recommendations.

In addition to specific recommendations for individual projects, recommendations were made to improve the culture, governance processes and practices at HIQ more generally.

In response, the Government has accepted 41 of the recommendations.

It rejected a recommendation regarding an expansion of the Mackay Hospital – the cost for which has more than doubled and the timeframe for which has blown out by more than a year.

The project has been dogged by major planning flaws. These include a failure to properly assess ground conditions, infrastructure requirements and site servicing for the development.

The report recommended that the Government terminate the main contract for Stage 1 of the project and completely replan the project with new design consultants.

However, the Government has instead opted to work with the current contractor to investigate potential solutions. It said that this was preferable on account of the existing contractor’s understanding of the site, current scope of works and key issues.

The Government has also released what it calls its Hospital Rescue Plan to deliver 2,600 new beds.

The plan includes three new hospitals, the new Queensland Cancer Centre, expansion of 10 major hospitals and new, expanded and upgraded health facilities.

The new hospitals and facilities to be delivered are essentially the same as those planned under the CEP – except that the new plan will deliver an additional 400 beds over and above the 2,200 beds that were envisaged under the existing program.

However, several projects will be replanned and redesigned in accordance with report recommendations.

For example, the Government intends to replan and redesign the aforementioned Bundaberg Hospital so as to enable all services and beds to be transferred to the new site.

This will avoid the aforementioned need for duplicated operations at the old and new sites.

Queensland Premier David Crisafulli welcomed the new plan.

“We promised easier access to health services and we’re delivering it with the Hospital Rescue Plan,” Crisafulli said.

“This record investment into our hospitals will help heal the Queensland Health Crisis and deliver more hospitals.

“Queensland now has a credible plan to deliver the hospital beds needed now and into the future.”

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