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A Healthy Pipeline: Delivering Australia’s Hospital Infrastructure
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A Healthy Pipeline: Delivering Australia’s Hospital Infrastructure

Infrastructure Partnerships Australia has released new research – A Healthy Pipeline: Delivering Australia’s Hospital Infrastructure. The report introduces a comprehensive health infrastructure trade demand model to illustrate the scale of the pipeline and the levels of trade resources, particularly the specialist and skilled trades, required to deliver it.

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A Healthy Pipeline: Delivering Australia’s Hospital Infrastructure

 Executive Summary

 

Our healthcare system is amongst the best in the world, with clinicians, allied services and the infrastructure sector delivering the high-quality services Australians deserve. But building and rebuilding the system is a perpetual task that has rightly seen the pipeline of hospital projects expand rapidly in recent years. Governments have sharpened their focus on ensuring the nation’s health infrastructure is fit for the future, able to respond to the needs of a growing and ageing population.

Delivering contemporary hospitals capable of supporting efficient and patient-centric care models is essential to maintaining our world class hospital system, but the pathway to do so is far from certain.

The health infrastructure expansion has not been met with commensurate growth in the specialist skills and labour required to deliver the scheduled construction pathway. An expanding, tightly-sequenced pipeline compounds the pressures faced by an already constrained health infrastructure market. Labour shortages are already present across a number of the specialist trade and skills areas required to design and construct hospitals. Many of these specialist trades and skills are not readily transferrable with other sectors. They have long lead times to train or convert skilled workers, with some skilled trades operating in direct competition with other high-demand sectors.

Infrastructure Partnerships Australia has developed a comprehensive health infrastructure trade demand model to illustrate the scale of the pipeline and the levels of trade resources, particularly the specialist and skilled trades, required to deliver it. It is clear from this work that the current volume and sequence of Australia’s health infrastructure pipeline will result in extended periods where the demand for highly technical and specialist occupations required far outstrips the supply available.

At its peak in late-2026, the projected volume of labour required to deliver the hospital pipeline will be two and a half times today’s level. To meet this peak, compound annual growth in the health infrastructure market would need to increase eightfold annually on what has been achieved over the last decade.

While all jurisdictions will require additional resources to deliver their pipelines, they each face unique challenges to do so, with some requiring more rapid uplifts and higher volumes of new labour than others.

Even when optimistic projections are applied to achievable levels of growth in the workforce, it would be exceedingly difficult to deliver the pipeline to its current schedule. There is a functional ceiling in Australia’s health infrastructure market that governments and delivery bodies must be aware of for future health infrastructure capital planning. Periods of undersupply in the market will result in suboptimal outcomes for all stakeholders, with inefficiencies leading to higher costs, longer construction times and ultimately less effective health services for end-users.

Governments and delivery bodies can ease near-term pressure in the pipeline by revisiting project scopes and timeframes to ensure the deliverability of their respective pipelines within prevailing market conditions. A rescoped pipeline will address the immediate challenge of ensuring projects can be delivered without significant cost or time blowouts at the expense of taxpayers.

In the longer term, reform measures should be undertaken to minimise the reoccurrence of future supply-demand pressure points. This can be achieved through addressing demand side pressures by improving pipeline planning and capital allocation models. Investment in the workforce that supports skills training and development for domestic and overseas workers should be implemented to address supply-side factors.

Introduction

 

Australia stands at a pivotal demographic moment. It continues to grow at a strong rate, has an ageing population and has long-term, complex health requirements. Combined with the global health emergency of recent years, and the emergence of new technologies and models of care, it has become clear to governments that increased investment in health systems is necessary to ensure optimal healthcare services for all – now and into the future.

This heightened recognition of the need for resilient healthcare systems has had a notable impact on the publicly funded health infrastructure pipeline. Annual capital expenditure from state and territory governments for health infrastructure has increased 94 per cent over the last ten years, resulting in a pointed growth in the number of new projects entering the pipeline. Infrastructure Partnerships Australia’s Australia and New Zealand Infrastructure Pipeline (ANZIP) currently tracks 54 major health infrastructure projects – worth a cumulative $42 billion – in or awaiting the commencement of construction in Australia. Of these, 20 projects worth $14.8 billion are under construction, with 34 projects worth a combined $27.2 billion yet to commence delivery.

Infrastructure Partnership Australia’s health infrastructure trade demand model (Figure 1) shows a rapid uplift in resources will be required to deliver the heath infrastructure pipeline to its current schedule. At its peak in late-2026, the resources required to deliver the pipeline will be a 150 per cent increase on current levels.

The health infrastructure market is already showing signs of strain delivering projects currently underway. Project teams are indicating difficulty delivering projects on-time and in-budget, largely attributed to an undersupply of the highly technical and specialist labour required by hospital construction and exacerbated by the pipeline’s tight sequencing.

Contractors and professional services firms are reporting skills deficits across nearly all major subcontractor trades and service skills which support hospital delivery. With the peak in hospital construction not expected to be reached until 2026, these pressures are only going to become more apparent and have greater impact on the delivery of health services over the coming years.

Figure 1: Forecast trade demand to deliver the health infrastructure pipeline, by jurisdiction

Source: Infrastructure Partnerships Australia

The Health Infrastructure Pipeline

Figure 2 shows the value and quantity of ANZIP projects currently under construction and in the pre-construction phase across Australia.

Figure 2: Value and quantity of health infrastructure projects by jurisdiction

Source: Infrastructure Partnerships Australia

As the ANZIP platform only captures publicly funded projects with a capital value greater than $300 million, the significance of the expanding pipeline is further magnified when other small to medium scale and privately funded projects are accounted for. In addition to the projects captured in Figure 2, there are a further 18 publicly funded projects in the pipeline that fall below the ANZIP threshold with capital values between $100 million and $300 million worth a combined $3.3 billion. Notwithstanding their smaller scale, these projects are also competing for the same pool of labour resources as larger projects . They are often complex to construct and require the same specialist skills. As such, these projects have been included in the trade demand modelling undertaken later in this paper.

The rapid acceleration of the pipeline has included some sudden substantial inclusions, such as the Queensland Government’s $11.2 billion Capacity Expansion Program (CEP). Announced in June 2022, the program seeks to deliver 15 projects, including three new hospital megaprojects, by 2028. These projects all underwent a swift procurement process which aspires to see them all delivered by 2028.

The Queensland CEP megaprojects join an already considerable list of health megaprojects announced over the last few years across the country yet to commence construction. This list is headlined by South Australia’s $3.2 billion new Women and Children’s Hospital, and also includes New South Wales’ $1.3 billion new Bankstown Hospital, Western Australia’s $1.8 billion new Women and Babies Hospital, and Victoria’s $2.3 billion redevelopment of the Royal Melbourne Hospital and Royal Women’s Hospital. The total hospital megaproject pipeline comprises 13 hospitals, with a combined value of $19.5 billion.

Despite seeing an uplift in the last 24 months, the forward construction pipeline is still some distance from reaching peak activity. There are an astonishing 29 projects worth a combined $22.8 billion expected to commence construction between now and the end of 2026. During peak construction in 2026, it is expected there will be 43 projects in main works construction. This is in stark contrast to the 20 projects valued at $14.8 billion currently under construction.

Figure 3 provides a forecast of upcoming major infrastructure expenditure across the pipeline of major health infrastructure projects, coloured by the year of construction commencement. Data for this forecast is drawn from the projects and contracts on ANZIP, including historical data points to demonstrate the growth in the health infrastructure pipeline since 2022. This data has been applied to a model which estimates the quarterly rate of expenditure for each project based on its position in the planning and delivery cycle. Should the health infrastructure pipeline be delivered to the current schedule, it is forecast that quarterly expenditure on the major health infrastructure pipeline will peak at over $2 billion by the end of 2026. This would be a doubling in the forecast expenditure for just two years earlier in 2024 and four times the expenditure undertaken in 2022.

 

Figure 3: Historical and modelled quarterly expenditure for health infrastructure projects

Source: Infrastructure Partnerships Australia

Health Infrastructure Trade Challenges

 

Infrastructure Partnerships Australia and Klok Advisory undertook an extensive stakeholder consultation process to inform this paper. Overall, the results of the stakeholder engagement found that the rapidly expanding health infrastructure pipeline has created significant shortages in most of the highly technical and specialist skills required to construct a hospital. Notably, delivery teams of projects under construction indicated considerable budgetary and scheduling pressures due to a lack of labour availability.

The engagement process included participants from the public and private sectors. Common issues identified include low numbers of qualified individuals, a limited number of firms and subcontractors available, materials and supply constraints, and industrial relations challenges.

The following trades were identified as facing particularly acute shortages:

  • form workers,
  • mechanical and electrical services,
  • fire and hydraulics,
  • vinyl laying,
  • plasterboard installers, and
  • medical gas installation.

Other shortages were identified across the professional services sector such as design skills, as well as the medical supply space including specialist plant and equipment suppliers. The impacts of these contemporary shortages on the rapidly expanded pipeline of work are outlined in the following section.

Footscray,,Victoria,,Australia,,02 07 2023.,Tower,Cranes,At,The,New,Footscray

Capturing the Challenge: Health Infrastructure Demand Model

 

Following the identification of constraints on key occupations involved in hospital construction in Australia, Infrastructure Partnerships Australia has developed a health infrastructure trade demand model to capture the challenge of delivering the forward pipeline. The model produces monthly volumes of on-site labour at a trade level and on a project basis for publicly funded health infrastructure projects in Australia with a capital expenditure greater than $100 million. The model aims to provide an insight to health infrastructure planners and delivery teams of the level of scale-up that will be required across the different specialised skills and trades involved in hospital delivery necessitated by the forward pipeline.

The model relies on the generally regularised construction program of medium to large scale hospitals, with projects containing distinct stages and requiring particular skills at similar phases during construction. This regularity in project programming enables an accurate measurement of pipeline labour requirements, as a typical delivery schedule can be used to estimate the resource requirements at a particular point during the delivery of a project.

The timelines which underpin the model have been developed using several industry-accepted generic hospital programs. The model identifies 21 on-site trades required for the delivery of major health infrastructure projects categorised across five delivery stages: pre-fitout, early-, mid-, and late-fitout, and commissioning.

Figure 5 illustrates a high-level trade program for a typical hospital project which informs the assumptions and trade requirements in the trade demand model.

Due to the non-linear labour requirements of trades throughout project development, categorisation of trades into early, mid, and late has been determined based on the period of peak labour distribution for each trade.

Figure 5: Generalised trade program for health infrastructure delivery

Source: Infrastructure Partnerships Australia

Figure 6 illustrates that at its peak in November 2026, a 150 per cent increase in the number of workers will be required across all under delivery projects compared to June 2024. During this period, 47 projects will be in construction across all states. Split across project phases, 127 per cent growth in workforce will be required for pre-fitout works, 163 per cent growth for early-fitout, 155 per cent growth for mid-fitout, 126 per cent growth for late-fitout and 128 per cent growth for the commissioning phase.

Figure 6: Forecast trade demand to deliver the health infrastructure pipeline, by project phase

Source: Infrastructure Partnerships Australia

Pressures for different trades will occur at different times. Aggregating the model by delivery phase enables a detailed examination of the trades under pressure at different stages during the delivery of the pipeline.

The below demonstrates periods of trade pressures by delivery phase and highlights the respective challenges faced by these trades as identified during the stakeholder engagement process.

Additional labour constraints

On top of the above identified trades, there are shortages across detailed design skills which are housed in large subcontract services firms or are procured from engineering firms. There are limited numbers of appropriately skilled and experienced designers across organisations. This is combined with shortages in a number of other professional services involved in hospital delivery.

In addition to on-site fitout trades, medical supply services are facing challenges across major medical equipment (MME) including pneumatic tubes, nurse call, boilers and chillers. There is now a near monopoly for some specialist equipment suppliers. Acquisition and provision of certified on-site installation labour is hard for MME suppliers given the scale of projects across the country, this is combined with even scarcer commissioning, implementation, and training resources.

Hospital delivery also requires tertiary works to enable project delivery including offsite connections, offsite manufacturing, ancillary works and other supporting infrastructure. These works will all require labour resourcing, however, are not constrained by the same limitations facing the specialist skills’ areas as labour can be resourced cross-sectorally.

Gosford,,Australia, ,May,18.,2018:,Construction,And,Building,Progress

Trade Demand by Jurisdiction

 

All states and territories will see an uplift in labour requirements to deliver their respective hospital pipelines over the coming years.

The trade demand model data, as outlined in Figure 12, shows that the majority of states – New South Wales, Queensland, South Australia and Western Australia – will see a significant uplift in resource requirements from current levels.

Figure 12: Forecast trade demand to deliver the health infrastructure pipeline, by jurisdiction

Source: Infrastructure Partnerships Australia

In NSW, there is a large pipeline of works to be delivered, peaking in late-2026 where a 63 per cent growth in the number of tradespeople will be required across 16 hospitals in November 2026. The vast majority of NSW’s pipeline for health infrastructure projects on ANZIP comprises projects located across greater Sydney and some regional developments. The development of the regional NSW pipeline of works has been characterised by smaller decentralised projects over a longer time period servicing communities with a smaller catchment area.

Our stakeholder engagement found that as these projects have been planned over long time horizons and with the support of the community, they have not been met with the challenges faced by metropolitan projects and regional projects in other jurisdictions.

Victoria will see a less significant resource requirement uplift compared to other states. Victoria reached a preliminary peak in February 2024 – owing to a number of megaprojects under delivery including the $2 billion new Footscray Hospital and the $1.1 billion Frankston Redevelopment. Beyond 2024, resource requirements alleviate for early- and to a lesser extent mid-fitout across 2025 before ramping up again from 2026-2027.

Queensland’s Capacity Expansion Program results in a significant and swift upwards spike in labour resource requirements from 2025, only alleviating in 2028. At its peak, a 604 per cent growth in workers will be required in June 2026 compared to today’s levels. The scale of the Program reflects the State’s need to deliver essential healthcare upgrades and resources and is Queensland’s largest ever health infrastructure expenditure. Notwithstanding the need to deliver important upgrades and capacity, the concurrent delivery of these projects will be challenging within the current resource-constrained environment.

South Australia’s pipeline sees a swift upswing in resource requirements for hospital works over the coming five years. This is largely due to labour demand to deliver the $3.2 billion New Women’s and Children’s Hospital, as well as completing other projects in its pipeline including the Flinders Medical Centre upgrade and expansion. The delivery of such a significant project in South Australia poses challenges as resources will need to be scaled at a rapid pace. Projects in jurisdictions which are unable to sustain long term pipelines of major health infrastructure have a greater onus to undertake more comprehensive planning across both local and national markets to attract the necessary resources in a competitive market.

Similar to South Australia, the Western Australian pipeline of labour demand is largely attributed to two large projects, the new Women and Babies Hospital ($1.8 billion) and the Comprehensive Cancer Centre ($750 million). Given the remoteness of the Western Australian market, the State has the most difficultly in attracting new resources – particularly from the east coast who already service a busy pipeline. However, as a singular market, the State also has preferable conditions for labour retention. As a discrete market with few out-of-sequence major projects, Western Australia has an opportunity to sequence projects so that the highly technical and specialist skills already existing within the State are available to move from project to project as required.

Across in Tasmania, the State’s health infrastructure pipeline is headlined by the Launceston Hospital Redevelopment, which is being delivered across a number of stages. The State will require a steady flow of resources as works are rolled out on the project over the coming years. In the ACT, resources are projected to increase when the new Northside Hospital moves into delivery at the latter end of the forecast period.

Figure 13 compares the number of on-site labour roles required by each jurisdiction across their respective forward pipelines. While all jurisdictions will require an uplift in resources, this chart demonstrates that each faces a different variation of the same challenge, with both actions unified across Australia and jurisdiction specific actions required.

Figure 13: Forecast volume of trade resources required, by jurisdiction

Source: Infrastructure Partnerships Australia

A Capacity Ceiling

 

At its peak in late-2026, the projected volume of labour required to deliver the hospital pipeline will be two and a half times today’s level. The compound annual growth rate achieved over the last ten years for capital expenditure in health infrastructure projects across all state and territory governments is 4.7 per cent. Using this capital expenditure growth rate as a proxy for workforce growth, the health infrastructure delivery market has achieved an approximate 4.7 per cent growth in annual delivery capacity over this period. Compound annual growth would need to be 40 per cent to meet the scheduled delivery peak of our current pipeline in late-2026.

Notwithstanding this growth, constraints are already being felt across a number of specialist skills on the critical path to hospital delivery. Looking ahead, Figure 14 illustrates that if the current growth rate were to continue at this same pace, the Australian health infrastructure market would fall 55 per cent short of having the workforce required for the forecast peak in 2026.

When applying a more optimistic 10 per cent growth rate projection, capacity would still fall 49 per cent short. If 15 per cent growth were to be achieved, a sizable task to achieve in a short time and in an already constrained market, capacity would still fall 43 per cent short of required levels.

To deliver the national pipeline as it is currently scheduled, a significant compound annual growth rate of 40 per cent would be required – an eightfold increase on the levels of capital expenditure growth realised over the last decade. Within the bounds of prevailing market conditions there are very limited opportunities for this level of growth. Historical trends highlight the limitations that must be faced by governments and delivery agencies, with inherent upper bounds in what can be achieved in a short period of time.

This analysis paints a sobering picture. Even with the most optimistic projections of annual workforce growth, delivering the pipeline based on current schedules will be exceedingly difficult.

This difficulty is indicative of a functional ceiling in the capacity of Australia’s health infrastructure market. As it is a two-sided market, it is impossible to tell exactly where this ceiling is or what impact it may have. However, it is prudent to acknowledge that such upper capacity limits exist. A rapidly growing and tightly sequenced pipeline increases the likelihood of exceeding the capacity ceiling where market resources cannot meet demand. Governments and health delivery bodies must be aware of this and of the price and schedule implications that exceeding a capacity ceiling may have.

Further, as the workforce continues to grow to meet the ceiling set by the current pipeline, there will be a natural dilution of the expertise and institutional sophistication required to deliver complex health infrastructure projects. How this dilution affects project delivery will need to be taken into account by all stakeholders.

Figure 14: Workforce growth projections

Source: Infrastructure Partnerships Australia

Gosford,,New,South,Wales,,Australia, ,December,20,,2018:,Hoisting

Enabling Delivery of the Pipeline

 

With the pipeline facing near-term constraints due to tight sequencing, governments and delivery bodies can ease this pressure by revisiting project scopes and timeframes. Measures to rescope the pipeline in the short term, which account for current market conditions, would underpin its deliverability. In the longer-term, while there is no silver bullet to addressing an undersupply of labour in the market, there are measures that can be progressed to minimise the reoccurrence of future supply-demand pressure points. Governments can look to both improve pipeline planning approaches and invest in workforce capabilities.

Short-term actions

Rescoping the short-term pipeline is necessary to ensure its deliverability. With the current state of play, governments and delivery bodies are already facing the challenge of minimising project cost and time overruns caused by the significant scale and tight sequencing of a pipeline which outweighs the resources available to deliver it. Our stakeholder engagement identified that significant cost pressures are being reflected in some construction price tender returns for existing projects, further compounding deliverability challenges. As illustrated in the previous section of this paper, achieving the growth in the specialist skills needed to deliver the current pipeline would require an annual eightfold increase in the growth levels achieved over the last decade. In the current constrained market, notwithstanding competition from other infrastructure asset classes, this is a difficult outcome to achieve.

Health infrastructure delivery bodies can mitigate these risks through a regular review of their pipelines and responding to constraints through restructuring or re-sequencing project delivery timeframes as necessary. A rescoped pipeline – focussing on delivering projects, or stages of projects, which are identified as immediate priority – will address the immediate challenge of ensuring projects can be delivered without significant cost or time blowouts at the expense of taxpayers.

Longer term reform

Longer term reform is required to underpin a supply-demand equilibrium and prevent pressure points from reoccurring in the pipeline. Reform should encompass both supply and demand side measures to facilitate the required growth anticipated for Australia’s healthcare system over the coming decades. This reform should be tackled on two main fronts: future pipeline planning and skilled labour supply. From a demand perspective, governments can ensure future pipelines are planned and structured to reflect the market’s capacity, while measures to increase skilled labour supply will ensure the market is equipped to mobilise to meet such demand. This will allow for timely and cost-efficient project delivery and achieve optimal service outcomes.

 

Governments can undertake measures across their planning, design and procurement processes to underpin an appropriately sized pipeline which can be delivered within prevailing market conditions.

 

To ensure a continued supply of skilled labour, governments should undertake measures to attract and retain domestic and overseas workers.

Similar to skills requirements for the broader infrastructure sector, a two-pronged approach is necessary to both attract and retain overseas talent and maximise domestic skill capabilities. A broad-ranging policy environment that supports both skills training and development for domestic workers, combined with visa reform that attracts and retains highly skilled workers from overseas, is a pre-requisite to ensuring a continued supply of the technical and specialist skills required to deliver health infrastructure.

 

Appendix – Trade Demand by Jurisdiction

Figure 15: NSW health infrastructure trade demand, by project phase

Source: Infrastructure Partnerships Australia

Figure 16: Victoria health infrastructure trade demand, by project phase

Source: Infrastructure Partnerships Australia

Figure 17: Queensland health infrastructure trade demand, by project phase

Source: Infrastructure Partnerships Australia

Figure 18: South Australia health infrastructure trade demand, by project phase

Source: Infrastructure Partnerships Australia

Figure 19: Western Australia health infrastructure trade demand, by project phase

Source: Infrastructure Partnerships Australia

Figure 20: Tasmania health infrastructure trade demand, by project phase

Source: Infrastructure Partnerships Australia

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