MELBA Support Services and Karden Disability Support Foundation will run the new accommodation homes replacing the Sandhurst Centre, the state government has announced.

The two service providers will form Sandhurst Lifestyle Options, an organisation designed to specifically cater to Sandhurst Centre residents.

Community Services Minister Mary Wooldridge made the announcement at the site of one of the new accommodation homes, on an L-shaped block facing Cecil Street and Holdsworth Road, North Bendigo, on Friday morning.

The government will build five homes - on five blocks of land throughout Bendigo - to house the centre's 29 residents.

The government has so far bought three blocks of land for homes, including one in North Bendigo, California Gully and another in Strathdale, and will acquire the second two sites in coming months.

Ms Wooldridge said the new homes would provide residents with increased privacy and allow them to better integrate into the community.

"Moving from an outdated institution will provide them with greater privacy, choice and community access in a home-like environment, while maintaining excellent professional support and personal connections with staff and other residents from Sandhurst," she said.

She stressed that both organisations were committed to helping Sandhurst Centre staff transition into their new roles.

"They are highly regarded in the work they do with their staff, how they value their staff, develop their staff and the staff are such a crucial part of the organisation," she said.

Melba chief executive Glenn Foard said Sandhurst Centre staff, currently employed by the Department of Human Services, would be awarded the same pay and working conditions in their new roles.

"We respect their skills and the experience they will bring ... The terms and conditions people are currently employed on will be matched," he said.

The state government announced it was fast-tracking the tender process for the new service provider in August, which the Health and Community Services Union said was political.

The decision came after the Labor Party announced it would give residents the choice of remaining in state-run care or private residential care.

A Health and Community Services Union spokesman said the union was disappointed with the tender process.

“If it was a speed-skating competition (the government) would have set a world record but it’s not, it’s about the care of the residents and the lives of the workforce and their families," he said.

The Sandhurst Centre is one of two remaining government-run institutions in Victoria for people with intellectual disabilities.