IFM Investors CEO David Neal is pushing state and federal governments to change the way they contract infrastructure construction so super funds can play a larger part.

Mr Neal, who this year left the Future Fund to join IFM, said the current procurement process is flawed and prone to cost blowouts that hurt taxpayers.

These problems arise from an over-reliance on large construction firms looking to maximise their profits during the building stage, which exit each project shortly after its completed.

Instead, Mr Neal said government should look to partner with long-term equity partners through a public tender program.

IFM Investors also wants larger projects to be broken down into smaller packages.

These changes would increase competition for projects and ensure private investors hold an interest in the long term success of the project beyond its construction.

They would also enable mid-tier contractors to compete against larger rivals for the smaller packages.

“This model is a win for taxpayers and it’s a win for working Australians: it will help grow their superannuation returns, while delivering them the public benefit of better infrastructure now and into the future,” Mr Neal said.

“IFM Investors is ready to invest billions of dollars in job-creating Australian infrastructure projects – we are putting forward this constructive proposal to help us do just that.”

• How to help super funds invest in infrastructure

‘A worthy aspiration’

IFM’s proposal for a more collaborative and longer-term investment model has merit, according to Infrastructure Australia chief of policy and research Peter Colacino.

“There’s no question that the Australian infrastructure sector prior to COVID-19 was over-heated and featured an adversarial culture that would benefit from high levels of collaboration and partnership,” he told The New Daily.

“It’s definitely a worthy aspiration.”

At its core, the proposal also addresses a lot of the issues Infrastructure Australia is considering for its 2021 Australian Infrastructure Plan for federal government.

But the program also makes sense for many private investors and superannuation funds in particular, Mr Colacino said.

“Superannuation has a particular investment profile,” he said.

“They want a long-life, stable return asset, which is what infrastructure generally is, so they’re trying to increase the number of those assets that are available.”

IFM’s proposal comes only a few weeks after Industry Super Australia (ISA) unveiled a plan to supercharge Australia’s economic recovery through heavy investment in infrastructure.

That plan would see the funds invest close to $20 billion in the sector over three years, potentially creating 200,000 construction jobs.

ISA chair Greg Combet said this type of investing would serve a dual purpose, generating both jobs and solid returns for members.

“While we’re generating the best returns in each of the asset classes in which we invest, we’re also mindful of the other elements that are very important – like job creation,” he said.