Industry Super Australia (ISA) has made a submission to the Productivity Commission (PC) advocating the inverted bid model for infrastructure financing in response to the PC inquiry draft report.
The PC approved ISA's proposals for funding public infrastructure last month, saying they were worthy of consideration along with other variants.
In response, the ISA made a detailed submission on the inverted bid model, which recommends not just early contractor involvement but also early equity involvement.
It said the inverted bid model was a "transparent and competitive process for the selection of private partners for the design, financing construction, maintenance and/or operation of public infrastructure".
ISA argues any advantage gained by solely contractor involvement is more than offset by lack of involvement by the equity owner-operator in asset design, cost, service delivery and asset management, the cost and time consequences of multiple tenders and the lack of competitive tension steering design innovation.
ISA has also proposed a risk-sharing agreement with the long-term equity partner, including a bidding project internal rate of return (IRR) in the funding competition, which will be changed into an agreed revenue equivalent before the project starts.
This is so that equity investors do not receive fees of any kind and their return comes from the proper management of the asset over its lifetime.
"ISA recommends that the Commonwealth Government, in consultation with State Governments, develop guidelines for the inverted bid model and instigate a pilot project and report the results to COAG," the submission said.
ISA is due to give evidence to the PC inquiry on infrastructure today.
