State and federal governments should impose greater penalties for unlawful industrial disputes and disqualify tenders from contractors who do "sweetheart" deals with unions.

That’s the view of the Productivity Commission which is calling for an overhaul of the processes which see infrastructure projects assessed and developed.

An overview of the commission’s draft report into public infrastructure, released on Thursday, finds the need for comprehensive reform of the current system including financing, selection, governance and planning and more specifically industrial relations law and building codes.

“There is enough evidence of site disruption, coercion and excessive enterprise bargaining arrangements to make changes,” the report noted.

Stricter guidelines such as those in place in Victoria should be adopted by the commonwealth and other states and territories, the commission said.

“Breaching the guidelines would potentially disqualify contractors from tendering for public infrastructure projects if they had mismanaged their industrial relations arrangements or had reached sweetheart deals with unions that precluded competition from sub-contractors with lower wage costs.”

There are also grounds for the Federal Court to raise penalties “commensurate with the economic damage of industrial unrest” for such unlawful conduct, the report said.

The changes could bring efficiencies equalling multi-billion dollar annual savings.

“A 10 per cent reduction in the cost of delivering infrastructure … would amount to an annual saving of around $3.5 billion,” it said.

But the commission added that perceptions of undue wage breakouts or lagging productivity at infrastructure construction sites were misplaced and that cost pressures have eased as the mining boom abates.

The commission also criticised state, territory and federal government project selection which in some cases lead to “costly outcomes for users and taxpayers”.

“Governments are sometimes weak at determining what, where and when infrastructure projects should be scoped and constructed,” the report said.

At a state level, electricity networks and desalination plants were cited as examples of “inadequate project selection”.

At a federal level, the former Labor government was accused of failing to complete a thorough cost-benefit analysis before proceeding with the National Broadband Network.

Assistant Infrastructure Minister Jamie Briggs seized on the criticism of Labor, saying in a statement: “The system left by Labor is broken and in desperate need of reform”.

Industry submissions to report authors backed the coalition’s reintroduction of the Australian Building and Construction Commission.

The Productivity Commission’s final report is due in May.