Housing minister Grant Shapps has ordered the review after the National Audit Office discovered delays and spiralling costs on a string of schemes to revamp social housing.
The watchdog questioned the use of the PFI process and doubted whether it was the best way to achieve value when it comes to housing refurbishment.
Amyas Morse, head of the National Audit Office said: “The Department for Communities and Local Government has pursued the PFI funding route for improving housing stock with only limited evaluation of the value for money of the programme. It should now carry out such evaluation.
“The Department should assess, as a matter of priority, whether its current and planned PFI projects are delivering value for money. It should at the same time, assess all its past projects. This assessment should be based on hard numbers as well as qualitative factors.”
The NAO report stated: “In the context of this programme, PFI has been a flexible and useful funding route for local authorities to improve existing housing and build new stock.
“However, the majority of projects required significant increases in central funding prior to contract signature and all have suffered delays.
“One early project cost the Department for Communities and Local Government over three times more than expected in its business case. Twenty one of the 25 projects which have been signed to date have experienced cost increases, with 12 of these over 100 per cent.”
“All signed projects, for which the NAO was able to obtain data, were delayed, on average by 2 years and 6 months.
“Local authorities have reported that their initial choice of PFI was driven by the funding structures of the Department and policy constraints rather than a pure focus on value for money.
“Some local authorities themselves have concerns that PFI procurement can be excessively costly and takes too long when compared with other routes.
“At the programme level, the Department has undertaken only limited evaluation of whether housing PFI delivers value for money compared to alternative investment routes.
“While the capital cost of PFI housing projects is similar to other developments, the Department’s evaluation to date has not taken account of the full costs. Procurement also tends to take more time, which can increase procurement and tender costs for local authorities and bidders.”
