OFF BALANCE SHEET reporting of PFI contracts makes it difficult to tell if the deals provide the best value for money, according to the NAO.

Privately-financed projects will often be off balance sheet, which could act as an incentive to use PFI.

The public auditor said that the case for using PFI needs to be challenged more in the wake of its analysis, which indicated the cost of debt finance has increased by 20% to 33% since the credit crisis.

The report complained that the lack of a systematic value-for-money evaluation of operational PFI projects by departments has resulted in insufficient data to demonstrate whether the use of private finance has lead to better or worse value for money than other forms of procurement.

Comptroller and auditor general Amyas Morse said: "The public sector should make better use of the hard-won lessons from the extensive and substantial PFI programme.

"This means acting as a more demanding and intelligent customer by harnessing government buying power through concerted tactics and tougher negotiation."

The report drew on five recent NAO reports on PFI procurement of the M25 private finance contract, financing PFI projects in the credit crisis, PFI in housing, hospital PFI contracts, the PFI Defence multi-role tanker aircraft capability and nine other reports on non-PFI projects.

It called on the Treasury and other government departments to identify alternative methods for delivering infrastructure and related facilities services, building on the lessons learnt from PFI, to maximise value for money.

In the current climate, the use of private finance might not be as suitable for as many projects as it has been in the past, it concluded.

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