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The business lobby group is warning that although PFI means building projects are completed more quickly and guarantees greater financial stability and transparency, the relics of old-style public sector procurement, such as the failure to put a price on delay and poor planning, are holding back PFI's full potential to deliver for patients.

The report suggests extra costs caused by procurement delays are adding an average bill of £2.4m, or more than one per cent of capital value, to major hospital projects. To date, the extra burden is almost £100m, costs which end up on the NHS's balance sheet. With the likely overruns of ongoing projects, including Bart's in London, this figure could exceed £122m.

The financial estimate - based on the costs of employing architects, project managers and other staff while the causes of delays are resolved - is conservative as it excludes costs incurred by the Department of Health and to unsuccessful bidders, delays before bidding starts, and the impact of overruns in numerous small-scale NHS PFI projects.

The report, Buying the best for the NHS: ensuring smarter capital procurement sets out a number of recommendations to improve health procurement and secure better value for money. These include improved needs analysis by hospital trusts before commissioning; buyers - i.e. trusts - being responsible for paying costs of delays up-front; better mediation between parties; improved training for procurement staff; and a simplified bidding process.

John Cridland, CBI Deputy Director-General, said: "The private sector has delivered more facilities and services on time and to budget than the old system of public design and construction ever did.

"Yet unnecessary problems remain. When the projects are still in the public sector's hands, delays are commonplace and costly. The financial realities of schemes are often not considered until late in the day, so further time-wasting reviews are needed. On other occasions, the NHS doesn't know what it actually wants and so new and revised bids have to be submitted.

"All these avoidable delays to hospital building projects are costing big money and ultimately diminishing the effectiveness and reputation of the NHS.

"PFI has secured the biggest hospital building programme in the developed world. The Government must continue to give clear, unambiguous support for the PFI, but also recognise that all too often it is making inadequate use of what private finance offers.

“The cost to the NHS of poor procurement is already extremely high, and will only increase if action isn't taken to remedy the situation. Such waste at a critical time for the NHS must be avoided. Ministers and officials must work with business to make sure that these problems are overcome.

“PFI can and does deliver, but the public sector needs to raise its game if the public is going to reap the full rewards.”

Specific recommendations include:

• Conducting a health needs analysis in the area in which a facility is to be built. This should cover existing facilities, gaps in provision, financial factors and views of all relevant parties. It should take account of regional and national developments in technology and specialisation, and national policies such as payment by results;
• Setting out a clear procurement timetable for each project, calculated by the complexity of the scheme and agreed to by all those involved;
• The lead procuring party being responsible for paying the costs of any delays to the agreed timeframes to ensure these financial implications are recognised. These would be paid up-front to qualified bidders and contractors rather than over the life of the contract;
• The Government creating a mediation process to investigate informally procurement delays, help resolve disputes and ensure a level playing field between parties;
• The Government and the NHS ensuring procurement professionals are properly trained and retained. The Government should establish a national procurement academy to formalise training;
• There being a centralised database of pre-qualification information for complex projects. This should hold as much information as possible on bidders, including details of financial backing, in order to avoid unnecessary and expensive duplication during the pre-qualification questionnaire (PQQ) process. Bidders should revise their information annually, rather than for each individual PFI bid.