The Department of Work and Pensions has ordered a study of the outsourcing of housing benefit to private contractors
The investigation comes as the ombudsman recommended that south London's Southwark council pay £4000 in compensation after delays by its housing benefit contractor left two tenants evicted and homeless.

A DWP spokesman said: "We know there have been mixed results with outsourcing so we're seeking to find out, through research, what works and what doesn't, to look at ways of improving efficiency. We have commissioned this comprehensive research study into benefit administration to consider the potential role outsourcing can play.

"We will be drawing up best practice guidelines from the research."

The research will be done by Iris Consulting and the Institute of Revenue Ratings and Valuation and will start within months. A spokesman for Iris Consulting said: "There have been a number of high-profile contract failures over the last year or so, particularly in London, and reports of more local authorities considering the future of their current contracts."

Last week local government ombudsman Jerry White recommended Southwark compensate two tenants who were evicted after delays caused by its housing benefit contractor, Liberata, in assessing their housing benefit applications.

His report found "maladministration causing injustice". A spokeswoman for the ombudsman said the sum was "quite high", but said "he felt this was what the case deserved".

A Southwark spokesman said: "Southwark council accepted fault. Re-housing is being organised."

Housing benefit minister Malcolm Wicks has pledged to spend £200m to ensure "people get the right amount of benefit at the right time".