The latest government move to speed up the ailing £760m private finance initiative in housing could be illegal because it goes against competition laws.
Under proposals outlined in a Housing Standardisation Guidance paper published in May, the Office of the Deputy Prime Minister is exploring alternative routes to competitive bidding. One such alternative would include councils bypassing the normal bidding process by entering into a partnership with firms wishing to renew their housing stock. Such a move would only be possible for small projects or specialised schemes that lack a pool of potential bidders.

An obscure European Union directive on public works procurement allows for councils to award contracts on specialised jobs without a requirement for a minimum number of bidders.

But Ben Denton, senior director at consultant Abros and adviser to a number of housing PFI projects, felt this procurement route could be fraught with problems. He said: "This would be right on the edge of what is legal. I think people would be within their rights to challenge this, given that there is an established market for housing PFI services."

Denton said companies which felt they had lost out would be likely to make the case that the process was anti-competitive. He added: "This regulation would help free up the PFI procedure, but it cannot be applied carte blanche."

A senior lender involved in bidding for housing PFI projects said: "Anything that is streamlined and tends towards partnering and away from the tedium of the current PFI process is good."

n Camden council has asked contractor Carillion to re-bid for a PFI contract after one of two other bidders dropped out. The council felt this left it open to accusations of a lack of competition.