A National Audit Office report on a £214m privately financed project to upgrade and run a Scottish motorway recommends that government departments negotiate with two bidders to achieve best value for money.

The recommendation, made in an NAO report published last Thursday on the competition to finish and run the A74(M)/M74 motorway in Scotland, includes the proviso that government departments reimburse some or all the losing bidder’s costs.

The report warns government departments against inflating tendering costs by requiring bidders to cost options that may not subsequently be exercised – in the case of the motorway, an option to construct and operate an English section of the road.

The report criticised the “shadow toll” payment framework of the Scottish Office development department, whereby the road operator is paid by the Highways Agency for the number of vehicles on the road. The report said it made the operator’s revenue depend unreasonably on traffic growth that it was powerless to encourage.