The expense of the PFI process also has an indirect impact on cost efficiency by providing a significant barrier to entry for potential bidders, preventing firms from bidding and undermining competition in procurement. The NAO (2007a) found that PFI hospitals and schools projects attracted a lower number of bidders than other forms of procurement, and that competition had declined over time.
In a sample of 46 contracts that signed between April 2004 and May 2006, one-third attracted only two bidders at the point they were requested to submit detailed bids. The NAO stated: "it was rare for procuring authorities to choose to eliminate weaker bids as the choice was out of their hands" (p 12). The absence of competition in procurement clearly presents risks that private sector bidders will be facilitated in seeking excess returns. It also ultimately bears the transaction costs of unsuccessful bids (PWC report 2008).