Cumberland Infirmary was the country's first PFI hospital

It says the private finance initiative scheme is too inflexible for the needs of the NHS.

The bidding process also needs to be simplified if targets are to be met, it says.

New figures show the programme is slipping behind its target of building 114 hospitals by 2010.

Mr Allan Wilen, economics director at the Construction Products Association, said 20 new hospitals should have been built last year to meet the schemes targets. Only eight were built.

"Clearly the pace of progress has been slowing. That's the concern that we've got. They have got a bit of catching up to do over the next three years if they are going to have these schemes open by the end of the decade," he said.

Inefficient

The NHS Confederation report said the way the system was working at the moment was inefficient.

"While the healthcare environment is changing rapidly, PFI with its 30- to 35-year contractual time horizon is acknowledged to be inflexible.

"Once built, it is difficult and expensive to modify and hospital, but the process is more complicated any expensive for PFI projects."

It said capacity planning needed to be better. In some cases new hospitals have been too small and others in the pipeline may be too large for local needs.

It said there was a shortage of suppliers and projects to attract bidders.

"We need to overhaul the bidding process both to make better use of scarce resources and effectively incentivise good design," it said.

It has become increasingly clear that the PFI process needs to be less rigid to give trusts the flexibility they need to build hospitals that stand the test of time Gill Morgan, NHS Confederation chief executive

Mr Wilen said identifying the preferred bidder earlier would help.

"Bidders would not then have to spend millions of pounds writing up detailed schemes," he said.

The report bases its recommendations on the experience of the Future Healthcare Network - a group of hospitals and primary care organisations using private finance to build healthcare facilities.

Gill Morgan, NHS Confederation chief executive, said: "It has become increasingly clear that the PFI process needs to be less rigid to give trusts the flexibility they need to build hospitals that stand the test of time.

"With a new round of PFI investment about to be announced, we believe there is now a real opportunity to take these reforms forward."

A spokesman from the Department of Health said: "Everyone accepts that healthcare needs and treatments are constantly changing which is why flexibility and adaptability has also been a key requirement of PFI from the beginning.

"It is inconsistent to claim that at the early hospitals PFI was responsible for producing too few beds than required whilst now it is producing too many.