The long, slow (and expensive) march to modernise the Colchester Garrison

A £1bn PFI scheme to provide accommodation for the Army, which has been five years in the planning with still no sign of completion, is to be examined by the National Audit Office.

It is understood the agency will look at the Colchester Garrison project to house 3,500 military personnel, in a wider investigation into the handling of the PFI.

The NAO will want to know why the scheme is still at least a year from financial close, having cost the taxpayer and bidders millions, when other projects have taken half the time.

The Colchester Garrison scheme was conceived by the former paymaster-general, Geoffrey Robinson and was part of a "fast track" that included the vastly more complex London Underground and Channel Tunnel rail projects. The financial close is estimated to be late 2004, but even if that deadline is met, the modernisation of the Victorian facilities for the 16th Air Assault Brigade will not be completed until at least 2008.

In 1999, a year after the scheme was launched, a consortium called RMPA, made up of Sir Robert McAlpine, WS Atkins and Sodexho, was selected as preferred bidder. This year, Partnerships UK, the Government's public-private partnerships unit, was drafted in to speed things up, but the scheme is still being delayed by the planning process. Part of the problem is that the site is of historic interest, because there has been a garrison at Colchester since the mid-1700s.

Colonel Jim Morrison, Colchester Garrison project director, said: "Why has it taken so long? It is an incredibly complex project. We are working closely with Colchester borough council on planning. I can't really comment further."

The problems at Colchester could put off potential bidders for future Ministry of Defence schemes, such as Project Allenby & Connaught, to redevelop barracks in Aldershot and Salisbury.

Richard Tierney, head of public-private partnerships at accountancy firm RSM Robson Rhodes, said: "The MoD needs to get its act together on Colchester. Some bidders are losing interest. Given the high costs of bidding for the schemes – £5m-plus is not exceptional – a five-year procurement timetable is not acceptable."