Universities and colleges are spending billions of pounds on building projects without properly assessing whether they need them, the National Audit Office has said.

Few institutions regularly examine how much their existing buildings are used, the NAO concluded after surveying ten major academic building projects. Many also jeopardise their financial health and operational effectiveness by not conducting adequate risk analyses of their proposed projects.

Six of the ten institutions examined had tried to quantify their overall space requirements using measures developed by funding bodies in the 1960s. A previous NAO survey in Wales had found that actual use of space was often less than timetabled use.

Most institutions visited by the NAO argued that quantified measures of accommodation had to be supported by other more subjective factors, such as the contribution a higher quality of estate made to an institution's image. The NAO's report says "the evidence for these benefits was essentially anecdotal, and there was no attempt to quantify the impact of investing in their estate on matters such as students and staff recruitment".

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Between 1993 and 1996, institutions spent about Pounds 1.6 billion on construction, the report says. Building projects, which can consume up to half of an institution's annual income, are one of the biggest investment decisions made in the sector. If they overrun or go overbudget, they can damage an institution's financial health.

Yet the NAO found the rigour of risk assessment, including a consideration of a project's going awry, were inadequate in seven of the ten institutions visited. "Common weaknesses included failure to identify the full range of risks associated with different aspects of the project and to quantify those risks, with sensitivity tests tending to be based on arbitrary variances," the report says.

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The report calls on institutions to better assess the need for buildings, the risks involved and the options available. It also said institutions should improve the competitive processes used in tendering for loans to fund projects.