Speaking at the Children, Schools and Families Select Committee last week, Sunand Prasad said that construction companies could lose between £5m and £7m when they bid for a BSF project, which then gets turned down.
There are usually at least three bidders for any one BSF project, meaning that more than £10m is wasted on unused bids every time a BSF school is built.
He said: "That money has to come from somewhere, and ultimately, the bidders who have risked that money will get it back from the public sector in the long term."
At present, bidders compete based on the amount of risk they can afford to take, instead of competing based on the value for money they can offer, Prasad warned.
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