The National Development Finance Agency (NDFA), part of the National Treasury Management Agency, will assess funding options for up to 20 capital spending projects with a total value of €6.6 billion.

The agency, established by the Government to advise on the financing of projects with a value of more than €20 million, will begin to assess the financing options proposed in future tenders and may reject these structures in favour of a more cost-effective alternative.

NDFA chief executive Mr Jim Farrell believes it will help to ensure that there is a better mix of funding and that the State gets better value for money for its investment.

The Government has committed to spend €33.6 billion between 2004 and 2008 on areas such as transport, education and the environment, and will be attaching new value-for-money safeguards to its investment.

Mr Farrell said the NDFA's presence will be visible during the tendering process.

Until now, when tenders were submitted, a proposed financial package would be included. The NDFA has the authority to raise funds through a bond issue and can also advise on the sale or leveraging of other State assets that may be considered to be a cheaper means of financing the project. "The big difference will be that we will decide whether we like the type of finance that is being put in place and whether we should raise this money ourselves," Mr Farrell said.

He suggested that this option may force financial institutions to "sharpen their pencils" and offer more competitive financing.

The NDFA can borrow €5 billion through the bond market. The agency can borrow money in its own right with the approval of the Minister for Finance, Mr McCreevy. It can also set up special-purpose companies to borrow funds and may transfer State assets to those companies.

The NDFA has acted in an advisory capacity on six projects this year with a total value of €650 million. Of this, around €400 million came from the private sector.