G4S and Serco have been heavily criticised by the National Audit Office for underperforming on a £620 million deal to house asylum seekers.
Private contractors have been under fire for the quality of the housing they provide, amid evidence of refugees having to live in pest-infested housing with no hot water or heating.
But today's report also points to a failure by the firms to live up the financial benchmarks of the contract, with the government now seeking rebates of £3 million to £4 million to recoup its additional expenditure.
G4S, Serco and Clearel signed contracts in March 2012 to find housing for destitute asylum seekers in a move intended to save £20 million a year over seven years.
The scheme saved just £8 million in 2012/12 and has been criticised for the quality of housing and also how long it took the firms to house asylum seekers.
The report found that G4S and Serco, which were singled out for criticism, took on housing stock without inspecting it and only later found many of the properties did not meet quality standards.
The findings come amid growing concern about the housing given to people trapped in the asylum process.
A recent home affairs committee report showed that the granting of asylum often turned out to be poisoned chalice for those fleeing persecution, with the approval decision activating a period of financial uncertainty which lasted up to four months.
During that time, refugees were without mainstream benefits or a right to work.
Anecdotal evidence presented to the committee by women's groups suggested that some women had been forced to turn to prostitution to avoid homelessness. There were also accounts of women being forced to remain in abusive relationships to avoid the streets.
In one case highlighted by the committee, a heavily pregnant asylum seeker was granted leave to remain in the UK but instead of being a cause for celebration, the decision meant she had to leave the property she lived in.
G4S subcontractors Target Housing Association, who would not be paid by the UK Border Agency if she stayed there, set the eviction for the same day she was supposed to go to the local hospital to have the birth induced.
The subcontractors made her pack and insisted she find her own way to the hospital using local buses.
Only the intervention of a sympathetic member of Target's staff, who offered to use her own car to drive the woman to hospital, prevented this from happening.
There are also numerous reports of housing providers entering properties unannounced and without knocking, in a move which often frightens families and their children.
Today's NAO report found that overall performance was improving but that G4S and Serco were still failing to meet some of their key performance targets.
It found that in three of six regions the transition to new contracts took longer than planned and that around 2,000 asylum seekers had to move because of the handover.
G4S claims the cost of bringing the housing up to the required standard is prohibitive, but the Home Office said providers should have been aware of the risks when they submitted their bids for the contract.
"It will be difficult for the Home Office, providers and local authorities to develop the mature relationships needed to achieve the envisaged savings and an effective service", Amyas Morse, head of the National Audit Office, warned
James Thorburn, managing director of Serco's home affairs business, said: "The transition from the previous contracts was, as the NAO acknowledges, challenging, but Serco at all times concentrated on minimising the disruption to service users through extensive communication including the provision of information in 12 languages.
"Over 90% of service users remained in the same accommodation, ensuring the continuity of key services for families and individuals.
"We accept there remains scope for further improvement and we are committed to working with the Home Office and our partners in local government, the NHS and the voluntary sector to achieve that."