Sir Paul's 14-strong package of final regulations, which is due to be laid before Parliament in January, shows five key differences from the draft proposals published in May which provoked outrage among councils.
The amendments reflect a major change of tack by the DoE, prompted by fears that the original proposals would require time-consuming primary legislation and were open to judicial review.
All credits and allowances, which councils offset against the amount of work they have to put out to tender, will now be statutorily defined in a new single list of credits.
Sir Paul has made a subtle but important change to the way bought-in goods and services are treated - they have been changed from an allowance to a credit. This means the amount of work that needs to be tendered will be calculated on a department's budget minus the amount spent on bought- in goods and services. Until now councils have been able to count the amount spent on these services as a contribution towards meeting their quota. The change means more work will have to go out to tender.
Similar changes will affect support services for contracts lost to the private sector.
The DoE predicts that these changes will concentrate competition on council labour costs rather than including other costs such as capital.
To soften the blow, Sir Paul moderated the proposed increases he originally wanted to impose on finance and IT services. Finance goes from 35% to 50% instead of 65%, with a 40% level for the counties to reflect the fact that they do not perform benefits work. The IT percentage is slashed from 70% to 40%, instead of increasing to 80%. Personnel's percentage rises from 30% to 40% as originally proposed.
On de minimis levels - below which a service is deemed small enough not to have to be put out to tender - the DoE backed down on plans to eventually reduce the cut-off point for competition in housing management to just 500 properties. This will now be set at 4,000 properties, dropping to 2,500 in 1999.
Plans to reduce de minimis for construction and property from £450,000 to £300,000 and personnel from £400,000 to £300,000 remain intact.
Consultation on the new regulations will close on 20 December. Assuming they are laid in the New Year, they will come into force in January 1998, giving councils a year to prepare. Finance and housing management have been given an extra six months due to the complexities of the former and the need to consult tenants on the latter.