Mr Forsyth said: 'I announced earlier this year that we would introduce Challenge Funding as a basis for distributing part of local authorities' capital allocations from 1997-98 onwards and I have already announced the outcome of the Transport Challenge Fund competition.
'I am now inviting councils to submit bids for projects and programmes covering other local services, which they would like to start in 1997-98.
'The amount of resources available for 1997-98 will be decided on later this year, but I expect that over the next three years some £100 million will be available for the Central Challenge Fund.
'Challenge Funding helps to foster partnership between the public and private sectors and brings private finance and expertise into public services.
'It can also offer opportunities for the involvement and commitment of local communities.
'The concept of competing for capital funding is not new in Scotland. We have for many years determined councils' capital allocations almost entirely on the basis of their competing bids as set out in their annual financial plans.
'We are now moving to a system where councils will each receive an automatic share of the available resources determined by a formula.
'Challenge Funding will form the basis for distribution of the remaining resources and is primarily aimed at large capital projects or programmes addressing key local needs and priorities.
'Bids can seek funding over three years, or even more in certain circumstances, and successful bidders will be guaranteed to receive the extra funding they are awarded.
'This is a very different approach to capital funding since until now councils have been required to bid annually for all the resources they were seeking - even for capital projects requiring funding over a number of years.
'Challenge Funding therefore has a considerable advantage for councils over the previous arrangements by removing any uncertainty over the future funding of major projects, and it benefits the taxpayer by ensuring that the best possible projects are the ones that get the public funds.
'I hope that councils will respond positively to this initiative and come forward with bids which aim to deliver significant benefits for their communities and make the most effective use of the public resources available.'