Officials say the proposals mark a fundamental shift in the way the department monitors CCT, arguing they will be less prescriptive than the current regime.
But they will give ministers more powers over councils and place a major responsibility on local government.Current regulations do not require councils to actively promote a market for CCT contracts.
In an exclusive LGC interview, environment minister Sir Paul Beresford expressed his disappointment with the way local authorities have responded to competition regulations.
'If you go out there and you don't get any competition, you have got to question whether you are doing it the right way, and whether in fact you should actually meet some of the bidders and get a better opportunity for a mixed, competitive bid.'
Under the proposals there will be less emphasis on prescribing what is anti-competitive, and more emphasis on scrutinising whether a council has obeyed the spirit of the CCT regulations.
Authorities will have to issue public reports at different stages of the tendering process, demonstrating they have tried to engender competition.
If they cannot show they have sought bids from private companies they may face ministerial charges of anti- competitive behaviour.
The proposals, to take the form of a consultation document, will closely mirror Audit Commission recommendations in a report published in March: Making markets: a review of the audits of the client role for contracted services (LGC, 3 March).
The report claimed no effective competition existed for too many services, revealing that for seven activities, 25% of councils received a tender only from their in-house team.
It suggested authorities had a duty to create private sector interest in the CCT market.
Little competition exists for services such as leisure management and catering, while it is healthy in refuse collection and grounds maintenance.
The consultation paper will also include guidance on how councils should take quality considerations into account for white-collar and manual CCT.
The government has been hinting since January that it will increase its powers regarding anti-competitive behaviour. 'It is clear there are certain services and certain parts of the country where
ministers are concerned there has not been the level of competition they would like to see,' said Andrew Purssell, principal policy officer for the Association of District Councils.
Mr Purssell said the ADC had been trying for some time to persuade the government that a low level of private sector interest in a particular contract was not necessarily an indication of anti-competitive behaviour.