Controversial plans to reshape the provision of care for hundreds of children in residential homes and units in Scotland are in doubt, after an angry reaction from private and voluntary sector providers to the proposals.

The scheme to change the way councils pay for children's homes, and measure their success, is being taken forward by Scotland Excel, the national procurement centre based at Renfrewshire Council, which has previously negotiated new national contracts for the provision of foster care and secure care for vulnerable children.

The Government-backed organisation is said to have been taken aback at the vehemence of responses to its Strategy for Children's Residential Care from many outside providers, and insiders say it has approached key players to arrange peace talks.

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Scotland Excel insists no new meetings have been scheduled apart from those already planned as part of the consultation.

About 1600 young people a year are provided with residential child care by local authorities in Scotland because they can no longer live in their family home.

A large proportion of that care – about 40% – is provided at in- house children's units, but places are also provided by charities, church-backed care organisations, social enterprises and private companies. The cost per child can be in the region of £3000 to £5000 per week.

The new arrangements would see councils jointly contracting for the delivery of care with an agreed menu of prices and specified outcomes for the children involved. Providers will subsequently be asked to tender for the work, but some sources suggest major players in the private and voluntary child care sector are not willing to bid unless the proposals are changed.

After starting the lengthy process last June, Scotland Excel's consultation on the plan closed on January 25. It says the framework it is proposing will ensure consistency and will put the children involved at the heart of decision-making.

Some of the responses make clear that providers are far from convinced those aspirations are being met. On the contrary, the plans have been attacked for being a financially led procurement exercise which ignores the need for better planning and more strategic commissioning of the care of some of Scotland's most troubled "looked after" children.

The exercise has also been slated for spotlighting only the cost of external services and ignoring the cost of in-house council-run services.

The Scottish Children's Services Coalition (SCSC), which represents groups including the private firm Spark of Genius and the advocacy charity Who Cares?, described the proposals as "driven purely by cost and not the needs of the child". If implemented, the framework would damage children's care and have costly long-term consequences, a spokesman said.

He added: "It is deeply disappointing to note that what is being proposed is a procurement framework driven by cost and not the needs of the young person concerned. We are aware of the constraints in public sector finance, but are concerned any short-term gain will be greatly surpassed by long-term pain facing young people as they are placed in the cheapest option rather than the most effective one."

SCSC called for a delay to the introduction of the framework. The response from another umbrella group, Community Care Providers Scotland (CCPS), was even more irate, saying the initiative should be started again from scratch.

Calling for a return to the drawing board, CCPS argued that the scheme flies in the face of collaborative planning of residential child care called for by both the Scottish Government and Audit Scotland. It described the exclusion of the 40% of places provided by local authorities from the framework as illogical and was scathing about Scotland Excel's suggestion that Renfrewshire Council – the lead purchasing authority – be given the power to have providers struck off in some circumstances.

"This leads us to assume that Scotland Excel and its client authorities consider either the national care standards or the Care Inspectorate's methodologies to be inadequate with respect to residential child care," CCPS suggests, adding that rather than setting up a brand new monitoring and enforcement regime, a better course of action might be to rely on the body "established specifically by ministers for that purpose".

CCPS also suggested consultation should have taken place earlier to look at the whole approach and queried the lack of involvement of children and young people.

Duncan Dunlop, chief executive of Who Cares?, said his organisation had approached Scotland Excel on this point and was now arranging for young people's views to be presented, albeit after the formal consultation had closed.

"There has been such a stink from all parties that it is being slowed down. We said you haven't asked young people about this and you need to," he said.

He added that young people looked after in the private and voluntary sector were often those for whom fostering or in-house council services had not worked out. Many benefited from residential care, but too many were then cut adrift when they left care, he said.

"It is not worth investing thousands of pounds in young people in these residential units if you are not going to sustain it, or return them to a chaotic environment when they leave. That is why this should be seen in a much wider context," he added.

The Government's forthcoming Children and Young People Bill gives children with a history of care the right to ask for help until they turn 25. Mr Dunlop said this should be legally enforceable. "Ministers need to make sure that is a statutory requirement for local authorities. Otherwise, we fear it is not going to happen."

A spokeswoman for Scotland Excel said the intention had always been to listen to feedback before developing a final strategy. She said some of the responses had been positive, and some agencies had not responded at all and were assumed to be supportive.

"We are currently analysing the responses received from a wide range of stakeholder groups," she added. "Our findings and recommendations will be published in March and, at this stage, it is too early to say what changes may be made to the strategy and service specifications as a result of the consultation.

"A meeting will take place with representatives of residential children's care providers to discuss the findings before final tender documentation is issued."