Private security giants G4S and Serco are to be stripped of all responsibilities for electronically tagging criminals following an overcharging scandal.
Electronic monitoring contracts will be handed over to rival firm Capita on an interim basis at the end of the financial year , Justice Secretary Chris Grayling said.
Capita is in the running to take on the contracts permanently.
In a written statement, Mr Grayling said: "We have signed a contract with Capita to take over the management of the existing electronic monitoring services on an interim basis.
"This will mean that management of these services, which are now operated by G4S and Serco, will transition to Capita by the end of the current financial year.
"Under these arrangements, Capita will be using the systems and equipment of G4S and Serco, but the two companies will no longer have a direct role in delivering the service on the ground."