Every young person out of work for more than six months will have four months of intensive careers advice before being offered work or training under a "new deal" for the jobless, to be launched in January.
The #163;3.5 billion scheme - funded by the windfall tax on the privatised utilities announced in this week's Budget - is intended to get a quarter of a million young people off benefits and into jobs.
But Graham Mackenzie, chairman of the School Curriculum and Assessment Authority, questioned the ability of the privatised service to fulfil its vital role in the Welfare to Work programme. He added: "The quality of some parts of the careers service is a disgrace."
Mr Mackenzie, who is also chairman of the Engineering Employers' Federation, said that some parts of the careers service were "manifestly not doing their prime job".
"The whole approach is one of bums on seats. The measures have been largely about the number of action plans the careers service has produced, not the quality."
He said careers officers had not told young people about engineering, leaving one in five Modern Apprenticeships in engineering unfilled and forcing the EEF to launch its own clearing house to get youngsters into jobs. "We are very concerned about what is happening and have flagged it up with the Department for Education and Employment," he said.
His criticisms strike at the heart of Welfare to Work, which requires the employment service to award contracts to outside bodies to give careers advice and run courses. Ministers are confident they can ensure that the quality of advice and training is high.
Advice, assessment, mentoring and help with job hunting will continue throughout the scheme. A follow-up programme, being called an Exit Strategy, will give people further advice and the possibility of extra training, if they are still out of work when the scheme ends.
Young people who are still unemployed after a further six months will be able to rejoin the scheme for more help.
A series of national and regional conferences are being staged during the summer to establish details of the scheme before a White Paper is published in the autumn.
Welfare to Work will be launched in some parts of Britain as early as January, with a nationwide scheme due to start in April.
Ministers are also due to announce a working group within weeks to draw up plans for the University for Industry, another key plank of Labour's education policy.
Cathy Bereznicki, chief executive of the Institute of Careers Guidance, said she could not comment without seeing details of Mr Mackenzie's criticisms.
Education Secretary David Blunkett demonstrated his faith in the careers service last month with a #163;5.5 million grant to help improve services for young people.
A DFEE spokeswoman said: "Ministers are pleased with the work the careers service is doing and think that careers guidance is going to be integral to the success of Target 2000 and the New Deal. They want to make sure targeting is done properly because that can prevent a huge amount of waste."