The education watchdog is consulting on plans to deal with as few as eight big inspection providers instead of the current 67, and give them contracts worth pound;45 million each.
MPs said it would be a conflict of interests if a company was asked to inspect the same authority that it was involved in improving its services.
The Commons education committee was this week concerned to hear that support services company Capita has already set up a large inspection firm with four other providers.
Andrew Turner, Conservative MP for the Isle of Wight, asked what Ofsted planned to do to stop inspections being influenced by other work. "Clearly the bigger the provider the bigger the chance of conflict of interest," he said.
His concerns were backed by committee chairman Barry Sheerman who said Ofsted could be held to ransom over prices if it became reliant on a handful of companies.
Elizabeth Passmore, Ofsted director of inspection, said the watchdog had safeguards to make sure inspectors were objective. "It is something we are very alert to," she said. "We want to make sure that our inspectors can continue to inspect properly without fear or favour."
Chief inspector David Bell stressed that consultation on the changes was not over. He added that the service had already seen an "evolution" in the way that inspection firms operated.