Tony Blair's advisers are vetting education development plans - which all councils have to draw up - and marking them good or bad.
Number 10's hands-on involvement is a further indication of the Prime Minister's determination to introduce "third way" solutions to failing authorities.
Last week, the Education and Employment Secretary advertised for private companies, not-for-profit organisations and other consortia to bid to take on education services in failing councils. He said councils would be judged on their education development plans and inspection reports.
During his speech at the North of England Education conference, in Sunderland, Mr Blunkett was last week forced to defend the policy after education authority leaders accused "shadowy creatures" from Downing Street of an anti-local government agenda.
Mr Blunkett said the power to remove failing LEAs' services was in the School Standards and Framework Act and had been trailed in the White Paper.
Graham Lane, education chair of the Local Government Association, said rumours were already circulating that Liverpool Council would be failed - but OFSTED has yet to arrive in the city. And leaks of Mr Blunkett's speech fuelled speculation as to which councils would be early targets.
The Department for Education and Employment wants to draw up a list of organisations that can manage literacy and numeracy schemes, provide pupil welfare services or administer admissions and financial services.
James Tooley, a director of the Education Partnership, which is short-listed to take over King's Manor, a failing school in Surrey, said he intended to tender. He said discussions with DFEE officials revealed an urgent need to have organisations in place to take over council services.
The DFEE is also advertising contracts for consultants to advise schools on their services to pupils and parents, and responses to OFSTED inspections.
Mr Blunkett said he did not rule out a company completely taking over a failing authority. Only a few, for example Nord Anglia, Capita and Education Partnership, are likely to volunteer to take over a whole authority. Others however have expressed interest in running specific services.
So far those interested include the Centre for Education Management, which emerged from the Grant-maintained Schools Centre; Gabbitas, a private-school consultancy; and Kingshurst City Technology College, Solihull.
The borough of Newham, east London, has also applied.