Councils whose bids for cash to finance projects aimed at increasing attainment among children in care were rejected on the grounds they were not good enough will have the chance to resubmit an improved offer.
Peter Peacock, Education Minister, is planning to have discussions with the 11 councils involved.
His move follows strong criticism by Jack McConnell, First Minister, who said councils were failing looked-after children and large numbers continued to leave school with no qualifications.
Speaking at the annual conference of Barnardo's in Edinburgh, Mr McConnell voiced disappointment at the fact that only 18 of 32 councils had responded to the offer of pound;6 million to fund programmes aimed at improving attainment among the 12,000 children in care in Scotland.
Pointing out that only seven applications had been successful, he said that more councils had to come up with schemes and more needed to raise their levels of ambition and aspiration and produce imaginative proposals.
"In modern, devolved Scotland, we just can't accept the low attainment in schools and the significantly poorer outcomes that we see time and again in young people in care and leaving care," Mr McConnell declared.
His criticisms amounted to what was probably the most severe rebuke the First Minister has delivered to local authorities and underlined his clear determination to increase pressure on councils who are failing to do enough to improve the education of looked-after children.
Mr McConnell told the conference, held to mark the 100th anniversary of the death of Dr Thomas Barnardo, that too many looked-after children reached adulthood without going into further or higher education, training or work.
Almost a quarter were not receiving support after they left care and almost one in six had a period of homelessness after they left care.
He said: "We need to significantly gear up our actions, we need to try new approaches, we need to see more innovation and more local commitment to break out of the cycle of where we are."
The First Minister also made clear his desire to increase the role of the voluntary movement. While it was the job of local authorities to co-ordinate services locally and set the strategic overview, it was the role of a strong and dynamic voluntary sector to provide the services in innovative and creative ways.
Mr McConnell said: "I want to see the balance continue to shift. I want the voluntary sector to take more responsibility for the delivery of services for vulnerable children, with the local authority taking more responsibility for the strategic overview of these services."
Council leaders rejected the First Minister's criticisms. Eric Jackson, social work spokesman for the Convention of Scottish Local Authorities, said the pound;6 million would not have gone very far. If ministers wanted a national pilot for all councils, they would "need to put their money where their mouth is".
Accusing the Scottish Executive of an "obsession" with exam results, Mr Jackson said: "The number of Standard grade passes is an obtuse measure of the educational attainment of looked-after children." In 2003-04, 60 per cent of young people leaving care had no Standard grades compared with fewer than 10 per cent of 16 and 17-year-olds as a whole.
Mr Peacock said: "It isn't just disappointing that only 18 councils came forward with ideas but, of those 18, we have only been able to approve seven at this stage as the remainder didn't score highly enough in the project evaluation.
"We plan to work closely with those councils to improve their applications and ensure the money that we have available will really make a difference for this group of young people."