The management of a special school for boys with behavioural problems could be handed to a profit-making company in the first deal of its kind, The TES has learned.
Four organisations are bidding to run The Priory School in Taunton, Somerset, on a contract that is expected to be worth about pound;1 million over five years.
It is believed to be the first time the running of a special-needs state school will be taken over by an outside organisation.
The four groups through to the final stages of the selection process include profit-making businesses, consultants and a third-sector bidder. The deadline for their proposals is today.
The controversial move by Somerset County Council has been taken after prolonged difficulties at the school, which has been in special measures since December 2006.
It follows a similar decision by Enfield Council in north London, which became the first local authority to out-source the management of a mainstream state school to a private business two years ago, when it handed Turin Grove School to American education firm Edison.
Mike Turner, the SEN (special education needs) group strategic manager for Somerset County Council, said the authority had chosen the approach because it lacked the expertise to deliver "rapid" improvements at The Priory School. It is the area's only school for students with social, emotional and behavioural difficulties.
"There was incremental improvement, but not the sea change that was needed," said Mr Turner. "We want access to groups with proven expertise in the area."
Part of any deal will be an expectation that the school will come out of special measures within 12 months of the start of the contract in January 2010. A five-year deal would allow for sustained improvements, the council said.
The school will remain under the command of the local authority and teachers' contracts will not be changed. The successful organisation will provide a management team of at least two full-time members of staff, who will be paid separate fees.
Mr Turner defended the use of outside consultants, saying that the key issue was high-quality education for the pupils. He said the local authority would be vigilant in evaluating the financial arrangements before awarding any contract.
Such deals push the Government's ban on operating state schools for profit to its limit. The Conservatives have also said they will not allow schools to be set up and run for profit if they win power at the next election.
However, the Government has paved the way for profit-making business to run pupil referral units for excluded and vulnerable children.
Trevor Averre-Beeson, who ran Turin Grove School for Edison, is bidding for the Somerset contract with his new company, Lilac Sky Schools. Mr Averre-Beeson, who has a record of turning struggling schools around and cutting exclusions, said he was "positive" that his approach would work in a special school.
"We are a private company and unashamedly working to be profitable on behalf of our shareholders, but there will not be any excess profits," he said.
"This is an ideal opportunity for a partnership that will allow for new ideas and innovation."
John Bangs, head of education at the NUT, described the move as an "abdication of responsibility" by Somerset County Council. He said that it should have pooled resources with other authorities to find a new school leader.
"The idea that outsourcing is a magic solution to solve fundamental leadership problems is wrong," he said.
Edison, an American education firm, took over the management of Turin Grove School in Edmonton, north London, back in 2007 in a pound;1 million three-year deal. It included performance-related pay dependent on hitting 16 targets, such as improved exam results.
The company, which runs about 100 charter schools in the US including Marion E Cahlan Edison Elementary in Las Vegas (pictured), wants to now manage academies.