Private security giants G4S and Serco are set to lose contracts for electronically tagging criminals to rival firm Capita following an overcharging scandal.
Electronic monitoring will be handed to Capita on an interim basis at the end of the financial year, Justice Secretary Chris Grayling said.
Capita is in the running to take on the contracts permanently later in 2014, Mr Grayling added.
The Serious Fraud Office (SFO) has opened a criminal investigation after it emerged G4S and Serco overcharged the Government for tagging offenders, some of whom were found to be dead, back in prison or overseas.
In a written statement, Mr Grayling said: "We have signed a contract with Capita to take over the management of the existing electronic monitoring services on an interim basis.
"This will mean that management of these services, which are now operated by G4S and Serco, will transition to Capita by the end of the current financial year.
"Under these arrangements, Capita will be using the systems and equipment of G4S and Serco, but the two companies will no longer have a direct role in delivering the service on the ground."
G4S and Serco both withdrew from competition for future tagging contracts, which were due to expire at the end of March.
During the interim period, Capita will be subcontracting tagging equipment from G4S and Serco but will take on full responsibility for supply if it wins the contract. Other preferred bidders include Buddi, Astrium and Telefonica.
Mr Grayling said: "This signals a fresh start for electronic monitoring that brings us a step closer to introducing the most advanced tagging system in the world.
"Monitoring the movements of dangerous and repeat offenders will be vital in cutting crime, creating a safer society with fewer victims and offering greater protection and reassurance to the public."
An audit by big four accountancy firm PricewaterhouseCoopers, launched in May, alleged that overcharging began at least as far back as the start of the current contracts in 2005.
Mr Grayling told the two firms that an independent forensic audit was required to look at, among other areas, internal email trails between executives to establish what happened.
In July, the Government reported G4S - well-known for its botched handling of its Olympics security contract - to the SFO when it refused to take part in an additional investigation to rule out any dishonesty.
Serco allowed a further forensic audit to take place, during the course of which the Ministry of Justice passed material to the SFO.
A G4S spokeswoman said: "We have been working with the Ministry of Justice and the new provider on detailed planning for the transition and will continue to provide the necessary support to the MoJ and the new provider to ensure the transition goes smoothly."