Two of the three organisations involved in the bidding to run the £70m Communitybuilders fund withdrew their applications after detailed talks about terms, it emerged this week.
The Communities and Local Government department and the Office of the Third Sector announced this month that they had awarded the Adventure Capital Fund a five-year contract to run Communitybuilders, which will give voluntary organisations loans and grants for projects that stimulate local democracy and community cohesion.
But the ACF was the sole remaining bidder after non-departmental body Capacitybuilders and the Big Lottery Fund pulled out.
The three organisations were selected from six original applicants that filled in pre-qualifying questionnaires in October. They entered a competitive dialogue process with the CLG and the OTS in December.
The process, which is used when awarding complex contracts, allows bidders to discuss in detail with contractors how they intend to achieve their goals. It resulted in the BLF and Capacitybuilders withdrawing their applications in January and April respectively.
Although only one bidder remained, the CLG department and the OTS waited another three months before announcing that the ACF had won the contract.
A Capacitybuilders spokeswoman said: "We were concerned that we would not achieve the recycling rates on loan finance necessary to ensure the sustainability of the programme over its five-year lifespan."
A BLF statement said: "A number of technical issues arose during the dialogue process that led us to the decision to withdraw".
Shadow third sector minister Nick Hurd raised concerns in the Commons in May about the length of time it was taking to establish Communitybuilders, which was announced in July last year.
Last week he told Third Sector: "It is ridiculous that in a recession the Government should not only sit on £70m for a year but then fail to run a genuinely competitive process to find the right organisation to invest the money in."
A spokeswoman for the CLG department, which is providing £60m of Communitybuilders' funding, said: "We had to comply with EU procurement law on selecting a partner, and that does take time. But we feel this has helped us to secure an excellent national partner."