Leicestershire County Council decided to streamline infrastructure funding for the sector, totalling £1.4m, and hoped local organisations would be able to agree on how a countywide service would work. The funding comes from district and county councils and the local primary care trust.
But after more than two years of wrangling, the 40 organisations involved were unable to agree a way to run the service, forcing the authority to go out to tender.
Three organisations put in bids to run the service in time for last week's deadline. They are: Voluntary Action Leicester; a partnership bid between North West Leicestershire Council for Voluntary Service and Voluntary Action Charnwood; and CVS Community Partnership, which provides support for voluntary organisations across Leicestershire and Rutland.
Andy Robinson, assistant chief executive at Leicestershire County Council, said: "We were hoping that the sector in Leicestershire could come to an agreement to move forward together, but that did not happen because there were differences of opinion as to how things should work."
Some infrastructure organisations would receive less money as a result of the shake-up, but they would be asked to do less in return, said Robinson.
Kevan Liles, chief executive of Voluntary Action Leicester, said getting voluntary sector organisations in the county to agree on the approach was "always going to be a difficult ask".
The fundamental sticking point was over whether the support should be provided from a central point or through local offices, said Liles. He was optimistic the process would help improve infrastructure in the county, saying there would be "short-term pain but long-term gain".
Kevin Curley, chief executive of local infrastructure umbrella body Navca, said: "We very much regret the way this has developed. We hope infrastructure in other parts of England will commit to working together collaboratively to avoid the risk and waste involved in unnecessary competition."
Both Neil Lambert, chief executive of Voluntary Action Charnwood, and Gill Wollerton, manager of CVS Community Partnership, declined to comment. The winning bidder will be decided in November.