The Government survived an attempt by the Conservatives and Labour backbenchers to overturn the bill last week, but now small charities are adding to the dissenting voices.
They say plans to commission services at a regional level will favour big charities with the capacity to offer projects on a large scale.
"It's one thing to go after a vibrant, mixed economy," said William Higham, head of policy at the Prison Reform Trust. "It's another to structure it in such a way that only certain people can compete on an even playing field.
"Regional commissioning is appropriate for some services, but the bulk of work is very local in nature and anything that would risk squeezing out the small charities and community groups has to be guarded against."
The trust has formed a coalition with Clinks, the umbrella body for small voluntary agencies working with offenders, the Local Government Association, the Prince's Trust and Crime Concern to call for locally commissioned services.
"There is a significant risk that a commissioning system involving only regional commissioning may not be sensitive enough to the specific needs of localities," the coalition said in a paper on re-offending. "Commissioning should take place at different levels, depending on what best meets local needs."
But Stephen Bubb, head of chief executives organisation Acevo, which backs the bill, said it would be a step forward. "Current arrangements are crap," he said. "They don't let us into the system and they drive out small organisations."