In March, the former Labour government announced it was to award the contract to Tribal after ending funding for the National Centre for Excellence and Residential Child Care (NCERCC).
But the coalition has today announced it will not be awarding any external contract to deliver this work.
In a statement, the Department for Education said: "The department is today launching a new programme of work to drive improvements in children’s homes, which will be led by the sector and the department. As a result, the department will no longer be awarding an external contract to Tribal to deliver this work.
"Considerable resources have already been spent trying to raise standards, and while there have been some improvements, there is much more to be done. Therefore, instead of reinvesting in an external contract, ministers have decided that the most effective and cost-effective way of achieving this change is to work in partnership with the sector to review what is working well and to identify areas for improvement."
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