Serco, a leading private contractor, is in line to win a multimillion-pound contract to run the National Citizen Service, proposed by the prime minister as a "big society", non-military version of national service for youngsters aged over 16.

The company, which recently announced global revenue of more than £4bn, has joined four charities in a controversial bid to run what has been described by the government as a key part of David Cameron's big society vision. Serco and its partners hope to win eight of the 19 contracts currently up for tender, with an estimated value of nearly £100m over two years.

The development has raised concerns that the National Citizen Service (NCS) will become another way for private firms to make money from the public sector as charities and voluntary organisations find themselves without the resources to bid for large contracts amid the economic squeeze. Pilot NCS programmes, aimed at bringing together 16- and 17-year-olds from different backgrounds to undertake character-forming community work, have been run by around 60 charities over the last year.

However, Justin Davis Smith, chief executive of Volunteering England, has warned that England's network of volunteer centres is at risk of "fragmentation" because of an average 12% local authority funding cut from 2009-2011, raising concerns that only private firms will be able to deliver such large community projects in future. One in 10 charities told researchers for a report by New Philanthropy Capital that they could close within the year due to cuts.

Gareth Thomas, shadow minister for charities, said he had concerns that private firms were proving to be the winners from the big society agenda. He added: "Far from creating the big society, it seems that once again Cameron is going back to his roots and creating the privatised society instead, with charities and voluntary groups used as mere 'bid candy' for the large corporate outfits going after public sector contracts."

Serco has joined Catch22, a charity for poor children that was paid £2.3m last year for its work on the NCS, and three other charities to take over the running of the scheme in the north-east and north-west of England, Yorkshire and Humberside, the West and east Midlands, the east, south-west and south-east from 2013.

Independent research into the NCS by NatCen found that 81% of those who signed up for the pilot programmes completed them, and 92% of those said they would recommend NCS to their friends. However, the research also raised concerns about the ability of its providers to expand the service nationally.

The programme, which provides a combination of residential weeks and volunteering projects, was attended by 8,500 young people last year at a cost of £14.2m.

The number of places is expected to rise to 30,000 this summer and 90,000 by 2014. Sir Stephen Bubbs, chief executive of the Association of Chief Executives of Voluntary Organisations, said the model of a private firm providing assistance to charities could work, but it depended on the contract between the parties. Under the government's work programme, where big companies have formed partnerships with not-for-profit organisations, charities have complained that they have been used to give credibility to contract bids but then not benefited financially. Bubb added: "If you are trying to scale this up, then involving a partnership can be good. What I think wouldn't work was if they did it on the model of the work programme, with Serco as a prime contractor. But if it's a partnership, then it probably can."

Serco is one of the leading outsourcing firms, but has faced criticism of some of its operations. Its staff assisting border controls have been found to have missed security alerts and to have left their stations unmanned. The company was recently found by the health regulator to be failing to meet legal requirements to provide enough staff, to train them properly or monitor their performance in the out-of-hours GP service that it runs for the NHS in Cornwall.

Jayne Colquhoun, from vInspired, one of Serco's charitable partners in the bid, said: "Having worked with local partners across the country to deliver NCS since 2011, we are keen to continue our involvement over the years to come and to provide a high-quality, exciting programme for 16- and 17-year-olds. Given the government's ambition to scale up the programme from 2013 onwards, we have joined up with Catch22, NYA, Serco and UK Youth to form the NCS Network. We hope this will enable us to continue our work with existing local partners and bring on board new delivery organisations." The winner of the contract will be announced next month.