Bail accommodation often houses prisoners released with electronic tags
Critics have condemned the practice of using a private firm to run bail hostels after it was revealed that the company's contract may be terminated.
It comes after failings were identified at a hostel on Teesside where a young man was murdered by another resident.
The National Association of Probation Officers said the contract had been "a nightmare" and it was vital to have hostels with proper supervision.
ClearSprings, which runs 204 centres in England and Wales, declined to comment.
The company has been served with a "rectification notice" by the Ministry of Justice.
The ministry, which awarded the national contract to ClearSprings in 2007, said the firm had 15 days to respond to the notice with "remedial measures". The notice period expires on Saturday.
It said that if the company failed to comply, one option was termination of the three-year contract.
Beaten and stabbed
The incident at the centre of the controversy occurred in March when 24-year-old Mark Bradshaw, who was on bail accused of assault, was beaten and stabbed to death at premises run by ClearSprings in Stockton.
One of his attackers was Kelvin Benson, who had a history of violence and had been bailed to the same hostel accused of assault.
Benson admitted murder and was jailed for life, with a minimum term of 13 years.
The government has got to go back to the days when people on bail were supervised properly, by experienced and trained staff. It's as simple as that
Harry Fletcher National Association of Probation Officers
During sentencing earlier this month, Judge Peter Fox QC expressed his concerns about the way the hostel had been run, saying the circumstances were "disturbing".
The ministry that said although Benson was risk-assessed before being placed in the hostel, records had not been properly checked.
A spokeswoman said: "A member of ClearSprings' staff failed to follow the proper procedures in this case.
"As this was linked to a serious incident, a rectification notice was issued to ensure ClearSprings fully complies with the terms of their contract in future."
The ministry said a ClearSprings support worker had left the company as a result and that other staff had been briefed and retrained.
There was also evidence that Benson's girlfriend had been at the hostel when she should not have been allowed there.
'Nightmare and mistake'
National Association of Probation Officers official Harry Fletcher told the BBC: "It's just not on, putting four or five volatile individuals in the same place with no supervision.
"The government has got to go back to the days when people on bail were supervised properly, by experienced and trained staff. It's as simple as that.
"This has been a nightmare, it's been a mistake, it needs to be unravelled."
Conservative shadow justice secretary Dominic Grieve said the whole project had been a failure.
Probation officer Harry Fletcher: "The whole contract has been beset by massive problems"
"I'm not at all happy and haven't been since this was first set-up with the way in which the government set-up this project," he said.
He said when the government put the contracts together, proper consultation as to where the hostels would be cited did not take place.
"When I started looking into where these contracts were being put together, it seems to me that they are pretty minimal in terms of the supervisory aspect.
"So to turn around and say to ClearSprings that it isn't being properly supervised, what did the government contract ClearSprings to do?"
Officials said they had been working with ClearSprings since the murder to "strengthen procedures". A programme of spot checks would also be put in place to ensure there were further improvements.
ClearSprings, which was paid £5.8m in 2008/9 to manage bail accommodation, was accused earlier this year of failing to inform local residents before properties were converted to bail centres.
There have also been complaints from members of the public that people at some of the premises have been rude, aggressive and violent.
ClearSprings has refused to comment and referred media inquiries to the Ministry of Justice.
The ClearSprings contract runs out in June 2010. The ministry said it was in the process of seeking bidders for the contract to run bail hostels after that date.
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