Ministers are facing a growing revolt over plans to hold a “reverse auction” to award legal aid contracts to the lowest bidders. Nearly 2,500 lawyers who say the scheme will cause “irreparable damage” to the quality of the justice system have already signed a Downing Street online petition urging the plans be scrapped.

The idea of a reserve auction, either an online e-auction or sealed bids, was devised for contracting out services such as refuse collection or school dinners. But Des Hudson, chief executive of the Law Society, warned: “What is being proposed is potentially very dangerous, dangerous from the point of view of clients, our criminal justice system and dangerous to the taxpayer.”

The plan is to apply it to criminal legal aid contracts for advice to people held at police stations. But this would lead to about 800 of the 2,100 legal aid firms that failed to secure a contract going out of business, Mr Hudson said.

The furore, two weeks before consultation closes, comes after The Times disclosed that an online auction system was being used to buy end-of-life and dementia care for the elderly. The NHS in London has held a series of 30 “reverse e-auctions” where bids were driven down instead of up, for £165 million worth of contracts. But the low bids have already damaged the quality of care. Mr Hudson, who was addressing a conference in London last week organised by the Legal Action Group and the Law Society to mark 60 years of the legal aid scheme, said that the plans, put forward by the Legal Services Commission, were being rushed ahead with no time for proper assessment of pilots.

“The contracts will go to the firms that offer the lowest price after meeting what we regard as a low threshold quality standard. The Legal Services Commission has been riding roughshod over the profession's concerns and playing fast and loose with its livelihood for the sake of a cost-cutting quick fix. The fix will be quick but the damage will be long-lasting.”

The work to be auctioned was “key” to all criminal work that a criminal law firm does, he said. Criminal lawyers who lost out in the auction would have to retrain urgently or close. “We fear the number of closures could be savage, eliminating any benefit of competitive prices to the taxpayer.”

Firms would be “under pressure to bid unsustainable prices to stay in the market, even if the effect is that they become insolvent before the end of the contract or are unable to maintain even the low quality threshold that has been set”. As a result, “irreparable damage” will have been done to the “supply base” of criminal law firms.

There is also concern over the timetable. Originally, the commission promised a proper pilot with full evaluation. Now, Mr Hudson said, it was moving forward much more quickly so that by January 2011, two thirds of England and Wales would be operating under competitive tendering.

It is not just solicitors up in arms. The Bar Council and Criminal Bar Association said the plans would damage quality, reduce choice and harm diversity. In a detailed and devasting critique, the Bar said the pros including savings would be outweighed by cons; that the plans had no economic rationale; that there was no evidence of the legal aid budget being out of control; and that no other jurisdiction in the world successfully funded criminal defence through tendering. The plans, it said, were being rushed through with no proper impact assessment. They would, for instance, adversely hit small ethnic minority firms - a point not denied by the commission.

Carolyn Regan, chief executive of the commission, insisted that the plans were still out for consulation. But moving to a competitive market was the next stage in reform of the £2 billion a year legal aid scheme.

She accepted that not all law firms bidding for contracts would secure them: “That is the nature of competition.” But she said: “I do believe the change will deliver a system that is sustainable for the future.”

She also pointed out the pressure in all public services to secure best value for money: “We would be failing in our duty if we did not ensure that legal aid was efficient.” The plans, she said, would ensure taxpayers' money was used to best effect. The auction would not go below a price that practitioners agreed was reasonable for the work to be done and would ensure that at least eight law firms won contracts in any area, so that there was choice.

The dispute is one of several over legal aid. Lawyers accept there is no more money in the pot. But the debate is over how to distribute it. There is also real concern that a change such as competitive tendering should not proceed without evaluation. Meanwhile, the hard message to get over is that this is not chiefly about money in lawyers' pockets; but about access to justice and fears that the plans will deny people help when most in need.

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