Cumbria County Council's cabinet has decided to recommend to the full council that the contract with its strategic partner Capita be extended by three years until 2011.
The proposed deal is linked to improvements in services provided by Capita and more closely links payments with performance.
A final decision on extending the contract is due to be made by the full council at its next meeting in Kendal on 17th November.
Capita joined the county council in a strategic partnership in February 2001. The original contract was for seven years with the option to extend for a further three.
The current recommendation to build improvements into the deal and extend the contract has come as a result of the "mid-term" review of the relationship between Capita and the council.
Jack Richardson, cabinet spokesman for the strategic partnership, said: "What we are recommending is that the council approves an extension of Capita's contract. The proposal also sets out some changes that will build upon the strengths of our existing close relationship with Capita and take the partnership forward."