Chapter 1 is inviting tenders to refurbish the homeless hostel in Liverpool, which houses 50 homeless men.
Mildmay House will be redesigned with the help of residents, local people and contractors into a mix of self-contained flats, individual en-suite rooms and purpose-built accommodation.
The homeless hostel, on Blackburne Place, is a supported housing project run by charity organisation Chapter 1. The £4.5m redesign project has been jointly funded by the Homes & Communities Agency and Chapter 1.
Deborah Mclaughlin, executive director for the North West at the Homes & Communities Agency, said: "As well as providing a better home for many people, this redevelopment will give residents access to training opportunities and employment while the work is being carried out. We're looking forward to following the journey of the people involved in this brilliant project."
Chapter 1 is working with project co-ordinators, G2 Development Consultants and DNA IC to allocate contracts. Rather than hiring one single contractor, tenders are being invited for smaller packages, with priority given to local suppliers.
The tenders will be selected not just on price, but on the additional opportunities they can bring, such as training for residents. The majority of the contracts are expected to be signed by June.
Caroline Hansen, operations director at Chapter 1, said: "This exciting investment in Liverpool will ensure we can continue to help people who are homeless. They deserve more than just a bed. We can offer them a better future.
"We are encouraging local suppliers to submit tenders, and are committed to prompt payment to make it easier for smaller enterprises to be involved.
"It's an ambitious project in a difficult economic climate, and we are indebted to the Homes & Communities Agency for their confidence in Chapter 1. Together we will change lives."
G2 Development Consultants provide strategic advice and project co-ordination services based on experience in both the public and private sectors.
DNA Integrated Construction is a construction company delivering project management for clients including charities, not-for-profit, private and commercial enterprises.
JBH Property is the lead consultant on the design.
The work is due to complete in 2014.