Procurement Policy Note (PPN) 024 signals a clear policy expectation that larger central government bodies should take a more planned approach to insourcing. In particular, central government departments with annual contract spend of £100m or more should prepare a five-year Insourcing Strategy, identifying where direct delivery may be feasible and what capability would be needed to support it. The PPN also introduces a Public Interest Test (the Test) to be considered at the outset of relevant service projects, before an authority commits to an outsourcing route or starts procurement. The Test is intended to inform, rather than replace, the later Delivery Model Assessment and business case process.
The direction of travel is away from default outsourcing and narrow, near-term cost comparison. Authorities are expected to ask a broader question: whether public ownership or direct delivery could better support long-term value, service resilience, accountability, workforce stability and wider public outcomes.
Insourcing Strategy
Insourcing strategy requirements
For authorities within the £100m annual spend category, the strategy should operate as a forward-looking planning tool rather than a one-off compliance document. It should help the organisation identify services that may be suitable for future insourcing, assess capability gaps, plan governance and transition arrangements, and give the market a clearer view of the authority’s likely direction of travel.
The Public Interest Test
What is the Test?
The Test is a short, structured assessment used early in project development to decide whether in-house delivery should remain a serious option. It considers both the characteristics of the service and the authority’s practical ability to deliver it. Its output should be treated as an initial sourcing indication, not the final make-or-buy decision, and should then be tested through the Delivery Model Assessment and business case.
Who is in scope?
The PPN applies to central government departments, executive agencies and non-departmental public bodies. Other contracting authorities, including local authorities, NHS trusts and foundation trusts, are not directly mandated but are encouraged to consider the approach as good practice. For in-scope bodies, the Test should be considered before starting relevant service projects, including re-procurements, where the proposed arrangement is above the £1m VAT-inclusive threshold and may result in a public contract under the Procurement Act 2023, unless an exemption applies. The exemptions include specified direct awards, exempt contracts, some defence and security services, overseas service delivery, certain regulated health procurements and qualifying research or evaluation contracts.
Timing and process
In practice, the Test will often be triggered when an existing contract is approaching expiry and the authority is deciding whether to re-procure, redesign the service or bring delivery in-house. It is not, however, limited to replacement contracts. It may also arise where there is:
- a new service requirement;
- a materially changed service requirement;
- potentially a project that involves reframing or restructuring service delivery before going to market.
Authorities should carry out the Test before procurement activity begins, typically around the Strategic Outline Case stage. For straightforward requirements, the assessment should be capable of being completed quickly using existing information; more complex projects may justify a short cross-functional workshop. The output should record whether insourcing remains a realistic option to be developed further, subject to later validation through the Delivery Model Assessment and business case.
What the Test assesses
The Test is made up of two parts:
- Part One asks whether the service is a good candidate for insourcing, focusing on value for money and strategic alignment, social value, and economic/market factors. Contracting authorities may elect to add additional criteria to reflect organisation-specific priorities, provided they are not intended to drive a particular outcome.
- If Part One is positive, Part Two tests organisational readiness: people, infrastructure and assets, delivery vehicle options, transition risks and governance.
There are no fixed pass marks, but a majority of positive answers in Part One indicates candidacy; readiness typically requires affirmative answers to all Part Two questions.
Where a project breaks down into obvious, distinct service lines (for example, a digital project naturally separating into system development and ongoing IT helpdesk support), contracting authorities may consider testing these separately, resulting in a distinct Provisional Sourcing Decision for each.
Evidence pack and engagement
Before applying the Test, authorities should gather enough information to make a meaningful early judgement without turning the exercise into a full business case. Relevant material is likely to include service requirements, current performance, market conditions, staffing and TUPE issues, indicative cost information, risk allocation and strategic alignment. The level of cross-functional input should be proportionate to the value, risk and complexity of the service, with commercial, operational, finance, HR, legal and policy input brought in where needed.
Outcomes and next steps
Where the Test supports insourcing, the authority should then undertake proportionate preparatory work on matters such as assets, data, staffing, capability and governance before the option is tested through formal appraisal. Where outsourcing remains the preferred route, the authority should still consider whether shorter contract terms, phased transition arrangements or capability-building measures are needed to preserve future flexibility.
Key takeaways
It is difficult to argue with the objective of this guidance and it is certainly part of current best practice anyway. It must be right that contracting authorities should ask themselves "could we do this better ourselves?" before procuring any contract and this is a key element of the Sourcing Playbook. However this PPN codifies that discipline and will make it more visible through the specific Public Interest Test and the Insourcing Strategy. The competing pressure of course for public bodies is the mounting criticism on the time UK bodies take to procure major projects and whether adding additional mandatory steps to the assessment process will help or hinder that.
Services with policy volatility, labour‑intensive delivery, restricted markets or persistent under‑performance may be prime candidates to consider for insourcing, provided capability and transition risks are manageable. Procurement teams will likely need greater integration with operational, HR and legal functions to undertake the assessment. Preparation will be key.
Do get in touch with any member of our Commercial & Procurement team at DACB to share your thoughts on this other developments in public procurement, we're always happy to discuss.
