Central government bodies to be required to conduct public interest test for £1m+ procurements and develop insourcing strategy if spend exceeds £100m

The Cabinet Office said its public procurement note on the Public Interest Test and Insourcing Strategy applies to central government departments, their executive agencies and non-departmental public bodies - referred to as ‘in-scope organisations’.

Other public sector contracting authorities “may wish to adopt the approach set out in this PPN and are encouraged to do so”.

According to the PPN, in-scope organisations should:

1. Conduct a Public Interest Test prior to commencing any planned project, including re-procurements, for a service with an estimated value of more than £1 million (including VAT) that may result in the award of a public contract under the Procurement Act 2023. This is subject to relevant exemptions.
2. Record the outcomes of all Public Interest Tests using the provided quarterly reporting template and submit this return to the Government Commercial Agency within 30 days of the end of each calendar quarter. The first return will cover the period from 1 April 2027 to 30 June 2027 and is due by 30 July 2027. In-scope organisations are responsible for redacting sensitive information from the return before submission.
3. Develop and publish a five-year Insourcing Strategy within 30 days of 1 April 2027, where the organisation has an annual contract spend of £100 million (including VAT) or more.

The Public Interest Test asks two key questions – whether the service is a suitable candidate for insourcing; and whether the organisation has the capability to deliver it.

The Cabinet Office PPN said: “To ensure that public services are run effectively and maximise public value, a new framework is necessary to systematically evaluate the option of delivering services in-house before a procurement begins. The introduction of the ‘Public Interest Test’ achieves this by placing greater emphasis on rebuilding state capability and long-term national resilience.

“Historically, government assessments of value for money have often focused too narrowly on the cost element of service delivery when comparing insourcing to traditional market options. The accompanying guidance addresses this by encouraging a broader, more comprehensive view of value for money. It provides a methodology for practitioners to evaluate internal delivery models, ensuring that sourcing decisions move beyond simple cost comparisons to actively take into account wider government objectives alongside key economic and social goals.

“By establishing a formal framework through five-year insourcing strategies, Government can identify these opportunities early in the project lifecycle. This forward-looking planning provides the essential lead time required to build internal skills and operational readiness, supporting a shift to a more interventionist, market-shaping approach in central government procurement.”

Chief Secretary to the Prime Minister Darren Jones said: "I want to end the era of ‘outsourcing by default’ and build stronger in-house capacity. The British people deserve value for their money – not just the cheapest, short-term option which may not deliver quality in the long-term.

"By introducing this Public Interest Test, and leading the way by looking to bring our cleaners and security staff back in-house when major contracts end in 2028, we are rebuilding our national capacity to deliver high-quality services the British people deserve."

Responding to the PPN, Nicola Cullen, Associate in the Public Law and Regulatory team at Capital Law, said: “The accompanying guidance suggests insourcing may warrant particular consideration where: markets are weaker, supplier performance has been poor, services are complex or difficult to scope and markets exist largely because government has created them.

“This suggests a shift from contract by contract decision making towards longer term capability planning and strategic consideration of how public services should be delivered.”

She observed that authorities will “increasingly need to evidence not only why they are procuring a service, but why external delivery represents the right model.”

Lottie Winson