On 17 June 2026, the UK Government issued Procurement Policy Note 024 (“PPN 024”) and an accompanying Guidance Note, which aims to create a new policy framework to ensure that insourcing the direct, in-house delivery of services is consistently and rigorously considered alongside traditional outsourcing approaches. PPN 024 only applies to central government departments, their executive agencies and non-departmental public bodies (the “In-scope Organisations”). However, other contracting authorities are encouraged to adopt the Public Interest Test as well.
A shift towards strategic sourcing and the Public Interest Test
PPN 024 outlines that sourcing decisions can have the potential to “critically impact the quality of public services and the successful delivery of government objectives.” The new policy framework requires a more strategic, long-term approach, encouraging In-scope Organisations to assess whether they should build the capability and competence to deliver services in-house.
Insourcing is positioned not simply as an alternative delivery model, but as a mechanism to enhance value, increase control and strengthen operational resilience. This reflects a broader move away from outsourcing as the default model for public service delivery, requiring contracting authorities to give structured consideration to whether services could be delivered more effectively in-house.
PPN 024 introduces the Public Interest Test (the “Test”) to address decisions on sourcing of services. The Test, which is an early-stage assessment designed to determine whether a service may be better delivered in-house, should be applied by In-scope Organisations from 1 April 2027 to new projects and re-procurements only, excluding projects already progressed through key internal approvals.
The Test must be applied before commencing any planned procurement for services with an estimated value exceeding £1 million, subject to the following exceptions:
- certain direct awards under the Procurement Act 2023 (the “Act”) including direct awards for urgency, prototypes, exclusive rights, repeat purchases, commodities, insolvency and user choice contracts, excluding direct awards based on the absence of competition for technical reasons;
- direct awards to protect life or public safety under section 42 of the Act;
- exempted contracts under Schedule 2 of the Act;
- certain defence and security contracts, where services relating to defence and security goods are provided by the original equipment manufacturer;
- contracts primarily for services delivered outside the UK;
- regulated health procurement contracts exempted under the Procurement Regulations 2024;
- research, evaluation and technical analysis work where:
- the requirement is one-off or highly infrequent, making in-house capability uneconomic;
- external delivery is needed to ensure independence, credibility or transparency; or
- delivery relies on established specialist fieldwork infrastructure, such as large-scale survey networks.
- requirements already assessed in the In-scope Organisations’ Insourcing Strategy, provided that assessment is sufficiently rigorous and comparable to the Test;
- procurements establishing only a framework or dynamic market; or
- call-off contracts under a framework or dynamic market where the Test was already undertaken when establishing the arrangement and the call-off relates to the same service.
The Test involves two stages:
- Part One considers whether the service is a suitable candidate for insourcing (taking into account value for money, service characteristics, social value and market conditions); and
- Part Two assesses whether the In-scope Organisation has the capability and capacity to deliver the service in-house.
The outcome is a Provisional Sourcing Decision, which indicates whether insourcing should be taken forward as a viable option. This is not a final decision but informs subsequent, more detailed appraisal processes.
Value for money
The Guidance emphasises that value for money should be evaluated holistically, taking into account whole-life costs, service quality, resilience and wider economic and social impacts. The policy framework outlines that a hyper-focus on cost alone can result in “false economies and unhealthy markets, often leading to unsustainable delivery models.” This may reduce value for money overall and may also result in supplier performance issues and poor contract performance over time. In contrast, insourcing may offer structural efficiencies by removing supplier profit margins, reducing administrative costs and enabling better use of internal resources.
Benefits of insourcing
The Guidance identifies several potential advantages of in-house delivery, including:
- greater accountability and flexibility, enabling quicker responses to policy changes and user needs;
- improved long-term contract value, by eliminating certain external costs and leveraging internal capabilities;
- enhanced capacity and expertise, through the development of a stable, skilled public sector workforce; and
- wider social and economic benefits, including job creation and support for local economies.
However, insourcing may not be appropriate in all cases. Decisions must be made on a case-by-case basis, supported by evidence and aligned with In-scope Organisations’ objectives. Switching to insourcing may also involve practical challenges, including rebuilding internal capability, transferring knowledge and managing workforce, systems and asset dependencies.
Insourcing strategies
Alongside the Test, PPN 024 introduces a requirement for In-scope Organisations with an annual contract spend of £100 million or more to develop and publish a five-year Insourcing Strategy. The Insourcing Strategy acts as a forward-looking roadmap, identifying opportunities for insourcing across service categories and setting out how In-scope Organisations will build the necessary skills, capacity and infrastructure. Insourcing Strategies must be completed by 1 April 2027 and published within 30 days of completion.
An Insourcing Strategy should include:
- service profiling and identification of insourcing opportunities;
- assessment of required competencies and capacity building plans;
- a target delivery model; and
- consideration of implementation challenges and mitigations.
Conclusion
The introduction of the Test and the requirement for an Insourcing Strategy represents a significant evolution in public procurement policy. By embedding a structured consideration of in-house delivery and promoting a broader conception of value for money, the UK Government aims to support more resilient, accountable and high-quality public service delivery.
For In-scope Organisations and suppliers alike, the new framework signals a more strategic and evidence-driven approach to sourcing decisions, with increased emphasis on long-term outcomes and public value.
Importantly, insourcing does not mean cutting short existing contracts, taking back assets or re-nationalising an industry, all of which may carry significant financial consequences. It is more likely to arise at the end of a franchise, outsourcing or service contract, when a contracting authority considers whether the follow-on arrangement should be delivered in-house.
Finally, it should perhaps be remembered that the Test and Insourcing Strategy introduce new processes; any organisation deciding to insource a service should therefore ensure that they carefully consider all relevant options and record their decisions with a full audit trail.
If you are looking for procurement advice, please visit our Procurement Centre of Excellence web page where you will find a list of our procurement lawyers.
Thank you to Eirini Sakellari, a trainee in our Commercial Team, for contributing to this article.
