Key takeaways
Insourcing must be actively considered
New guidance requires structured assessment before outsourcing.
Value extends beyond financial cost
Decisions should reflect resilience, expertise and social impact.
Early planning strengthens sourcing decisions
Robust evidence and clear rationale support compliance.
In recent updates we have flagged some ways that procurement law, and hopefully practice, is shifting in the direction of considering non-financial value as a key element of decision-making. We have noted changes in recent procurement legislation – including both the Procurement Act 2023 and Provider Selection Regime 2023 – and in guidance on value-based procurement for medtech released recently by the Department of Health and Social Care.
Here, we summarise the key points in another piece of guidance, a procurement policy note (PPN), applying more widely than healthcare – PPN 024 – The Public Interest Test and Insourcing Strategy. This focuses on the need for public bodies to carefully consider insourcing services as a ’crucial mechanism for enhancing value, control and resilience’ and flags the need to move away from previous assessments looking only at narrow cost elements of service delivery shifting to a ’more comprehensive view of value for money’.
What has been released and how does it apply?
The PPN was published in June 2026 and comprises the PPN itself – The Public Interest Test and Insourcing Strategy, together with a longer guidance document covering its application.
The PPN must be applied by all central government departments, their executive agencies and non-departmental public bodies, but excluding NHS trusts and foundation trusts. However, other contracting authorities, including NHS trusts and foundation trusts should consider the guidance to be good practice when planning projects and services.
There are two elements to the guidance:
a requirement to carry out a Public Interest Test (PIT) for individual services on a case-by-case basis and
a requirement to develop an Insourcing Strategy (IS) which is a medium-term roadmap of how the Contracting Authority will develop its internal capability.
The PIT should be applied from 1 April 2027 to all new procurements (procurements already underway by then are out of scope) where individual contract values are estimated to be in excess of £1 million including VAT. Contracting authorities can use their discretion to apply it for lower value contracts. Contracting authorities with an annual contract spend of more than £100 million including VAT should prepare an IS which is a living document covering a minimum of five years.
There are exceptions to the kinds of contracts which are covered. Key ones, in summary, include:
contracts for regulated health procurements – in summary, healthcare services and services procured together with those
some direct award scenarios
defence and security contracts
service contracts where the primary object is provision of services delivered outside of the UK
procurements solely to establish a framework or set up a dynamic market (although the PIT should be applied to call offs under it with a spend of more than £1 million (including VAT) and
services already appraised under the Insourcing Strategy.
Why should insourcing be considered?
The PPN notes that a ‘fundamental shift’ is required in how public services evaluate their delivery models and that a new approach is needed to guarantee that viability of internal delivery is explored consistently. The guidance sets out more detail about the perceived benefits of insourcing, to include:
public accountability and agility – oversight for public bodies and rapid response to needs such as policy priorities and national emergencies
long-term value for money – realising structural efficiencies over time
increasing public sector capacity and expertise – better quality services through retaining or building core technical expertise in house and
high-quality jobs and stimulating local economies – drive UK growth and deliver targeted social value outcomes.
The guidance explains that there should be a holistic approach to assessing value for money, beyond upfront costs.
What is the Public Interest Test?
According to the guidance, the PIT is an early-stage assessment which should be completed, usually on a desktop basis, before the Strategic Outline Case stage. It is in two stages:
Part 1 – is the service a good candidate for insourcing?
Part 2 – assesses the Contracting Authority’s readiness to insource.
The test should usually be completed in two days, and only if complex. Progress beyond the desktop assessment will involve a workshop of subject matter experts.
In conducting Part 1 of the PIT, indicators that a service might be a good candidate for insourcing include factors ranging from value for money and strategic alignment to social value and economic growth. Value for money explicitly includes consideration of wider economic and social impacts.
Part 2 of the PIT includes considering factors such as whether the Contracting Authority already has, or can reasonably recruit, appropriate staff bearing in mind capacity and budget, whether it already has, or has budgetary provision to acquire, relevant infrastructure and assets, and potential risks and impact of transition to an insourced model.
When the PIT has been completed, the Contracting Authority should produce a Provisional Sourcing Decision which is then the starting point for further analysis of whether a service should be insourced. Results of tests carried out are to be published centrally.
If you would like more information about how this PPN applies to your organisation, please get in touch.
What are the practical implications of the PPN?
For contracting authorities, the PPN reinforces the need to treat sourcing decisions as a structured and evidence-based exercise, rather than as a binary choice between outsourcing and insourcing. Authorities will need to be able to demonstrate that they have considered the viability of insourcing at the appropriate stage, particularly where the PIT applies, and that their conclusions are supported by a clear rationale.
In practice, this means keeping a robust audit trail of the assessment undertaken, the evidence relied upon, the factors considered and the reasons for the provisional sourcing decision. That record is likely to be important not only for internal governance and approvals, but also to support transparency where the outcome of the PIT is published centrally.
Authorities should also consider how the PIT interacts with wider project planning, business case development and procurement strategy. The guidance suggests that the PIT should usually be undertaken at an early stage, before the Strategic Outline Case, so authorities will need to build this into their procurement timetables and decision-making processes.
Where insourcing is not progressed, the authority should be able to explain why, including by reference to issues such as value for money, strategic alignment, capacity, workforce, infrastructure, transition risk and deliverability.
For bidders, the PPN is a further reminder that contracting authorities may be giving more active consideration to whether services should be delivered in-house before deciding to go to market. This may affect the timing, scope and shape of future procurements, particularly for services above the relevant threshold or in areas where authorities are reviewing their medium-term delivery models.
Bidders may therefore wish to monitor early market engagement carefully and be prepared to demonstrate not only price competitiveness, but also the wider value they can offer, including resilience, social value, innovation, service quality and support for the authority’s strategic objectives.
The PPN does not mean that services must be insourced. However, it does mean that contracting authorities within scope will need to show that they have properly considered whether insourcing is in the public interest before proceeding with an alternative delivery model.
For both authorities and bidders, the practical message is that sourcing decisions are likely to require earlier planning, fuller evidence and a clearer explanation of how the preferred approach delivers value in the broader sense contemplated by the guidance.
If you’d like to discuss how the PPN might affect your organisation or to learn more about our experience in procurement, contact us today to find out how we can support.
