On 17 June 2026, the Cabinet Office published Procurement Policy Note 024 (PPN 024), introducing a new requirement, effective from 1 April 2027, for central government departments, their executive agencies and non-departmental public bodies to apply a Public Interest Test before commencing certain procurement projects (defined below). These in-scope organisations will also be required to complete an Insourcing Strategy by the same date. Contracting authorities in the wider public sector, such as local authorities and housing associations, may adopt the same approach if they wish to do so.
Alongside the PPN, the Cabinet Office has published a detailed guidance note setting out the requirements for conducting Public Interest Tests and completing an Insourcing Strategy.
The Cabinet Office noted that previous sourcing decisions, made on a contract-by-contract basis, had "focused too narrowly on the cost element of service delivery when comparing insourcing to traditional market options".
Under the new framework, in-scope organisations must consider the whole-life cost of projects, the benefits of local investment and organisational resilience. The stated aim is to "build internal skills and operational readiness, supporting a shift to a more interventionist, market-shaping approach in central government procurement".
Key Requirements under PPN 024
First, in-scope organisations must conduct a Public Interest Test before "commencing any planned project, including re-procurements, for a service with an estimated value of more than £1 million (including VAT)". Certain categories of contract are excluded from this requirement, including, direct award contracts made under Sections 41 and 42 of the Procurement Act 2023; exempted contracts under Schedule 2; and procurements solely to establish a framework or dynamic market, or call-off contracts where a Public Interest Test has already been conducted for the same service.
Second, the outcomes of all Public Interest Tests must be recorded and published. The aim of this requirement is to ensure transparency of decision-making. Results should be recorded using a template quarterly reporting form and submitted to the Government Commercial Agency within 30 days of the end of each calendar quarter.
Third, in-scope organisations must publish a five-year Insourcing Strategy within 30 days of 1 April 2027. This requirement applies only where the organisation has an annual contract spend of £100 million (including VAT) or more.
The Public Interest Test in Practice
The guidance note provides that when conducting the test, authorities are encouraged to rely on existing internal data, historic contract performance metrics and high-level market knowledge.
Before arriving at a Provisional Sourcing Decision (PSD), which provides an initial indication of whether a service should be insourced, authorities must consider two questions:
- Whether the service is a good candidate for insourcing.
- Whether the authority has the capability and capacity to deliver the service in-house.
In assessing these questions, authorities are encouraged to consider factors including social value, value for money, economic growth and market impact, and organisational capability.
The results of the test, a PSD, should be formally recorded in a short evaluation document and signed off by the relevant Senior Responsible Owner (SRO).
The guidance note further provides that a decision to insource should be followed by initial mobilisation-enabling work before a Delivery Model Assessment (DMA) is conducted. The DMA will undertake a full disaggregation of the service to provide a final recommendation of the preferred delivery model.
Components of an Insourcing Strategy
In addition to a Public Interest Test, the PPN requires authorities to submit a five-year Insourcing Strategy.
Insourcing Strategies should address matters including service profiling and operational requirements, identification of insourcing potential, required competencies and capacity building, target delivery models, and implementation challenges and mitigations.
The guidance also requires authorities to take a consultative approach when developing their strategies, engaging with trade unions, the wider workforce and service end-users to inform their approach.
The content of PPN 024 reflects the current government's desire to have more services delivered in-house by the public sector. Whether the requirement to consider insourcing before launching a procurement actually leads to greater insourcing will depend on the appetite and capability of the relevant contracting authority to take on direct service delivery. Organisations within scope of PPN 024 should begin preparing now for the 1 April 2027 commencement date, ensuring that appropriate internal processes and resources are in place to conduct the Test and to develop and publish their Insourcing Strategies.
For more information on insourcing and procurement structuring, please contact Rebecca Rees (rrees@trowers.com) or Louis Sebastian (lsebastian@trowers.com).
