Procurement Policy Note 024: Insourcing and the Public Interest Test

Sourcing decisions play a critical role in determining the quality of public services and the successful delivery of government objectives. Insourcing can be an important means of improving value for money, increasing organisational control, and strengthening resilience.

To drive a fundamental change in how public sector organisations assess service delivery options, a new approach is required to ensure that the feasibility of delivering services in-house is consistently considered.

This Procurement Policy Note (PPN) applies only to central government departments, their executive agencies, and non-departmental public bodies (collectively referred to as "in-scope organisations"). Other public sector contracting authorities are encouraged to adopt the approach outlined in this PPN where appropriate.

The Public Interest Test must be completed before commencing any planned project, including re-procurements, for services with an estimated value exceeding £1 million (including VAT) that could result in the award of a public contract under the Procurement Act 2023. The following exceptions apply:

a. Direct award contracts made under Section 41 of the Act, which permits direct awards in specific circumstances, including extreme urgency, prototypes, exclusive rights, repeat requirements, commodities, insolvency, and user choice contracts. This exception does not apply where the justification is based on paragraph 6 of Schedule 5 (absence of competition for technical reasons).

b. Direct award contracts made under Section 42 of the Act, where the award is necessary to protect life or public safety.

c. Exempt contracts listed under Schedule 2 of the Act.

d. Defence and Security contracts, as defined by the Act, relating to services connected with Defence and Security goods where those services are provided by the original equipment manufacturer.

e. Service contracts where the primary purpose is the delivery of services outside the United Kingdom.

f. Contracts for regulated health procurement that are exempt under Regulation 43 of the Procurement Regulations 2024, which excludes health services defined in Section 120(2) of the Act from the standard procurement regime.

g. Contracts for policy or programme evaluation, research, or the development of technical data or analysis, where the work meets the criteria set out in section 4.2 of the guidance.

h. Contracts where the specific service requirement has already been explicitly assessed through the Insourcing Strategy, provided that the analysis undertaken is of comparable depth and rigour to that required by the Public Interest Test.

i. Procurements undertaken solely to establish a framework agreement or a dynamic market.

j. Where a Public Interest Test has already been completed and the resulting sourcing decision was to establish a framework agreement or dynamic market, subsequent call-off contracts for the same service will not require an additional Test.

For more information on this PPN click here