The Cabinet Office has published Procurement Policy Note 024 (PPN 024), introducing a mandatory public interest test for all government service contracts worth more than £1m, inclusive of VAT.

From 1 April 2027, departments must apply the test before commencing any planned project, including re-procurements, that may result in the award of a public contract worth more than under the Procurement Act 2023. Exemptions apply for certain categories of contracts including defence and security contracts, direct awards, and regulated health procurements.

Government organisations with annual contract spend of £100m or more must also develop and publish a five-year insourcing strategy within 30 days of 1 April 2027. Departments will be required to report on the outcomes of all public interest tests on a quarterly basis to the Government Commercial Agency.

As a first major application of the new approach, the Cabinet Office confirmed it plans to bring building management services – including cleaning and security staff – across 83 government buildings back in house when current contracts end in 2028, affecting about 2,000 outsourced workers. 

The Cabinet Office has also cancelled the Learning Framework 2.0 procurement following the establishment of the National School of Government and Public Services.

Chief Secretary to the Prime Minister, Darren Jones, said the guidance would “end the era of outsourcing by default”, while Chancellor Rachel Reeves said she was “determined to change the UK's economic model so that public services are run in the public interest”.

New political direction for procurement

Anja Beriro, Partner specialising in public procurement at UK and Ireland law firm Browne Jacobson, said: "This is a deliberate and material recalibration of the relationship between government and the outsourcing market, and both sides need to sit up and take notice.

“The political direction is unmistakable, but the real question is how departments will ensure they are ready to deliver on it. Applying a multi-factor public interest test that goes beyond cost to weigh up social value, accountability and in-house capability will require a level of commercial sophistication that years has been used less in recent years due to the reliance on the private sector.

“The impact on re-procurements is particularly significant. Requiring a public interest test on every re-procurement above £1m fundamentally changes the calculus for incumbent providers, many of which have invested heavily on the basis of long-term contract relationships. Government needs to consider how it simultaneously retains a competitive, high-quality supply base, for when it is required, and no longer treats potential contractors as a preferred choice.

“For contracting authorities, the immediate priority should be an honest capability audit. If you are going to have to justify – in writing, on a quarterly reporting basis – why a service should be outsourced rather than delivered in house, you need to understand what 'in house' genuinely looks like for your organisation, and whether you have the workforce and infrastructure to make it work."

Complex employment law considerations

Kerren Daly, Partner in employment at Browne Jacobson, said: “The government is presenting this as a story about procurement and value for money, but when 2,000 outsourced workers begin transferring into the civil service in 2028, it very quickly becomes a complex employment law story.

“TUPE will be the first consideration but isn’t the finish line. Protecting transferring workers' existing terms on day one is the easy part. 

“The hard part is harmonisation: how do you integrate a workforce employed on private sector terms into a civil service structure with its own grading, pay scales and pension arrangements without exposing yourself to equal pay claims, constructive dismissal risks, or industrial action?

“If departments uplift terms to match civil service equivalents, they need to cost that properly from the outset. If they don't, they face a two-tier workforce doing equivalent work on materially different terms – precisely the arrangement the government says it wants to end.

“The broader point is the five-year insourcing strategies will generate a rolling programme of potential transfers across central government. Organisations that treat insourcing as purely a procurement decision, without embedding employment law expertise from the start, will find themselves managing avoidable disputes and delays. 

“The strategic planning on the people side needs to start now, not when contracts expire in 2028.”