Procurement in a Nutshell: Procurement Policy Note: The public interest test and insourcing strategy
26th June, 2026
Procurement in a Nutshell
26th June 2026
Procurement in a Nutshell: Procurement Policy Note: The public interest test and insourcing strategy
Find out more
Earlier this month, the government published a Procurement Policy Note (024) regarding a new Public Interest Test (the 'Test') which requires central government bodies and other in-scope authorities to apply the Test from April 2027.
Other public sector contracting authorities are strongly encouraged to adopt this approach.
The Test will commence prior to any planned project for a service with an estimated value of more than £1 million that may result in the award of a public contract under the Procurement Act 2023.
The PPN and Guidance Note can be found here.
What is the Test?
The Test is an initial evaluation of a service to identify whether it has the potential to be better delivered in-house. The Test should be applied to services that are currently delivered by third parties (‘outsourced services’), to a new service or where significant changes are planned to be made to a service that is currently delivered in-house.
The Test comprises two parts:
- Part 1: whether the service is a good candidate for insourcing.
- Part 2: considers a contracting authority’s readiness to insource the service.
It is notable that the Test does not have to be binary. Instead, the PPN Guidance Note highlights that it could be beneficial to identify the scope for a potential ‘mixed-economy model’ where certain elements are delivered in-house.
Part 1: Characteristics of Service
- Focuses on the characteristics of the service and whether it would be a good candidate for insourcing.
- The considerations are broken down into: Value for Money and Strategic Alignment; Social Value; and Economic Growth and Market Impact.
The Contracting Authority should identify if the above indicators identify that a service is a good candidate for insourcing.
Part 2: Organisational Capability and Capacity
If the Contracting Authority has determined a service to be a good candidate for insourcing, then prior to coming to a Provisional Sourcing Decision, a contracting authority should assess its readiness for insourcing.
What does this mean for you?
In-scope organisations should and other public sector contracting authorities are strongly encouraged to:
- Conduct a Public Interest Test prior to commencing any planned projects, including re-procurements, for a service with an estimated value of more than £1 million (inclusive of VAT) that may result in the award of a public contract under the Procurement Act 2023.
- Record the outcomes of Public Interest Test using the provided quarterly reporting template and submit the return to Government Commercial Agency within 30 days of the end of each calendar quarter. The first return will cover the period 1 April 2027 to 30 June 2027 and is due by 30 July 2027. In-scope organisations are responsible for redacting sensitive information from the return before submission.
- Develop and publish a five-year Insourcing Strategy within 30 days of 1 April 2027, where the organisation has an annual contract spend of £100 million (inclusive of VAT) or more.
For further information, please contact Tim Care or Melanie Pears in our Public Sector team.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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