Why this matters now
On the 17th of June 2026, the Cabinet Office published PPN 024: The Public Interest Test and Insourcing Strategy. The policy note applies to central government departments, executive agencies and non-departmental public bodies, but it expressly states that other public sector contracting authorities may wish to adopt the approach and are encouraged to do so.
That makes it highly relevant to local government.
Councils already make sourcing decisions that affect service quality, workforce resilience, local markets, financial sustainability and long-term public value. Whether a service should be delivered in-house, outsourced, recommissioned, redesigned, shared, transferred, brought back under council control or procured differently is rarely a narrow procurement question. It is a commissioning, finance, workforce, legal, operational and political governance question.
PPN 024 does not make insourcing mandatory for councils. It does not say outsourcing is wrong. It does not replace local decision-making or the statutory best value framework. Its importance is that it reflects a wider direction of travel: public bodies are being asked to evidence delivery-model decisions more carefully, look beyond short-term price and assess whether the public interest is better served through internal or external delivery.
For local authorities, the practical message is clear. Before a significant service is re-procured, extended or materially changed, the sourcing decision should be capable of scrutiny. A council should be able to explain not only how it procured, but why it chose that delivery model in the first place.
What the Public Interest Test is intended to do
The Public Interest Test is designed to support an evidence-based decision about whether a service should be delivered in-house or outsourced before a procurement begins.
For in-scope central government organisations, the test is to be applied from the 1st of April 2027 to planned projects and re-procurements for services with an estimated value of more than £1 million including VAT, subject to specified exceptions. The accompanying guidance describes the test as a way of looking beyond short-term pricing and assessing long-term value for money, service quality and wider economic and social goals.
For councils, the formal duty does not apply in the same way because the PPN applies only to central government departments, executive agencies and non-departmental public bodies. However, the underlying questions are familiar.
Is the service strategically important?
Does the council need more direct control?
Is there sufficient internal capability to deliver?
Is the external market healthy and competitive?
Would outsourcing create dependency or fragility?
Could insourcing improve quality, resilience or accountability?
Could outsourcing deliver specialist expertise, innovation or capacity the council does not have?
What would the transition cost, risk and time requirement be?
How would either option affect service users, staff, suppliers and local markets?
These questions are not theoretical. They sit behind many current council decisions on highways, housing repairs, leisure, waste, adult social care, transport, facilities management, digital services, professional support and community services.
The value of the Public Interest Test approach is that it forces those questions to be asked before the procurement route becomes locked in.
Why this matters for councils even where the PPN is not mandatory
Local authorities do not need to wait for a formal obligation before improving sourcing governance.
Many councils already undertake options appraisals, business cases, make-or-buy reviews, commissioning strategies and gateway approvals. The risk is that these exercises can become inconsistent. Some are commercially robust. Others are produced late, rely heavily on assumed market behaviour or focus mainly on immediate affordability.
A Public Interest Test-style approach can help councils strengthen three areas.
First, it can improve early decision-making. If internal delivery is not viable, the authority can identify why and design a stronger procurement. If external delivery is not providing value, the authority can consider whether capability should be built internally before the next expiry date.
Second, it can improve auditability. Members, scrutiny committees, auditors and suppliers may challenge whether the council has simply rolled forward a historic model. A properly documented sourcing review provides a clearer explanation.
Third, it can improve market management. If a council understands which services are likely to remain external, which may be insourced and which require redesigned delivery, it can engage more honestly with suppliers and avoid unstable procurement pipelines.
The point is not to bias decisions towards insourcing. The point is to stop sourcing decisions being made by default.
Insourcing is not automatically lower risk
The current policy environment places more emphasis on rebuilding public sector capability and considering internal delivery. That is significant, but councils should avoid treating insourcing as a simple solution to supplier performance or market weakness.
Insourcing can improve control, transparency, workforce alignment and accountability. It may be appropriate where the market has failed, where delivery is highly strategic, where quality depends on integration with council services, or where the authority has the capability and capacity to manage the function directly.
It can also create risks.
The council may not have the workforce, systems or management capacity required.
Transition may be costly and disruptive.
The authority may inherit operational liabilities, assets, contracts, data issues or employment obligations.
Internal delivery may reduce exposure to supplier margin but create new budget, pension, HR, management and capital pressures.
Service quality may decline if the council underestimates the complexity of operational delivery.
A decision to insource should therefore be tested with the same commercial discipline as a decision to outsource. It should include realistic assumptions, transition planning, workforce assessment, financial modelling and a clear understanding of service impact.
Outsourcing is not automatically poor public value
Equally, outsourcing should not be treated as a failure of public capability.
External suppliers can provide specialist expertise, resilience, technology, operational scale, innovation, market insight and short-term capacity that a council may not be able to build efficiently. In some service categories, market delivery may remain the strongest value for money option.
The problem occurs where outsourcing is used without sufficient strategic control.
The specification may be weak.
The market may be too narrow.
The council may become dependent on a small number of providers.
Performance measures may not reflect real outcomes.
Contract management may be under-resourced.
The contract may be extended repeatedly because the authority lacks the capacity to redesign the service.
In those circumstances, the issue is not outsourcing itself. The issue is weak commissioning and contract governance.
A Public Interest Test-style review should therefore assess whether external delivery can be made to work better, not simply whether the contract should be brought in-house.
The risk of default re-procurement
One of the most important lessons for councils is the danger of default re-procurement.
A contract approaches expiry. The service has always been outsourced. The incumbent has delivered acceptably, or at least without crisis. The service team wants continuity. Procurement begins planning a new tender on broadly similar terms. The sourcing model is carried forward because there is no time to consider alternatives.
This is common and understandable. It is also risky.
The market may have changed.
The council's strategic priorities may have changed.
User needs may have changed.
The costs and benefits of internal delivery may have shifted.
Supplier performance may have been tolerated rather than properly assessed.
Previous social value, innovation or transformation commitments may not have been delivered.
The authority may be losing the opportunity to redesign the service before entering another multi-year commitment.
For significant services, councils should therefore review delivery options early enough to influence the business case. If the first serious discussion about insourcing takes place shortly before tender publication, the authority has probably left it too late.
What a council sourcing review should cover
A strong sourcing review should be proportionate to the service, value, risk and market.
It should begin with the service objective. The council should define the outcome it needs, the statutory or policy context, the users affected, the current service issues and the consequences of failure.
It should review current performance. The authority should consider cost, quality, complaints, KPIs, user experience, workforce stability, social value, carbon commitments, supplier resilience and contract management findings.
It should test internal capability. The council should assess whether it has, or can build, the operational capacity, management expertise, systems, governance, workforce structure and funding needed to deliver directly.
It should test market capability. The authority should consider supplier capacity, competition, innovation, pricing, financial resilience, SME and VCSE access, local supply chains and risk of dependency.
It should compare full cost and public value. This should include transition, mobilisation, management, pensions, systems, assets, procurement cost, contract management cost, contingency arrangements and long-term flexibility.
It should identify risks and mitigations. Both insourcing and outsourcing options require credible risk treatment.
It should recommend a delivery model with reasons. The decision should be understandable to procurement, finance, service leadership, legal advisers, members and auditors.
This is the type of structured support that can sit alongside Prestige Commercial Consulting's procurement advisory and route-to-market services, particularly where authorities need clear decision records before starting a procurement.
How this links to the Procurement Act 2023
The Procurement Act 2023 governs the procurement process, but sourcing decisions occur before the route-to-market is selected.
That makes the pre-procurement record especially important. A council may run a compliant tender but still face criticism if the underlying decision to outsource, insource or re-procure was not properly evidenced.
The Act also creates a more transparent environment. Pipeline notices, tender notices, contract details notices, contract performance notices, payments compliance notices and contract termination notices increase the visibility of procurement activity over time. Decisions that were once buried in internal project papers may now be easier to compare against public records.
If a council decides to outsource a strategic service, the procurement documents, KPIs and contract management arrangements should reflect the sourcing rationale.
If a council decides to insource, it should still document value for money, transition risk and the reason why procurement is not being pursued.
If a council decides to use a framework, dynamic market or competitive flexible procedure, the chosen route should flow logically from the sourcing decision.
The procurement file should tell one coherent story from service need to sourcing choice, route to market, award and contract management.
What councils should do now
Review upcoming re-procurements.
Councils should identify services over the next 12 to 24 months where a sourcing decision has not yet been fully tested. Priority should be given to high-value, high-risk, politically sensitive or operationally critical services.
Create a sourcing decision template.
A standard template should capture the service objective, current delivery performance, internal capability, market capability, cost and value considerations, transition risk, preferred delivery model and approval route.
Bring procurement into the discussion earlier.
Procurement officers should not be asked only to run the tender after the delivery model has been decided. They can add value by challenging assumptions, testing the market, identifying route options and ensuring the eventual process reflects the strategic decision.
Connect sourcing with contract performance evidence.
If a service is being re-procured because of supplier underperformance, the council should use contract management evidence, not anecdote. If a service is being retained externally, the authority should understand whether the previous model delivered the expected value.
Consider insourcing capability honestly.
Where internal delivery might be beneficial, councils should assess what capability must be built, how long it would take, what transition would cost and how service risk would be managed.
Avoid using insourcing as a short-term reaction.
A poor supplier experience does not automatically mean the service should be brought in-house. The council may need better specification, market engagement, contract management or supplier resilience controls.
Use training to build confidence.
Sourcing decisions require officers to understand procurement, commissioning, contract management and governance. Structured learning through the PCC Learning Platform can support officers who need stronger confidence in Procurement Act 2023 planning, route selection and commercial decision-making.
Practical tools and implementation resources can also be developed through the Prestige Commercial Consulting support hub, particularly where authorities need repeatable templates rather than one-off advice.
The supplier perspective
Suppliers should pay close attention to the renewed focus on insourcing.
The best response is not to argue that outsourcing should always continue. It is to demonstrate the public value that external delivery provides.
Suppliers should be ready to evidence quality, innovation, resilience, value for money, social value, transparency, supply chain strength and responsiveness. Where a contract is approaching expiry, suppliers that can show clear delivery evidence will be better placed than those relying on incumbency.
Suppliers should also understand that sourcing reviews may change the shape of future opportunities. A council may insource part of a service, outsource specialist elements, divide requirements into lots, create a mixed delivery model or move to a different route to market. Early and constructive market engagement will therefore be important.
Closing takeaway
PPN 024 is not simply a central government policy note to be filed away by local authorities. It reflects a wider procurement governance trend: public bodies are expected to evidence sourcing decisions, consider internal capability and justify delivery models before procurement begins.
Councils should use this moment to review how they decide whether to insource, outsource or redesign services. The strongest authorities will not treat insourcing or outsourcing as ideology. They will treat sourcing as a disciplined public value decision.
Where an authority needs support with sourcing reviews, procurement options, route-to-market strategy or governance records, Prestige Commercial Consulting Limited can help scope practical, fixed-output support.