The Cabinet Office has published new guidance on government contract procurement in an effort to “end outsourcing by default”.
The guidance sets a new public interest test for the procurement and re-procurement of contracts worth over £1m and asks departments to create five-year roadmaps to rebuild their in-house capabilities.
As part of this new approach, which was first trailed in April, the Cabinet Office has said it plans to bring government building management services across 83 government buildings back in house, including cleaning and security staff contracts.
The new guidance says that, from 1 April 2027, departments must conduct public interest tests “prior to commencing any planned project, including re-procurements, for a service with an estimated value of more than £1m (including VAT) that may result in the award of a public contract under the Procurement Act 2023”.
The guidance sets out a number of exemptions which allow organisations to skip the public interest test. These include defence and security contracts, direct award contracts and contracts for regulated health procurement.
Once the public interest test is introduced next year, departments will be asked to record the outcomes of all public interest tests using a quarterly reporting template and submit this return to the Government Commercial Agency within 30 days of the end of each calendar quarter. The first return will cover the period from 1 April-30 June 2027.
The guidance also says that all government organisations with an annual contract spend of £100m (including VAT) or more must develop and publish a five-year insourcing strategy within 30 days of 1 April 2027.
‘A more interventionist approach’
A procurement policy note explaining the new guidance says: “Historically, government assessments of value for money have often focused too narrowly on the cost element of service delivery when comparing insourcing to traditional market options.”
It says the new guidance “addresses this by encouraging a broader, more comprehensive view of value for money”.
“It provides a methodology for practitioners to evaluate internal delivery models, ensuring that sourcing decisions move beyond simple cost comparisons to actively take into account wider government objectives alongside key economic and social goals.”
It adds that, by establishing a formal framework through five-year insourcing strategies, government “can identify these opportunities early in the project lifecycle”.
“This forward-looking planning provides the essential lead time required to build internal skills and operational readiness, supporting a shift to a more interventionist, market-shaping approach in central government procurement,” the guidance says.
Announcing the new guidance, Darren Jones, the chief secretary to the prime minister, said: “I want to end the era of ‘outsourcing by default’ and build stronger in-house capacity. The British people deserve value for their money – not just the cheapest, short-term option which may not deliver quality in the long-term.
“By introducing this public interest test, and leading the way by looking to bring our cleaners and security staff back in house when major contracts end in 2028, we are rebuilding our national capacity to deliver the high-quality services the British people deserve.”
Chancellor Rachel Reeves added: "I am determined to change the UK’s economic model so that public services are run in the public interest with more workers brought back in house.
“For too long outsourced workers who play a vital role in public services have been overlooked and treated differently. This government was elected to insource more public services and that is what we are doing."
Wave of insourcing 'starts in our own buildings'
On the plans to bring building management services such as cleaning and security staff back in house, which will be subject to completing the public interest test, the Cabinet Office said it will begin this process when current contracts end in 2028.
Cabinet Office minister Chris Ward said: "This government promised to deliver a wave of insourcing – and that starts in our own buildings and with our own staff.
“Bringing the government's cleaning and security services back in house is just the start, and – alongside a new public interest test – shows that under this government, the age of outsourcing is over."
Commenting on this announcement, PCS general secretary Fran Heathcote said: “This is a huge victory for members and a clear vindication of our campaign for insourcing.
"For too long, outsourced workers have faced lower pay, poorer conditions and been treated as second-class citizens."
Heathcote said the plans should bring around 2,000 workers back into the civil service and "help end that unfairness, deliver better value for taxpayers and show that public services work best when they are delivered in the public interest, not for private profit".
She said the government "should now apply the same approach to other outsourced services, including pension administration".
Learning and development contract axed
The Cabinet Office also confirmed it has cancelled plans to procure Learning Framework 2.0 following the establishment of the National School of Government and Public Services.
Two months ago, the department said it would use the Learning Frameworks 2.0 contracts to deliver training services to the civil service until April 2029 whilst the infrastructure needed by the National School of Government and Public Services was established.
But the Cabinet Office said it has “accelerated this transition and will not be taking forward the Learning Framework 2.0 procurement, with our new in-house model reducing reliance on external spending and providing better value for the taxpayer”.