Insourcing by Default: What the 2026 Public Interest Test Means for Care Providers

In March 2026 the government declared that outsourcing public services by default was over. The detail arrived in June 2026 as Procurement Policy Note 024, which from April 2027 requires central government to test whether a service could be delivered in-house before it goes out to the market, and requires the largest spenders to publish insourcing strategies. It is central government policy, not a new rule for councils or the NHS, but it changes the climate every care provider bids into, and the direction of travel is not subtle.

What the evidence shows

• The policy was announced on 26 March 2026 and set out in PPN 024 on 17 June 2026. Procurement Policy Note 024, the Public Interest Test and Insourcing Strategy, takes effect from 1 April 2027 (Cabinet Office, PPN 024).
• The Public Interest Test applies before outsourcing. In-scope bodies must assess the merits of delivering a service in-house against the market, early in planning, for services estimated at more than £1 million including VAT that could lead to a contract under the Procurement Act 2023. The outcome is recorded and reported quarterly to the Government Commercial Agency (Cabinet Office, PPN 024).
• The largest spenders must publish insourcing strategies. Organisations with annual contract spend of £100 million or more including VAT must develop and publish a five-year insourcing strategy within 30 days of 1 April 2027 (Cabinet Office, PPN 024).
• It binds central government, not councils. PPN 024 applies to central government departments, their executive agencies and non-departmental public bodies. Other contracting authorities, including local government and the NHS, are encouraged to adopt the approach but are not required to (Cabinet Office, PPN 024).
• It sits inside a wider reform. The same announcement promised a new definition of social value weighted towards community impact, a tell us once principle so suppliers submit their information once, and new tools to cut bidding time. Government reports public procurement at around £400 billion a year (gov.uk, March 2026).

The language around the reform matters as much as the mechanics. The government framed the change as ending outsourcing by default and described the ambition as the biggest wave of insourcing in a generation. For providers, the signal is that commissioners across the public sector will increasingly be expected to justify why they buy a service from the market rather than run it themselves, even where the formal test does not yet bind them (gov.uk, March 2026).

What this means for providers

First, do not overreact. If you bid to councils for adult or children's social care, or to the NHS and integrated care boards for health care, PPN 024 does not apply to those buyers. Councils and the NHS are encouraged to adopt the approach, not required to, and most social care is commissioned by them.

Second, take the direction of travel seriously. A public interest test is now the default posture of central government, the new social value definition will reach wider than central departments, and local commissioners often take their lead from national policy. Expect more scrutiny of why a service is outsourced at all, and more weight on what an external provider delivers that an in-house team could not match.

Third, know where it already bites. If you bid for any centrally commissioned service worth more than £1 million, the buyer will have weighed in-house delivery before the tender reached you. Your bid has to answer that unspoken question: why is an external provider the better answer here.

What to do about it

1. Check who is commissioning before you worry about the test. Council and NHS care contracts sit outside PPN 024. Centrally commissioned services over £1 million sit inside it.
2. Write every bid to answer the in-house question. Lead with the capability, reach, specialism or outcomes a commissioner could not stand up internally at the same cost or speed.
3. Make value for money explicit, not implied. The reform ties outsourcing to demonstrable public benefit, so show the benefit in numbers, not adjectives.
4. Strengthen your social value offer now. A new, community-weighted definition is coming, and specific, local, measurable commitments will carry across every buyer.
5. Watch for local adoption. Track whether your councils and integrated care boards choose to apply a public interest test or an insourcing review, because some will move earlier than they are required to.

Frequently asked questions

Does the Public Interest Test apply to council and NHS care contracts? No. PPN 024 binds central government departments, their executive agencies and non-departmental public bodies. Councils and the NHS are encouraged to adopt the approach but are not required to, and most social care is commissioned by them.

When does it take effect? From 1 April 2027. Insourcing strategies for the largest central government spenders are due within 30 days of that date.

Does this mean public services are being brought back in-house? Central government must now test in-house delivery before outsourcing, and the largest spenders must plan for insourcing, so expect more services to be considered for in-house delivery over time. It is a change of default, not an immediate ban on contracting out.

Can TenderLab help us respond to this? Yes. We position your bid against the in-house alternative and build the value-for-money and social value case commissioners now expect.

Do you write the full quality response? Yes. We draft the full response from your verified evidence, or strengthen a draft you have already started.

What is the realistic lead time to engage us? Bring us in early, ideally when the notice appears, so there is time to build the evidence before the deadline.

Are you interested in this topic? Contact TenderLab for a free consultation.