Ministers move against outsourcing by default

The government has set out plans to make central departments test whether services should be delivered in house before renewing major public contracts, altering the procurement landscape for outsourcing providers and service contractors.

The Cabinet Office and HM Treasury said a new Public Interest Test will apply before the renewal of expiring government contracts worth more than £1m. The policy will require departments to assess long-term service quality, public value, workforce treatment, and internal capability alongside cost.

Central government departments with more than £100m in annual contract spending will also be expected to create five-year roadmaps to rebuild in house capacity. Ministers said cleaning and security services will be the first focus, with the government looking to bring those workers in house when major contracts end in 2028.

The move follows a decision not to proceed with the Learning Framework 2.0 procurement, after the government established the National School of Government and Public Services to reduce reliance on outsourced training contracts.

Darren Jones, Chief Secretary to the Prime Minister, said he wanted to “end the era of ‘outsourcing by default’” and build stronger in house capacity. Chancellor Rachel Reeves said she was determined to change the UK’s economic model so that more public services are run in the public interest.

The policy does not end outsourcing across government. Ministers said departments will continue to work with public sector suppliers. The change is that departments will have to justify whether external provision remains the right model when contracts come up for renewal.

Facilities management providers, training suppliers, security contractors, cleaning contractors, and advisory businesses will now face a more explicit challenge to incumbent contract models. Renewal will no longer be assessed only through procurement competition, cost, and service specification; it will also require evidence that outsourcing remains preferable to direct delivery.

The approach follows years of scrutiny over public sector outsourcing, including concerns about contract failure, weak accountability, low-paid work, fragmentation, and loss of internal commercial expertise. It also sits alongside a wider employment policy agenda in which workforce conditions, trade union access, statutory sick pay reform, and contract security are taking on greater weight. Those pressures were examined in workers’ rights reforms raise employer pressure, which looked at the practical burden of upcoming employment changes.

The effect will vary by sector. Large facilities management providers may face greater pressure where work is labour intensive, visible, and politically sensitive. Specialist technology, infrastructure, defence, consultancy, healthcare, and engineering suppliers may be less exposed where government cannot easily reproduce capability internally, although the requirement to demonstrate long-term value may still alter bid strategies.

Departments will also carry more operational responsibility if services are brought back inside government. Rebuilding capability requires managers, systems, payroll arrangements, legal frameworks, procurement expertise, operational controls, and transition plans. Insourcing can improve accountability, but it can also transfer risk back into the state if capability is not rebuilt properly.

Contractors will need stronger evidence of service quality, workforce standards, resilience, productivity, and value beyond price. A low-cost bid may carry less weight where the policy test requires departments to consider long-term outcomes. Suppliers able to demonstrate innovation, transparent cost structures, strong employment practices, and measurable service improvement may be better positioned.

The larger question is where the boundary sits between public and private delivery. Government remains dependent on external providers across complex service areas, while suppliers rely on predictable procurement pipelines. The Public Interest Test will not remove that interdependence, but it will make renewal less automatic and force both sides to explain why a service should remain outside government.