UK government publishes guidelines to ‘end era of outsourcing’ – will IT be in scope?

The UK government’s plan to “end an era of outsourcing” is starting with cleaners, security staff and government training, but how far could IT and business process insourcing go?

From 1 April 2027, any central government outsourcing contract with a value of over £1m, including IT and business process outsourcing (BPO), will be put through the government’s Public Interest Test.

According to the Cabinet Office, its Public Interest Test and Insourcing Strategy mean that, “before any IT or BPO service is outsourced, departments will evaluate individual contracts on a case-by-case basis – holistically assessing value for money, economic and market impact, and social value goals”.

It added: “Departments will make the final decision for each contract.”

Following the announcement of the guidelines, Darren Jones MP, 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.”

The government kicked off the plan by announcing that it would bring cleaning and security work back in-house. “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 high-quality services the British people deserve,” said Jones.

While the government said one of the benefits of insourcing is increasing “service quality, efficiency and productivity by retaining or building core technical expertise in-house”, IT services could escape much of the insourcing due to the need for specialist skills. The Public Interest Test guidance states the exemption: “Where the contract is for … technical data/analysis development and the work will be once-off or highly infrequent (thus making it unviable to build the requisite specialist technical expertise or recruit permanent in-house staff).”

Furthermore, the guidelines ask government bodies to consider whether they have the required competencies and capacity building: “The contracting authority should map the specific competencies required to insource services, spanning key factors such as skills, technology and infrastructure. Where gaps are identified, the strategy should assess the feasibility and suitability of developing these capabilities in-house to enable direct delivery.”

It said government bodies should assess whether they have the required technical leadership, assets and infrastructure: “Does the contracting authority possess the senior operational leadership required to run these services? If not, is it a viable option to recruit and retain leadership? Does the contracting authority currently own, or could it acquire, the physical and digital assets needed to operate these service lines?”

Directly awarded contracts that do not go through procurement are also exempt.

Fran Heathcote, general secretary of the Public and Commercial Services Union (PCS), said: “For too long, outsourced workers have faced lower pay, poorer conditions and been treated as second-class citizens. This is a huge victory for members and a clear vindication of our campaign for insourcing. This achievement demonstrates what can be won through collective action.”

She called on the government to apply this approach to other outsourced services, including IT-enabled BPO, such as pension administration.

The PCS said insourcing should be considered for the Civil Service Pension Scheme (CSPS) following “Capita’s shambolic handling” of workers’ pension payments.

Capita took over CSPS administration on 1 December 2025, after winning a £239m contract in 2023. It has been beset by problems (see box, below).