Insourcing vs outsourcing - where is Gov IT’s Nirvana?

For those working for the Government inside these larger Gov IT projects, there’s a line of control which, if poorly defined, can lead to situations where a genuinely small and simple change is stymied by many layers of bureaucracy. This is frustrating - and the lack of flexibility, coupled with the realisation that you are absolutely at the mercy of your supplier, is much less than comfortable.

A new dawn 

With this in mind, changes to procurement regulations for Government departments, Agencies, Arm’s Length Bodies and Non-Departmental Public Bodies that could help prevent this from happening sound like a really good thing. 

Procurement Policy Note (PPN) 024 mandates conducting a Public Interest Test (PIT) for all projects exceeding £1m inc. VAT to consider whether the project is suitable for insourcing prior to any procurement. The types of projects identified as ripe for insourcing include those where value (value for money, social value etc) is low and costs are high, there is a need for greater flexibility, or there is in-house capability already. 

What’s great about this procurement note is that it doesn’t mandate insourcing - it only requires proper evaluation and documentation. 

So when should a public sector body revert to insourcing?

Sticking to the knitting 

IT is not the core job of government; it’s a facilitator. It’s there to help get government jobs done, expediently and efficiently. However, there is a fine line between outsourcing to ensure that the primary jobs of government get done… and letting core competencies, operational control and resilience evaporate entirely. 

And it’s at this point that things get interesting because insourcing doesn’t necessarily bring as much stability as it might first appear. A key issue is cost. The government simply does not pay competitively vs. its private sector counterparts. This means the team is likely to be made up of personnel who are early in their careers, with fewer skills and less real-life experience and expertise. Add to this the cost of hiring, the cost of training and the cost of the inevitable higher churn as people look to develop their careers, taking their specialist domain knowledge with them… and the picture looks a little different.

Sometimes the specialist domain knowledge, expertise, and low turnover of teams held in a partner organisation offers the stability needed. 

Delivering value

The PPN isn’t saying, even for a moment, ‘Insource everything’. It’s asking for a considered choice, based on multiple factors, an important one of which is value. 

Value comes in many forms, but two that are particularly relevant here are value for money and supporting government values. The key thing is being able to articulate and evidence that value, whether in terms of delivery speed, risk to the organisation, the delivery of successful outcomes or a combination of these and more. 

When it comes to supporting the wider government objectives, again some of these things can be achieved or maintained through outsourcing - the standards, the jobs and the apprenticeships and the delivery of social value.

Choosing wisely 

Not all outsourced deliveries are equal. Some deliver great value, some offer great flexibility, some offer significantly better outcomes and lower risk…and some do none of those things and are extremely costly. 

What this change means is that from April 2027, every largish project now requires taking a step back, evidencing, considering and reconsidering what’s best and what makes sense when it comes to delivering a public sector service. But, what’s better is that every service will then be evaluated on an ongoing basis, helping those with needs choose wisely in the short, medium and long term and hopefully helping each service find its Nirvana.