Government's new National Procurement Policy rethinks outsourcing

The Government has announced a new National Procurement Policy Statement, setting out strategic priorities for public sector procurement under the Procurement Act 2023.

The policy aims to simplify procurement processes, boost economic growth, deliver greater social value, and reassess the role of outsourcing in public services.

The statement underscores the Government’s commitment to a mission-driven procurement strategy, using public sector spending to support UK businesses, promote innovation, and enhance social and environmental sustainability. The policy aligns procurement activities with the Government’s Industrial Strategy and broader national objectives, including:

• Boosting economic growth by creating more opportunities for small and medium-sized enterprises and social enterprises.
• Encouraging innovation through early market engagement and adoption of new technologies.
• Supporting environmental sustainability by prioritising clean energy, waste reduction, and high environmental standards in public contracts.
• Strengthening communities by requiring suppliers to provide high-quality jobs and recruit from underrepresented groups.
• Enhancing NHS procurement to support a sustainable and future-proofed health service.

One of the most significant changes in the policy is a new Public Interest Test, which will require contracting authorities to justify outsourcing decisions rather than defaulting to private sector delivery. This test, set to be introduced through an update to the Sourcing Playbook, ensures that public sector bodies assess whether work could be done more effectively in-house before putting contracts out to tender.

The shift reflects growing concerns over outsourcing failures in areas such as healthcare, transport, and local government services. The Government states that while outsourcing can drive efficiencies, it must be weighed against public interest, long-term value, and the potential risks of contractor failure.

Authorities will need to demonstrate that outsourcing:

• Delivers better value for money than in-house provision.
• Does not undermine service quality or workforce conditions.
• Aligns with strategic national priorities, such as economic growth and social value.

This represents a fundamental shift from past decades, where outsourcing was often the default approach in public sector contracting. The move could see more services brought back under government control where in-house delivery proves more effective.

The Procurement Act 2023 introduces new transparency measures, ensuring greater visibility of upcoming contract opportunities and supplier performance. Authorities will be expected to benchmark their procurement activities against best practices, helping to identify efficiencies and drive better value for taxpayers.

Additionally, the policy mandates that suppliers must demonstrate strong ethical standards, including compliance with employment law, tax obligations, and measures to combat modern slavery, bribery, and corruption.

The Government has set a priority to increase procurement spending with smaller businesses and voluntary, community, and social enterprises. Authorities are urged to reduce barriers to entry for smaller businesses, ensuring fair competition and a diverse supply chain.

The National Procurement Policy Statement comes into effect on 24 February 2025 and will remain in place until it is amended or replaced. Contracting authorities across the public sector must adhere to the new guidelines when awarding contracts.

The policy marks a significant shift in the UK’s public procurement strategy, leveraging the Government’s purchasing power to drive economic growth, sustainability, and social impact, while introducing a major re-evaluation of outsourcing in public services.