Source · Select Committees · Public Accounts Committee
Recommendation 27
27
Rejected
Insourcing government work often proves more expensive than outsourcing due to various costs.
Recommendation
If the market isn’t sufficiently competitive, one option we suggested that the Cabinet Office could consider is what value there might be to bringing the work in-house. The Cabinet Office said that ‘insourcing’ was always considered when making such business case appraisals. It said that insourcing was generally, but not always, more expensive than outsourcing options, because of transition costs, transfer arrangements, and the ‘on-costs’ of joining the civil service.60 59 Letter from Cabinet Office, 5 August 2025 60 Q 108 15
Government Response Summary
The government disagrees with the recommendation to set out its commercial strategy for pension administration including consideration of the benefits and costs of administering the scheme in-house, stating that it follows standard procurement procedures and the Procurement Act 2023.
Government Response
Rejected
HM Government
Rejected
6. PAC conclusion: There has been a small market of pension administrators bidding for the contract, potentially limiting the Cabinet Office’s ability to secure value for money for the scheme administration. 6. PAC recommendation: The Cabinet Office should set out in its Treasury Minute response its overall commercial strategy for pension administration including consideration of the benefits and costs of administering the scheme in-house. 6.1 The government disagrees with the Committee’s recommendation 6.2 The Procurement Act of 2023 outlines the requirements for ensuring equal treatment and transparency across the procurement process. The Cabinet Office is legally required to follow the guidelines as set down by the Act. 6.3 The Cabinet Office follows the standard procurement procedure when deciding on the needs of the contract this includes. • Identifying the need • Performing market analysis • Developing a sourcing strategy 6.4 During early stages of any procurement several options are reviewed, these include reviewing whether an in-house solution is a viable option as well as the outsourcing options before any decision on procurement direction is made. 6.5 All options are then assessed against a series of critical success criteria to determine the most appropriate solution for the service. 6.6 The Cabinet Office will continue to comply with the Procurement Act 2023 and any future iterations for all future procurement exercises relating to Pensions.