Approval processes for complex outsourcing: the official guidance, explained

The key facts

• Published in May 2021 as part of the guidance supporting the Sourcing Playbook, covering how HM Treasury, the Infrastructure and Projects Authority and the Cabinet Office assure large projects.
• The strengthened assurance process applies only to projects classed as complex outsourcing, as defined in the Sourcing Playbook; the process for non-complex projects is unchanged.
• Complexity indicators include first generation outsourcing, planned transformation of services, a limited market or government as the only buyer, and services or assets not well understood internally.
• The only process change for complex projects is that commercial experts from the Cabinet Office or Crown Commercial Service attend the Project Validation Review (PVR).
• Departments flag potential complex projects through their commercial pipelines; Cabinet Office commercial teams decide, with HM Treasury spending teams, and departments can appeal the assessment.
• The PVR review team leader produces a report within five days of the review, and the SRO must develop an action plan to address its recommendations.
• Assurance continues at OBC and FBC stage, including scrutiny of the Should Cost model, low cost bid bias, supplier financial stability, cash flow and benefits realisation.

What this guidance note is and who it applies to

The Approval Processes guidance note was published by the Cabinet Office in May 2021 as part of the suite of guidance that supports the Sourcing Playbook. It explains how central government strengthens the approval and assurance of large, complex outsourcing projects, and how HM Treasury, the Infrastructure and Projects Authority (IPA) and the Cabinet Office each play a role. Its central argument is that commercial expertise from right across government must be involved from day one, because experience shows that early decisions can set projects up to fail before procurement even begins.

The guidance applies to projects classed as complex outsourcing, a term defined in the Sourcing Playbook. Importantly, the assurance process for non-complex projects is not changed by this note. For complex projects, the single change it introduces is that commercial experts from the Cabinet Office or the Crown Commercial Service attend the Project Validation Review, bringing a cross-government view into the room at the earliest stage of the project lifecycle.

What counts as complex, and how projects are flagged

The guidance lists the factors that might make a project complex: first generation outsourcing, a planned transformation of services, a limited market or a situation where government is the only buyer, and services or assets that are not well understood internally. Projects with a well understood scope and a well established market are unlikely to be classed as complex.

Departments should use their commercial pipelines to flag potential complex projects to central commercial teams. Cabinet Office commercial teams then decide whether a project is complex, in conjunction with HM Treasury spending teams. If a department disagrees with the assessment, it is able to appeal. This makes pipeline discipline a practical prerequisite: a project that is invisible to the centre cannot be assessed or supported early.

Project Validation Reviews: early commercial challenge

Project Validation Reviews are held at a very early stage of the project lifecycle so that subject experts can review, discuss and challenge a department's initial thinking as it sets its commercial strategy. The guidance describes what the review enables: more robust early engagement between departments and central assurance and commercial teams, alignment of the project's objectives with the organisation's wider change portfolio, support in setting the project up for success before strategic options are fully developed, sharing of views, opportunities and risks with key stakeholders, and consideration of early strategic delivery options and standards.

It is up to the Senior Responsible Owner to advise the IPA of projects requiring a PVR. The IPA then arranges attendees from a range of stakeholders, including commercial teams. Departments must send informed and empowered representatives so the review is productive. Commercial areas of discussion include delivery model assessment decisions, market engagement and how it has informed the strategy, market capability and strength using the recommended metrics, internal capability and capacity and the accuracy of information, pilots and proof of concept, understanding of volumes, and TUPE considerations.

The review team leader produces a report within five days of the review, and the SRO is then responsible for developing an action plan to address any recommendations. The guidance is careful to frame the PVR as supportive as well as challenging: it exists to help departments present thorough and informed advice to their Secretary of State or Minister, not to catch them out.

Assurance does not stop: OBC and FBC expectations

The commercial conversation is expected to continue after the PVR, and departments are encouraged to keep drawing on the resource and knowledge held in central commercial teams. The existing assurance process continues to apply at Outline Business Case and Full Business Case stage, where the assurance team expects to see evidence of compliance against the Government Commercial Operating Standards.

At OBC, the topics under scrutiny are market engagement, pricing mechanisms, risk transfer and KPIs, the structure of requirements, the Should Cost model, and the financial and economic standing of potential bidders. At FBC, attention turns to the Should Cost model again, low cost bid bias, supplier financial stability, cash flow for the supplier, and benefits realisation. For project teams, this list is effectively an evidence checklist to build against well before each approval gate arrives.

How eSourcing Data helps

Assurance runs on evidence, and the teams that pass gates smoothly are the ones whose records already exist in a usable form. eSourcing Data captures market engagement, procurement activity, evaluation and contract records as structured, timestamped data, so the audit trail that reviewers expect at PVR, OBC and FBC builds itself as the project progresses instead of being reconstructed under pressure before each gate.

The guidance leans heavily on commercial pipelines as the mechanism for flagging complex projects early. eSourcing Data's planning and reporting tools help authorities keep a live view of upcoming procurements, making it straightforward to spot the projects that carry complexity indicators and to share that picture with governance boards and central teams.

For wider public sector bodies that are encouraged rather than mandated to follow this guidance, the platform's proportionate workflows, including below-threshold processes, make it practical to adopt the same disciplines of documented decisions, tracked actions and evidence-based approvals without central government scale resources.

What to do about it

1. 1Keep your commercial pipeline current and flag any project showing complexity indicators to central commercial teams as early as possible.
2. 2Ensure the SRO advises the IPA where a Project Validation Review is needed, and send informed, empowered representatives to it.
3. 3Prepare PVR evidence covering delivery model assessment, market engagement, market capability metrics, internal capability, volumes and TUPE considerations.
4. 4Turn the PVR report into a tracked action plan owned by the SRO within days of receiving it.
5. 5Assemble OBC evidence early: pricing mechanisms, risk transfer, KPIs, requirements structure, the Should Cost model and bidder financial standing.
6. 6Ahead of FBC, be ready to evidence supplier financial stability, cash flow and benefits realisation, and test your evaluation for low cost bid bias.