The board is asking whether the investment is working, and the executive who insourced the capability is the one who has to answer. The question is reasonable, and so is the discomfort it produces. The instinct is to initiate an independent review, the way one would after a large supplier engagement. That instinct is sound. The framing is not.
In Brief
- Reviewing an insourced capability and auditing a supplier are different kinds of work — the executive is the subject of one, not the buyer of the other.
- The firm best placed to review whether insourcing is working is rarely the firm that delivered the predecessor program, because the only credible recommendation against re-outsourcing must come from a reviewer with no contract to win back.
- The APS Strategic Commissioning Framework has shifted what “delivering” means — the question now asked of insourced capability is whether it is producing outcomes inside the agency, not whether it has procured the right vendors.
- A defensible review surfaces structural truth about how decisions are made, where capability genuinely sits, and what the operating model is actually rewarding — not whether project schedules held.
- The reviewer’s incentive structure is the audit. The first question to ask of any proposal is what that firm has to gain from the recommendation it is most likely to make.
Reviewing an insourced capability is a different kind of work to auditing a supplier. When a vendor delivered the program, the executive was the buyer, asking whether they got what they paid for. The reviewer’s job in that case is to assess the supplier’s performance against the contract; the executive sits outside the work being reviewed. When the capability has been brought in-house, that distance is gone. The executive is now reviewing decisions they made, structures they signed off, hires they approved, and outcomes their own organisation produced. The reviewer is, in effect, being asked to assess the executive’s own organisation — which is to say, in part, the executive themselves.
Why this distinction tends to disappear
From the outside, the two reviews look procedurally identical. Both involve a scoping conversation, document collection, interviews, a findings register, and a recommendation set. The artefacts are the same. What is different is the position the executive holds inside the work. In a supplier audit the executive is reading findings about another party. In an insourcing review the findings are findings about the agency the executive is responsible for. That changes what makes a review credible — and what makes one quietly defensive.
Here is the pattern that surfaces when an insourcing review is scoped using supplier-audit habits: the questions narrow toward whether the program ran on time, whether milestones were met, whether the team grew to its target headcount. These questions are answerable, and the answers are usually reassuring. The harder questions are the ones that surface structural truth — whether the operating model the agency built around the new team is actually producing the decisions the agency needs to make, whether capability now sits inside the agency or has migrated quietly back into a small set of contractor hands, whether the governance structures that look most robust are the ones obscuring the delivery gap. They are also the questions a reviewer with a continuing relationship with the agency has reason not to press.
The APS Strategic Commissioning Framework is the policy backdrop that makes this question matter now. The framework, released by the APS Reform Office in 2023, requires core public service work to be performed by APS employees and restricts outsourcing to a narrow set of defined circumstances (APS Reform Office, 2023). That has shifted what “the investment is working” means. The question is no longer whether the right suppliers were procured. It is whether capability has actually been built inside the agency, in a form the agency can sustain. A review scoped against the old test will produce a reassuring answer to a question the board is no longer asking.
What an honest review is actually examining
A defensible insourcing review surfaces three things supplier audits rarely examine. The first is decision velocity inside the agency: whether the people now occupying the in-house roles are making the decisions the predecessor arrangement made externally, or whether those decisions have quietly migrated to a smaller group of senior contractors operating around the team. The second is structural capability — whether the operating model the agency built around the team is producing institutional knowledge that holds when individuals leave, or whether the program is delivering through a small number of high-performers whose departure would reset the curve. The third sits at the accountability line itself: whether the executive layer above the team can credibly answer questions about delivery without relying on contractor briefings, and whether the data the executive sees is data the agency owns or data that arrives via a vendor.
These are the questions a board now expects to be answered. The Senate Finance and Public Administration References Committee inquiry into consulting services made the broader point clear: the credibility of advice to government depends on the independence and incentive structure of the advisor (Senate Finance and Public Administration References Committee, 2024). The same logic applies inside the agency. The credibility of a review depends on whether the reviewer has anything to gain from the recommendation they are most likely to make.
The reviewer’s incentive structure is the audit
This is the part that is uncomfortable to name and easy to skip. A firm that delivered the predecessor outsourcing arrangement, or that holds adjacent panels with the agency, has an incentive that runs through the review: a finding that insourcing is not delivering is, for that firm, a finding that more outsourced work is required. That incentive does not need to be acted on for the review to be compromised — it needs only to shape which questions are pressed and which are softened. A finding that capability gaps exist is easy to write. A finding that the operating model is producing decisions the agency cannot defend is harder. The latter is what the board needs.
ZXM’s exit-design model addresses this directly: the work is designed from the start to end, with no follow-on engagement to win, which means a reviewer can press the harder question without the firm carrying a counter-incentive. The Australian National Audit Office’s analysis of Commonwealth procurement reporting shows how concentrated the supplier market for management and professional services has become, with ten procurement categories awarding more than 40 per cent of total contract value to a single supplier between 2012-13 and 2021-22 (Australian National Audit Office, 2022) — which is why the question of who is reviewing is now itself part of the review.
The board is asking the right question. The risk is in answering it with the wrong shape of review. An insourcing review scoped against supplier-audit habits will produce a reassuring report and leave the structural question untouched. A review scoped to the actual question — is the capability now inside the agency, in a form the agency can defend — produces something the executive can stand behind when the next inquiry comes.
The executive who reviews their own organisation honestly is already further ahead than the one who waits for the question to be asked again.
References
APS Reform Office. (2023). APS Strategic Commissioning Framework. Australian Public Service Commission. https://www.apsreform.gov.au/resources/aps-strategic-commissioning-framework
Australian National Audit Office. (2022). Australian Government Procurement Contract Reporting — 2022 Update (Auditor-General Report No. 11 2022–23). Commonwealth of Australia. https://www.anao.gov.au/work/information/australian-government-procurement-contract-reporting-2022-update
Senate Finance and Public Administration References Committee. (2024). Inquiry into the management and assurance of integrity by consulting services. Parliament of Australia. https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Finance_and_Public_Administration/Consultingservices
