The public sector in Australia, as in other western countries, has been accused in recent times of being too costly, too rigid, inefficient and ineffective. What is apparently needed is a public sector that is smaller, less costly, more efficient and more effective. The search for alternative and better ways to organise and undertake work to meet these reform objectives is at the heart of the rapid expansion of Competitive Tendering and Contracting (CTC) within the public sector in the last two decades. But increased reliance on government contracting does not always lead to outsourcing. Some government agencies allow, indeed encourage, their current employees to also bid for the work on offer by including an In-House Option (IHO) within their CTC processes. In a number of cases these IHOs have been selected ahead of their commercial competitors. IHOs are effectively internal tenders that, if selected, must be implemented by work areas within the confines of the policies and practices of their parent organisation. The reasons commonly expressed in support of IHOs are to do with addressing the potentially problematic aspects of organisational review and possible outsourcing, and to assist the parent organisation achieve its reform intentions in the most effective and least disruptive manner possible. This research examined the achievements of six IHOs within the Australian Defence Organisation. It also asked what can be learned from their experiences? The findings show that IHOs can contribute to reform and enhance the effectiveness of CTC processes but that these achievements come at a price�borne primarily by the staff who work within selected IHOs. IHOs add to the competition of CTC exercises. They also act as an insurance policy against being caught with no reasonable bids and offer a benchmark against which to assess unknown bids. But competition can also focus bidders on doing what is necessary to win rather than what is best for an organisation or its staff. Having IHOs increases the uncertainty for staff about their future employment while at the same times raising expectations that if they can be successful they will be able to make changes and improve their work areas. This research has shown that this does not always occur and staff can find the whole experience frustrating and demoralising. Organisations that include IHOs within their CTC methodologies need to assist them if they are to have the best opportunity to propose new and innovative ways of working. And they must be prepared for the possibility that their IHOs could win. Selected IHOs need support to successfully implement changes, and as the IHOs examined here have shown, they can make significant improvements in work practices and more efficient use of resources if given the chance.