"One source said the department is likely to TUPE staff over under the move"
Good luck. When this reverse TUPE insourcing lark was tried at HMRC as part of the winding down of the Aspire contract all the people worth hiring jumped ship rather than join the civil service or one of the associated GovCos set up to isolate the department from the pension liabilities. There's no getting away from the fact that civil service Ts&Cs and working conditions are crap compared to the private sector.