Public Sector Outsourcing Contracts- The Impact of Uncertainty Incentives and Transaction Costs on Contractual Relationships

Despite widespread implementation across the industrialised world publicsector outsourcing remains a contentious policy for the simple reason thatmany outsourcing contracts fail. Critics of outsourcing often argue that thestated efficiency gains are illusory if outsourcing leads to a reduction in thequality of service provision or a reduction in workers' terms and conditions ofemployment. In this book we ask: Do the criticisms of outsourcing have anyempirical validity? How can we explain the observed heterogeneity in outsourcingoutcomes? In answering these questions we focus on the role ofuncertainty incentives and transaction costs on contractual relationships.Although the importance of these factors is well-known there is littleempirical work analysing the effect of these factors on public-sector outsourcingarrangements. The results therefore should help business studentsand government policymakers in identifying factors that affect the efficiencyof outsourcing arrangements.