Revision with unchanged content. Despite widespread implementation across the industrialised world, public sector outsourcing remains a contentious policy for the simple reason that many outsourcing contracts fail. Critics of outsourcing often argue that the stated efficiency gains are illusory if outsourcing leads to a reduction in the quality of service provision or a reduction in workers? terms and conditions of employment. In this book, we ask: Do the criticisms of outsourcing have any empirical validity? How can we explain the observed heterogeneity in outsourcing outcomes? In answering these questions, we focus on the role of uncertainty, incentives and transaction costs on contractual relationships. Although the importance of these factors is well-known, there is little empirical work analysing the effect of these factors on public-sector outsourcing arrangements. The results, therefore, should help business, students and government policymakers in identifying factors that affect the efficiency of outsourcing arrangements.