Poor governance design: Its impact on transaction costs and value creation.

We argue the hierarchical nature of contractual governance within outsourced services is not effective, consequently increasing transaction costs for the Buyer and Supplier, and reducing value in use. We studied outsourced public sector Repairs and Maintenance (R&M) contracts considering the contracts within the relational exchange and their role in governing and directing the delivery of services. A key feature is delivery via a Value network, Buyers and Suppliers outsourcing elements of procurement and service delivery. Within this sector, the use of construction influenced standard forms of contract and traditional performance measurement regimes utilising temporal and volumetric metrics are endemic. Our findings demonstrate that the relationship between contractual governance and measurement is a traditionally held perspective of output and operand resources. Additionally the forms of contract create a disconnect to the governance objectives sought, exacerbates transaction costs and diminishes “value in use” for the Resident.