Determinants of contract duration in outsourced services in the defense sector

ABSTRACTIn this article we analyze the contract duration using Transaction Cost Theory with a sample of 283 outsourced services in the Spanish Army during the period 2009–2014.The analysis results show that the greater the specificity of the service, the greater the duration of the contract. In addition, it is obtained that the greater the uncertainty about the behaviour of the provider, the lower the duration of the agreement. These results are consistent with existing literature and empirical works.However, in the case of external uncertainty and incompleteness of the contract, they do not affect the contract duration. This may be because less complex services for shorter terms can be specified better and are less affected by external circumstances. Therefore, the uncertainty should be decomposed and analyzed according to their sources.