The Economics of Outcome-based Security Contracts

Song Chen

Abstract

As manpower constraints gave pressure to the service industry, Singapore government brought in outcome-based contract to deal with the problem. Thus, it is necessary to understand and analyze OBC in order to make better use of this method and help it gets its market. The goal of this project is to analyze the outcome-based contract systems and develop analytical and decision models that help both the service buyer and service provider to evaluate the suitability to adopt OBC. It will analyze the pros and cons of OBC, identify various factors or criteria that can help with evaluating the suitability, then evaluate the suitability between OBC and the traditional contracts, which employs the method of Analytic Hierarchy Process (AHP). Lastly, conclusion and recommendation will be provided. After building the model and analyzing it, conclusion and recommendation can be made. Comparing to traditional method, OBC may make use of technologies instead of manpower, which may be more efficient and also cost more than the traditional method. However, what matters the most is the feasibility and the risks of OBC. To let companies and agencies accept OBC, the outcome-based contract needs to be well-planned and provide feasible method to the industries.