Identifying Risk and its Impact on Contracting Through a Benefit Based-Model Framework in Business to Business contracting: Case of the defence industry

Two defence contracts for availability are studied in the attempt to better understanding the provision ofservice in a maintenance, repair and overhaul environment that is contracted on the performance of theequipment, rather than merely providing equipment. The nature of the contract changes the dynamics of thedelivery, bringing behavioural issues into the forefront, with both customer and firm focused on value cocreation,rather than each party’s contractual obligation. Our study provides a customer focused approachthat exposes gaps in the way organizations approach their service provision in MRO. We argue thatcustomer involvement and behavioural issues in the co-creation process has to be factored into the designand delivery of traditional MRO delivery systems. This paper uncovers four areas that pose risks toperformance based contracts and are crucial in the design of services under such a contractualenvironment and provides a research agenda for future studies in this area.