The purpose of this study is to determine the factors that drive outsourcing of public services based on the asset specificity and uncertainty associated with the service. Based on the transactional cost, economic principles, and the discriminating alignment hypothesis, a model was developed to examine the relationships among asset specificity, uncertainty, and the mode of service delivery for 67 services provided by the public sector. Descriptive statistics and chi-square tests were used to investigate the proposed relationships among asset specificity, uncertainty, and the mode of service delivery. Empirical results show that low asset specificity and low uncertainty result in outsourcing, and high asset specificity and high uncertainty result in insourcing in the delivery of public services. Results of this study support the general framework of the transactional cost economic (TCE) as it relates to outsourcing of services provided by the public sector.