Summary: While Chapters 2 and 3 are motivated more specifically by the pharmaceutical industry, in Chapter 4, we turn our attention to outsourcing contract design in a general setting. Reflecting on the growing bargaining power of some of the contract manufacturers, we examine the outsourcing contract selection problem with a price-setting vendor (contract manufacturer) under cost uncertainties. Applying a real options approach, we develop profit ratio functions for the vendor and client (OEM) under fixed price (FP) and cost-plus (CP) contracts to analyze their contract selection decisions. Supply chain coordination is also investigated. Our analysis shows that when the vendor has a big cost advantage, contract selection becomes independent of operating costs. In addition, contracts selected by the vendor and client always conflict with each other, with no supply chain coordination available. When the vendor has no or a small cost advantage, however, contract selections may or may not conflict. In addition, even if there is no conflict, a coordinated contract can generate higher profits for both players. Also, since the client has a timing flexibility to exercise a contract, the vendor cannot always induce a positive profit even if he controls outsourcing prices.