The transportation of convicts to the British penal colony at New South Wales in the late 18th and early 19th centuries was largely undertaken by private merchants under contract to government. In the early years, the outcomes of this system, as measured by mortality rates, were mixed, but by the turn of the century, public officials had refined its operation, resulting in a significant decline in convict deaths. Close study of the evolution of this system reveals that government officials were grappling with many of the same issues encountered by public service commissioners today – trade-offs between price and quality, the use of transactional versus relational contracting forms, and heavy reliance on financial incentives as opposed to intrinsic motivation. Government's success in reducing mortality on the convict ships highlights the importance of system design, effective monitoring and management when public services are delivered under contract.