The trend to outsource the engineering functions in state departments of transportation (DOTs) to private consultants has increased in recent years. However, most DOTs do not have a strategic approach to the outsourcing of engineering functions or projects. This thesis addresses that gap by examining outsourcing decision-making in the Texas Department of Transportation (TxDOT) and developing a rationalized procedure. TxDOT, the largest state DOT in terms of annual construction program,expends about 65% of its engineering on consultants. Staff from 18 of TxDOTs 25 districts were interviewed for this research, and Strengths, Weaknesses, Opportunities, and Threats (SWOT) Analysis is used to identify improvements to the current decision-making processes. A framework is presented for systematic assessment of the outsourcing potential of engineering functions, which would enable TxDOT districts to determine what engineering work to contract out cost-effectively without sacrificing core competencies. / text