Local governments seeking to reduce costs are giving serious consideration to privatization. By subjecting service provision to the rigors of market competition proponents believe efficiency will be increased. Opponents are concerned that service quality, social equity and labor conditions may be diminished. With privatization the role of government shifts to contractor rather than direct provider. Special care must be taken to ensure adequate oversight as government remains ultimately responsible for service delivery.

Privatization is a worldwide phenomenon. In recent years Eastern European countries have been turning to privatization as a way to dispose of state-owned, out-of-date, and inefficient firms as well as to provide an influx of foreign capital. In the United States arguments for and against public sector provision of goods and services reflect current political ideology on the role of government and the role of markets. Because no comprehensive studies on the costs and benefits of privatization have been carried out, the debate continues based on largely untested assumptions.