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Contracting public services to private firms is one of the most common types of alternative service-delivery arrangements. The relevant literature suggests that if, and only if, the contracting is properly implemented, then it may, but need not to deliver positive outcomes. This study examines the experience with contracting among Slovak municipalities. Despite some methodological problems, the data suggests that, externalization of production generally does not deliver improved efficiency and quality. The core purpose for failures and the possible policy responses are also offered.