This paper provides a detailed examination of "contracting," a type of privatization, and is intended to clarify the issues surrounding decisions to privatize public services. Privatization introduces competition among market participants as a means of generating revenue, spurring development of an industry, and/or improving the quality of services at a lower cost to taxpayers. Contracting is where the government purchases services from the private sector through a competitive bidding system designed to force down costs. Contracting is also intended to increase accountability based on performance. Opponents claim that only the government will truly protect the public interest, but there have been an increased number and focus on contracting initiatives at the state and local level over the past 30 years. Even so, a government's decision to contract a service is difficult. It requires significant evaluation and complex planning and includes such basic questions as what effect the contract will have on the community and local businesses. Several obstacles have regularly impeded the progress in contracting initiatives, but the main obstacle is resistance from public employees who would most likely be replaced by the contracted vendor. The decision to contract thus tends to be affected by political, economic, and social pressures, all of which weigh on the initiative differently. (Contains 16 references.) (RJM)