Privatization currently enjoys wide appeal as a solution to public problems. Supporters of privatization hope that shifting responsibility for the funding, administration, and delivery of services to private organizations and individuals will spur market competition and thus lower costs, improve service effectiveness, and enhance program quality. An increasingly common form of privatization in health and human services is contracting with nonprofit organizations. Such contracting, in practice, does not follow market principles but is, instead, fraught with politics and inadequate information and built on long-term relationships between government and contract agencies. The operations and practices of contracting have important implications for the ongoing debate on the desirability of vouchers for health care insurance and for reform in the contracting process.