The New York Times has a long article on Sandy Springs, GA, a town that has privatized nearly all of its major operations except police and fire. There are some interesting ideas in here. I liked the idea about awarding a backup contract to the second place bidder in case the first place bidder failed. Too often, I have seen the high cost (and hassle) of re-running a procurement process cause a state agency to accept below-par contractor performance.
I understand that though this is the world I swim in, it may seem bizarre to most. Even Sandy Springs has not given up responsibility for defining services, paying for them, setting service standards, etc. They just don't pay civil service workers to clean the bathrooms.