The problem is that private businesses have to answer directly to their customer base. A business that produces shoddy or overpriced goods will eventually find its customers shopping elsewhere, forcing the company to change its ways or go out of business. When it comes to governmental functions, this feedback is missing; for example, a citizen who does not like the way medicare is administered does not have to option of not contributing to it.
Additionally, the typical business theory of offering "just enough" quality as a way to maximize profits is not an appropriate way to approach services which are critical to our health, safety, and welfare - should the military be just good enough? How about education?
As a result, I don't think that privatizing these functions will improve anything unless the communications path from user to provider is considerably shortened. As it is now, even when millions of people are dissatisfied with a certain service, the process of getting that service changed is too cumbersome and indirect to be manageable. You can, of course, vote out various politicians, but you can't pinpoint a single issue by doing that.
It is very difficult when privitisation results in private companies taking over services and seeing money as the only end objective of pursuing those services as opposed to efficiency or effectiveness. The example of private contractors providing security forces in Iraq quoted above is a very good example of how privitisation can radically change such services. I think we need to be very careful of seeing privitisation as some kind of magical solution to bureaucratic inefficiency.
There are certain kinds of functions that are easily privatized. These are things like janitorial services. However, there are other functions that are not so easily privatized. These are things like information services.
When an agency tries to privatize IT, it has to be able to define exactly what it wants to buy in order to write a contract with a private company. This is extremely hard to do in a way that will get what the agency needs without wasting money. Please follow this link to read more.
Certainly there are exceptions, as noted above, but if efficiency and efficacy are the goals, private enterprise will do better than the government every time. As it is, there is very little incentive for a government agency to be either efficient or effective. Privatization is likely to increase productivity, cut costs, and deliver a better product without the constraints and burdens of federal bureaucracy. There are the risks of mismanagement and profiteering, but that's really not so different from what's already happening more often than any of us probably know--or want to know.
Bullgatortail makes a valid point: cost and operational efficiency would certainly be beneficial in such area as the Post Office and NASA. Governments do not operate toward a bottom line and are almost legendary for paying exorbitant fees for goods and services that a competitive company could have secured much more cheaply. I do not think private operation of the military or educational systems is feasible. I'm not sure if the Edison Schools are still operating (they were "for profit" but contracted with the local school board) but my impression was this was a very poor way to operate schools. Likewise, my understanding is those areas that have allowed private contractors to operate prisons have had disappointing results. Bottom line, in some instances private contractors can deliver more efficiently than a government bureaucracy; but it is not true in every case.
I think the previous posts illustrate the diversity of functions performed by either private contractors or government employees. There is no uniform response to your question because there are too many variables involved in examining the conditions and requirements inherent in the differing arrangements. When you are addressing a function that is utilizing taxpayer funding, there has to be accountability for the use of those funds - something that has been and is seriously lacking in many spheres of involvement. Consider the military, the rebuilding of Afghanistan, Iraq, et al, FEMA response after Katrina, etc. However, the "for-profit" motivation of private contractors can lead to a different set of undesirable outcomes - cost-savings through cutting corners and not meeting specifications, labor abuses and outsourcing of components that results in loss of jobs, inequities in earnings between labor and management.
Certainly, many governmental agencies would benefit from being privatized. The development of the new space program is one such example. Allowing private companies to build the new shuttle prototypes would at least guarantee that the money being used would be spent conscientiously. Monetary waste at NASA was absolutely rampant during the past decades, and such would probably not be the case if corporations were allowed to build the new shuttles. Remember, the bottom line for private businesses is profit margin, so they would be much more likely to toe the budgetary line than many of the mismanaged Federal agencies who spend without proper oversight. The U.S. Postal Service is another example of an agency that would benefit from privatization. The USPS loses billions of dollars each and every year; projections call for a $238 billion deficit during the next decade. No private business would survive with such a longstanding record for ineptitude as the USPS. UPS and Federal Express make money; why not the USPS?