The purpose of this article is to explain the reasons for the low involvement of non-governmental organizations in Russia in the provision of social services by the state order. This entails in uncovering ways to overcome barriers to the expansion of the share of the non-governmental providers. The main challenges of the reform are considered from different sides: (1) through comparison of the expectations for the reform with the results that it gave in the developed countries over the 30 years of reforming the welfare state, (2) from the point of view of the for-profit and non-profit organizations interests, (3) through the identification of the discrepancy between the emerging heterogeneity of service providers and the prevailing nature of the public governance in Russia.
It is shown that the main barrier to the expansion of the share of non-state organizations in the provision of social services is the low capacity of the social service market, which makes the market entry risky. This applies to both the charitable and the competitive market for social services. If they were more developed they could serve as a source of market maneuver and a reliable alternative to state contracts in case of failure to obtain them.
For the reform to succeed, the state must be prepared to finance not only the contracts themselves, but also the development of competition and alternative markets, including quasi-market mechanisms to increase the effective demand of the population. In addition, the pluralism of state regulation should comply with the plurality of vendors and terms of service.