Contracting out public services represents one of the very frequent forms of alternative service delivery. Current literature is  more and more skeptical regarding the potential of contracting related to the efficiency of public service delivery. The goal of this article is to analyse (based on data collected by the authors during the last 20 years in two countries) the efficiency of contracting local service delivery. The study addresses three research questions: What is the proportion of contracted local public services? Does contracting improve the efficiency of  local service delivery? Which factors determine the efficiency of contracting? Concerning the first question, the data show that the role of contracting in delivery of local public services is still very significant in selected countries when compared to Western countries. Concerning the second question, research findings suggest that contracting may deliver limited efficiency improvements, but its full potential is  not confirmed and utilised. This is especially (third research question) the result of the very low quality of contract management.