Study data came from a review of literature and government documents and from contacts with governmental and private organizations. Corrections in the United States faces the problem of lack of clarity and consistency in correctional goals and policies, sentencing changes that have produced overcrowding, and the failure of rehabilitation. Private contracting for prison services has a long history. Several private corporations currently operate halfway houses, juvenile detention facilities, and minimum-security institutions. Private companies are also involved in the financing, construction, and design of correctional facilities. New York is the only State that prohibits the private management of a prison. Other states have passed specific legislation permitting and regulating private contracting. Crucial issues related to private contracting are security, liability, and accountability. Efficiency and flexibility appear to be two main benefits of privatization. The government will always retain responsibility for corrections, but private companies should be given the chance to operate prisons and demonstrate the benefits of private sector involvement. Chapter notes and 100 references.