Matt Steinglass disputes the idea that privately-run entities are clearly better than their government-controlled peers. I am going to quote extensively because he makes some really good points:

First of all, there’s no need for a strained comparison to McDonald’s or Wal-Mart: there are lots of private military organizations, and it turns out they’re neither better at their jobs nor most cost-effective than government militaries. Blackfoot has cost the US military vast amounts of money in Iraq and Kuwait, has relied to a large extent on infrastructure put in place by the US military, and yet has been involved in a disproportionate share of screw-ups and war crimes. There’s no evidence it has done its job (mostly escorts for diplomats and protection of limited areas) better than regular military has, even though the jobs it’s assigned are much easier than the military’s missions because they’re so much more limited. As a general rule, mall security guards are worse than police officers, irregular militias are worse than regular armies, and mercenaries are worse than the Marines. That’s why the term “rent-a-cop” is a term of disdain, not of admiration. One of the reasons why private companies can’t do the security job as well is that discipline and motivation are interrelated, and the motivation of rising in the corporate ranks and making lots of money does not inspire the kinds of effectiveness that are useful in creating disciplined fighting forces and peace officers. Another reason is institutional memory: almost no private company has the long-term institutional memory and connection to experience of a regular military, and none can hope to retain career officers the way the military can (though the loss of crops of junior officers during experiences like Vietnam and Iraq is worrisome). Note the comparison here to health care. The profit motive is not a sufficient, or even a very good, incentive for driving good health care. The doc who is primarily trying to make the most money is not under any circumstances the doc you want.