In this editorial we present evidence on lack of cost savings with privatization and show the importance of managing markets, policy, and political interests to ensure benefits from privatization. We draw on our own work and that of papers presented by members of the Scientific Committee at the Barcelona International Workshop on “Local Government Reform: Privatization and Public Private Collaboration”, which we organized in June 2006 at the University of Barcelona, Spain. We give critical attention to the challenges of managing costs, structuring the market, and managing political interests. We argue that the debate on local government reform is moving beyond the `either/or’ dichotomy of public or private and now must focus on synergy between the public and private sectors. The challenges of a dynamic market-management approach are the focus of this theme issue.