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In a privatization competition, private contractors bid against an in-house team to perform a governmental function that is currently performed by the in-house team. The Department of Defense initiated 3,500 privatization competitions from 1978 to 1994, generating estimated annual savings of $1.46 billion. We estimate a reduced-form model of the savings from these competitions that takes into account the premature cancellation of some competitions and the censoring of the in-house bid at current cost. The Department of Defense maintains a list of candidates for future privatization competitions. Using our model, we forecast annual savings of $5.74 billion if privatization competitions were completed for all functions on this list., I. Introduction THE theoretical literature provides two approaches to reducing the cost of the government provision of goods and services. One approach (Rose-Ackerman, 1986; Tirole, 1994) is to implement incentive [...]