Contracting out of social services is defined as the purchase of services by government agencies from for-profit and nonprofit organizations. It has a long history beginning with the English Poor Law of 1723 and becoming a major policy during Reagan's administration. Both the advantages and shortcomings of contracting out are described and analyzed. The effects on providers' accountability to government and clients and the implications for social work practice and ethics are discussed. Special emphasis is given to the social workers' dilemma facing a dual loyalty to contractor–employer on the one hand and to clients on the other.