One area I've thought about is military services.
When we did those jobs in-house, our soldiers got valuable job training for when they left the service. They learned how to cook for hundreds of people, how to do the electrical wiring on base, etc. So our tax dollars served a double purpose-- helping our military effort and providing job training.
Soldiers also had to be focused on quality control because they needed to answer to their supervising officers.
Therefore it was painful to read of privatized military contractors serving moldy food to our soldiers and electrocuting them in their showers with faulty wiring.
And there is so much profiteering in our military privatization. I remember when most of our legislators, Democrats included, were cleverly incited into screaming for the defunding of ACORN because of the right wing's theater of possible fraud. Alan Grayson and some others suggested that if our legislators were in favor of cutting ACORN off because of suspected fraud, they really should stop dealing with military contractors ALREADY convicted of fraud.
http://www.huffingtonpost.com/2009/09/22/whoops-anti-acorn-bill-ro_n_294949.html
The congressional legislation intended to defund ACORN, passed with broad bipartisan support, is written so broadly that it applies to "any organization" that has been charged with breaking federal or state election laws, lobbying disclosure laws, campaign finance laws or filing fraudulent paperwork with any federal or state agency. It also applies to any of the employees, contractors or other folks affiliated with a group charged with any of those things.
In other words, the bill could plausibly defund the entire military-industrial complex. Whoops.
Rep. Alan Grayson (D-Fla.) picked up on the legislative overreach and asked the Project on Government Oversight (POGO) to sift through its database to find which contractors might be caught in the ACORN net.
Lockheed Martin and Northrop Gumman both popped up quickly, with 20 fraud cases between them, and the longer list is a Who's Who of weapons manufacturers and defense contractors.
http://www.contractormisconduct.org/