In the last twenty years, the phenomenon of government contracting with nonprofit human service organizations to deliver welfare services has intensified. This phenomenon, also known as privatization or purchase of services, is intriguing for welfare as well as nonprofit scholars. Using the functional-structuralist approach, the author explores analytically the mutual benefits as well as risks involved in contracting. He reviews four theoretical approaches regarding the evolution and function of voluntary organizations and how they and the public authorities divide the provision of welfare services. He discusses what each party gains, how each party takes advantage of this arrangement, and how these relationships affect services and clients. This article is based on personal experience in the U.S.A. and Israel as well as the literature from other countries including many European countries. Finally, he proposes that the framework presented in this article guide a cross-national, empirical analysis of the relationships between nonprofits and governments in welfare provision and its consequences.