NPR reported this morning that the Bush administration has contracted out more of government's jobs than any other president. That is basically outsourcing or privitizing government's responsibilities. This was done on no-bid contract so there was no public discussion and there has been no accountability.
These types of actions give away our tax dollars to private corporations, often friends and supporters of the administration. This results in an income redistribution from tax payers to wealthy stockholders or individual owners. Since there is no oversight we don't know if they are staying in budget nor if jobs are being created.
This also means that many aspects of our lives are governed by the decisions of corporations. They are essentially governing without accountability.
This, and other deregulation does not create less government. Deregulation simply transfers governing power from public forms of government - elected and accountable to the people, to private government without accountability.
This is not what we expect from government. Irresponsible government using our tax dollars to fund private companies is far from efficient. Democracy may sometimes be slower, but it is better!