Competition and profit motive are two great drivers for any vibrant industry. It is necessary to to remove distinction between private and public sectors. The resources of both needs to be merged for better functioning.
At these times of difficult global economic conditions, the public sector is most likely to be hit harder. Local authorities such as municipalities may become incapable of providing proper services, may suffer from thefts of public money, and may have poor billing & revenue collection for various "claimed" justifications. I know a case of a municipality which has not received ~ 2 million $ from some people who were provided with electricity but did not pay & they think of not paying at all.
Here, a skillful private sector company can be called upon to help in increasing the efficiency of such failing municipality. The private company is expected to provide "state of the art" solution to such problem. The municipality will stay "since its members are usually elected" but it requires a helping hand to function well. This integration "though at a paid cost" ought to lead to better municipal services for all.
Sometimes, the reverse occurs, i.e. a private company (assuming it is important for the country) may pass through a worsening situation, and then the public sector may be called upon to aid with expertise in order to save the company.
In both cases, when the "private" helps the "public" or vice versa at a reasonable cost, then this is good for all.
Public sector entities have to follow specific rules and principles, which are different from those of their private counterparts. Anyway, the topic is very interesting and, from a managerial point of view, literature concerning New Public Management has investigated different forms of integration between public and private entities.