perils of privatization

A lot of libertarians favor privatization of government functions. Alex Tabarrok makes an extremely important point in this post about privatizing prisons:

If the reason for contracting out is that public prisons are run poorly, why should we expect government to do a better job at writing contracts?

Does that mean we shouldn't have private companies run prisons, that the government should continue to do it? There is another, imperfect althernative and that is to minimize the number of prisons, no matter who is running them, by having as few crimes on the books as possible. Repealing the War on Drugs and all the other unnecessary laws would do more to improve prisons than anything else.