This article critically evaluates the arguments advanced to support the extension of competitive tendering (otherwise known as contracting-out) lo rail track maintenance within the corporatised NSW rail industry. It is argued that the economic characteristics of track maintenance are such that focussing on short-term cost minimisation may lead to reduced efficiency from a whole-of-government and economy wide perspective. Issues of equity are also considered, particularly in relation to increases in unemployment in regional areas. It is concluded that the adoption of a wider perspective, and a wider definition of efficiency than short-term cost minimisation, substantially reduces the desirability of contracting out.