The research topic is outsourcing on example of Eco Ltd. for waste management in the County of Zadar. Eco Ltd. company is jointly founded by the City of Zadar, Zadar County and City of Benkovac. This research topic is chosen because outsourcing of supporting activities is frequently suggested in the context of modernization of public administration as a business model that raises the level of efficiency of public administration. The research results indicate that the outsourcing in Croatia is much less developed than in other European countries, and the fundamental obstacles arise from trade union activities and bureaucratic nature of the current public management. On the other hand, the experience of many countries shows that outsourcing in the public sector distorts the market and creates a quasi-market without true competition causing declining quality and increasing prices of outsourced municipal activities. That is why many municipalities conduct the process of recommunalization. Example of company Eco Ltd. also shows that outsourcing is used exclusively in the process of research and development while municipal waste management shall be retained under control of local and regional government.