The emergence of quasi‐markets – new regulatory tools to design and manage public service delivery through competition – has led to a new ecology for local authorities, who increasingly operate alongside for‐profit, not‐for‐profit and other governmental contractors for social service provision. This raises a series of challenges related to the secondary regulatory measures to correct for market and government imperfections under conditions of competition between entities with different objective functions. In shared governance systems, such as the European Union structural funds, additional tensions are generated by the double role of the public sector as purchaser and potential provider of services. This analysis presents empirical evidence from a transitional context in which quasi‐markets have been newly established, based on data from the Romanian human resource development operational programme (RO‐SOPHRD) between 2007 and 2011. These findings enhance our understanding of the dynamics of distortions created by quasi‐market environments for public service delivery in emerging economies.