The private prison industry claims that governments can save money by privatizing prisons, but what does the evidence actually indicate? To maximize returns for their investors, for-profit prison companies have perverse incentives to cut costs in vital areas such as security personnel, medical care, and programming, threatening the health and safety of prisoners and staff. Yet research and the recent experiences of states show that the promised cost savings often fail to materialize for government agencies that contract with for-profit prison companies. Furthermore, proponents of prison privatization may employ questionable methodology when calculating costs of private facilities. This includes finding ways to hide the costs of private prisons, ensuring that increased costs are not apparent until after the initial contract is signed, and using inflated public prison costs during comparisons. This backgrounder summarizes recent research and state reports related to private prison costs, and then discusses some common, yet dangerously flawed and unsound tactics employed to make private prisons appear cost effective.