Abstract Background Public-private partnership (PPP) has been suggested as a tool to assist governments in lower to middle income countries fulfil their responsibilities in the efficient delivery of health services. In Tanzania, although the idea of PPP has existed for many years in the health sector, there has been limited coordination, especially at a district level – which has contributed to limited health gains or systems strengthening obviously seen as a result of PPP. Methods This case study was conducted in the Bagamoyo district of Tanzania, and employed in-depth interviews, document reviews, and observations methods. A stakeholder analysis was conducted to understand power distribution and the interests of local actors to engage non-state actors. In total 30 in-depth interviews were conducted with key informants that were identified from a stakeholder mapping activity. The initial data analysis guided further data collection in an iterative process. The provision of Reproductive and Child Health Services was used as a context. This study draws on the decision-space framework. Results Study findings reveal several forms of informal partnerships, and the untapped potential of non-state actors. Lack of formal contractual agreements with private providers including facilities that receive subsidies from the government is argued to contribute to inappropriate distribution of risk and reward leading to moral hazards. Furthermore, findings highlight weak capacity of governing bodies to exercise oversight and sanctions, which is acerbated by weak accountability linkages and power differences. Disempowered Council Health Services Board, in relation to engaging non-state actors, is shown to impede PPP initiatives. Conclusion Effective PPP policy implementation at a local level depends on the capacity of local government officials to make choices that would embrace relational elements dynamics in strategic plans. Orientation towards collaborative efforts that create value and enable its distribution is argued to facilitate healthy partnership, and in return, strengthen a district health system. This study highlights a need for new social contracts that will support integrative collaboration at the local level and bring all non-state actors to the centre of the district health system.