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For many years, Pakistan has had a wide network of Basic Health Units spread across the country, but their utilization by the population in rural and peri-urban areas has remained low. As of 2004, in an attempt to improve the utilization and performance of these public primary healthcare facilities, the government has gradually started contracting-in intergovernmental organizations to manage these BHUs. Using five nationally representative household surveys conducted between 2001 and 2012, and exploiting the gradual roll-out of this reform to apply a difference-in-difference approach, we evaluate its impact on BHU utilization. We find that contracting of the BHU management did not have any effect on health care use generally in the population, but it did significantly increase the use of BHU for childhood diarrhoea for the poor (by 4% points) and rural (3% points) households. These increases were accompanied by lower rates of self-treatment and private facilities usage. We do not find any significant effects on the self-reported satisfaction with BHU utilization. Our findings contrast with earlier small-scale studies that reported larger effects of the contracting of primary care in Pakistan. We speculate that the modest additional budget, the limited management authority of the contracting agency and the lack of clear performance indicators are reasons for the small impact of the contracting reform. Apparently critical aspects of services delivery such as location of BHUs, ineffective referral system and medical practice variation in public and private sectors have contributed to the overall low utilization of BHUs, yet these were beyond the scope of the contracting reform.