The paper modifies Laffont and Tirole (1986) and Laffont and Martimort (2002) model of government procurement for monopoly regulation, and applies it to deduce an optimal scheme of subsidy. We find out that: (1) the optimal scheme of subsidy is more effective in providing an incentive to increase the producer's offort than government procurement; (2) when there are 'imputed profits' for the producer under a regulated procurement, a subsidy scheme may create higher social welfare; (3) as long as profits of an inefficient producer without intervention are not too small, the subsidy scheme promotes social welfare more than non-intervention policy.