Third in a series of infographics which demystify the jargon and technical terms associated with the payment by results commissioning model.
The purpose of the new interactive tool is to help commissioners, investors and providers consider whether it might be appropriate to use PbR for a particular service. The tool asks key questions on both the rationale for using PbR and key elements of the contract such as defining and validating outcomes and guarding against common PbR problems such as “creaming and parking” and unintended consequences.
Oxfam and the other agencies are working in very challenging circumstances and won’t receive full payment unless they hit their targets on time. This makes realistic pricing very tricky and raises the key ethical issue of how much risk to pass on to local implementing partners; or, if none, how to ensure their motivation.
The issue of providers “gaming” PbR contracts is a hot issue in the literature. Commentators take different views with some stating that it is only rational and efficient for providers to focus on the outcomes incentivised by PbR payments to the best of their ability while others describe similar behaviour as “gaming.”
Designing PbR contracts can be a tricky business with plenty of examples in the literature of commissioners and providers wishing they had never signed on the dotted line. In addition to getting the outcomes and payment incentives right, two issues are particularly critical: the overall length of the contract and the he delay until, and interval between, incentive payments.