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Russell Webster

Russell Webster

Criminal Justice & substance misuse expert and author of this blog.

Payment by Results and international aid

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.

Water, Sanitation and Hygiene Programmes and PbR

A recent report: Implementing WASH programmes in a payment by results context makes for interesting reading for those of us interested in PbR best practice. The report identifies many of the key issues which have emerged from PbR programmes in many very different sectors such as worklessness, criminal justice and substance misuse.

The report is written by Emma Feeny on behalf of the SWIFT Consortium (the Consortium for Sustainable Water, Sanitation and Hygiene in Fragile Contexts) which is led by Oxfam, and includes Tearfund and ODI as Global Members, and Water and Sanitation for the Urban Poor (WSUP) as Global Associate, along with many implementing partners in the Democratic Republic of Congo and Kenya.

The UK Government’s Department for International Development (DFID) wants PbR to be a major part of the way it works in future, and other donors look set to follow suit. In 2014, DFID launched a WASH Results Programme which aims to reach 4.5 million people by December 2015, supporting achievement of the Millennium Development Goals. The programme is financed on a PbR basis: the three delivering consortia receive payments only upon third-party verification that they have achieved a set of agreed results.

The report sets out lessons learnt from this programme based on an internal review.

Many of the findings are similar to those which emerged from a recent PbR literature review that I undertook.

Learning points

The key learning points will be familiar to regular readers and are set out below:

The need for a clear, detailed idea of what a PbR framework entails

It’s essential that all partners understand how the contract will work in practice, and how implementing it will differ from implementing a grant-funded programme.

The need to price sufficiently for risk

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. This reminds me of the issues for small voluntary sector sub-contractors in the PbR-funded Work Programme and privatised probation system known as Transforming Rehabilitation.

The need to price sufficiently to meet monitoring and reporting requirements

It costs time and money to develop a robust outcome monitoring and verification framework which may be more expensive in areas of extreme poverty lacking in infrastructure.

A blended approach may be appropriate

A total PbR approach is very high risk and the report suggests mixing grant-funding for recurring costs or for activities, with PbR for the achievement of outcomes. This approach can reward innovation and enable partners to focus on working with communities and government, rather than being locked into a costly cycle of verification of activities and outputs.

Cashflow

The report also highlights the importance of milestones to trigger payments to ensure that providers can cope with cashflow difficulties, another issue very familiar to Work Programme sub-conractors.

Verification challenges

One of the outcome targets is “sustained hygiene behaviour change” but how do  you measure this, over what period and at what expense? (See here for a longer exploration of outcome verification and PbR.)

Contract flexibility is critical

Our state of knowledge about how exactly PbR works in practice is currently very limited and it is prudent to build in the ability to modify contracts from both commissioner and provider perspectives. The WASH report suggests a diluted version of this, proposing a mechanism to transfer
targets between partners or countries, or to take a portfolio approach, with consolidated milestones/payment triggers, so that under-achievement in one area can be balanced by over-achievement in another.

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PbR interactive tool

The literature review I mentioned above was conducted as part of a project funded by the Oak Foundation to develop an interactive tool to assist commissioners and providers to decide whether a payment by results approach might be an effective approach to commissioning a particular service.

The prototype of the tool is now live – if you are interested in PbR in any field, please take it for a test run and let me know your views.

2 thoughts on “Payment by Results and international aid”

  1. Dear Russell
    Thanks for your useful summary and for bringing attention to SWIFT’s report. As a member of the independent monitoring and verification (MV) team working on the WASH Results Programme, I wanted to pick up on one of the key issues you raise, which is the challenge of verifying outcome targets. The example that SWIFT cited – sustained hygiene behaviour change – highlights both the challenge and a risk.
    In your blog on outcomes verification you noted that there is a risk that suppliers will cherry pick those people (drug users under rehabilitation, for example) who will achieve specified outcomes more easily. In WASH programmes suppliers may of course cherry pick easier-to-reach communities, or those known to have cultures more receptive to latrine use. Another aspect to cherry picking is that suppliers (and perhaps donors) may pick outcomes that are easily measured and thereby be persuaded to de-prioritise those that are not. Hygiene behaviour change – a critical element of WASH programmes in terms of their health benefits – is a case in point. If it is true, as SWIFT suggests, that it is difficult to agree an appropriate measure and to verify this to everyone’s satisfaction, then the risk of putting it aside into the “too difficult” box rises. The WASH Results Programme is to be credited for not side-stepping this challenge and therefore facing the tricky questions that SWIFT poses; but in a sector that has itself no clear answers on how to effectively measure hygiene behaviours at reasonable cost, this will remain a thorny problem.
    The MV team is about to start verifying outcomes on this programme, and will continue to post its experiences at https://washresultsmve.wordpress.com/.
    Joe Gomme

  2. Hi Joe
    Thanks very much for taking the time to comment. There is still an awful lot we don’t understand about how PbR plays out in practice so it’s great to share practice across different sectors.
    I’ve added your site to my feedly so I can keep up with your efforts.
    Look forwards to reading about them
    Russell

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