Like many of us, the NAO is in a slightly awkward position in regards to payment by results. On the one hand, it is reluctant to recommend that any public programme adopts a PbR approach because there does not, as yet, exist an evidence base that suggests it is an effective commissioning approach.
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The NAO makes a very strong recommendation not only that all government payment by results schemes should be evaluated but that these evaluations should be shared across government in order to develop a more robust evidence base for PbR; indicating whether and how this commissioning model should be utilised.
The NAO cautions that in designing PbR schemes, commissioners need to get the balance between pure PbR and non PbR payments right. Where a scheme is financed by a Social Impact Bond, it may be possible – and indeed appropriate – to stipulate that 100% income is dependent on achieving the specified outcomes.
To date, government has mainly used payment by results as a cost-cutting exercise with PbR focusing attention on the bottom line rather than on achieving more sustainable outcomes which benefit society and bring long term savings to the public purse.
Are the NAO’s features a copper-bottomed guarantee of an effective PbR scheme? Or are you more in agreement with me that the attraction of PbR is the chance to move away from the straight-jacket of contemporary procurement and stimulate fresh approaches, under-written by the knowledge that if a provider fails, the commissioner doesn’t have to pay?
PbR schemes are typically targeted at intractable, multi-faceted social problems with the hope that an outcome-focused approach will encourage innovation and more holistic responses. If government departments cannot even co-ordinate their commissioning around PbR, it will be very difficult for providers to design and deliver new solutions.
PbR schemes now account for at least £15 billion of public spending in the UK including the Work Programme, the new private probation contracts and numerous homelessness and substance misuse schemes. Despite extensive negative media coverage, neither the Cabinet Office nor the Treasury currently monitors how PbR is operating across government.