The evolution of Social Impact Bonds
Social Investment fund manager Bridges Ventures see a bright future for Social Impact Bonds driving outcomes-based commissioning of public services in the UK.
18th May 2016
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Here you can find over 150 posts tracking every major development in payment by results since 2011. You can see where PbR has succeeded and, more frequently, where it has failed across a wide range of sectors: offending, welfare, employment, substance misuse… If you’re looking for something in particular, try the search box below.
Social Investment fund manager Bridges Ventures see a bright future for Social Impact Bonds driving outcomes-based commissioning of public services in the UK.
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 final post summarises the most important lessons to bear in mind if you are involved in commissioning, investing in or providing a payment by results-funded scheme.
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.
The main message from the literature is that commissioners need to be proactive in ensuring that PbR providers deliver a good quality service — particularly when service users include vulnerable groups
When outcomes are the basis for payment, it is important that the provider receiving the payments is responsible for achieving the outcomes. Targets should not be unduly influenced by external factors (such as the state of the economy for Work Programme type schemes) or by the work of other agencies who are not receiving payment from the contract.
It’s no surprise that the government is such a strong supporter of social investment; at a time when investment in public services is being cut substantially year after year, #socinv is a key source of extra funding.
Latest post in a series examining the lessons from the payment by results research literature focuses on the importance of verifying outcomes.
Not only do outcomes therefore have to be accurate and realistic but commissioners need to consider that providers will quite reasonably de-prioritise work which is not governed by an outcome.
commissioners are urged to consider whether potential providers have sufficient financial resources to bid for a contract which requires considerable initial investment and where payments are delayed until the achievement of outcome measures has been verified.
It is not possible to transfer all risk, be that risk reputational, practical or financial. Commissioners retain their responsibility for local citizens receiving a good quality and effective service.
