This is the second in a series of posts about the five principles of PbR commissioning set out in a recent Audit Commission report.
Principle 2: Understanding risks and accountability
One of the principal reasons that the Government (particularly the Treasury) is so keen on the PbR approach is because of the transfer of financial risk away from the public purse.
The Audit Commission report helpfully makes it clear that it is not possible to transfer away all risk, by posing some key questions:
- What happens if a scheme fails?
- Or succeeds so well, a council/government department can’t afford the payments?
- Will elected members still be held accountable for performance.
- What about the impact on (the usually vulnerable) client group?
- What about the commissioners’ reputation?
The commission then goes on to highlight the technical nature of PbR commissioning, stating that it requires technical, financial and legal expertise.
This is one of the hidden costs of PbR.
Organisations keen to explore the potential of PbR should be aware that this level of expertise is not easily available. Much of it resides the with financial intermediaries such as Social Finance who have pioneered the development of social impact bonds (of which more in week 4 of this series).
It is likely that councils and others who wish to commission PbR schemes will need to assemble a commissioning team with expertise in a number of key areas:
- Understanding the service users/target population and in particular what the key outcomes (which will determine the payments) should be.
- A knowledge of the provider market – is there sufficient expertise and appetite for PbR to encourage healthy competition and different approaches?
- Technical skills to construct a fair, accessible and legally and financially sound procurement process.
Creating a level playing field
Commissioning across departments