Payment by results contracts
[mks_dropcap style=”squared”]N[/mks_dropcap]CVO and Bates Wells Braithwaite (a solicitors’ firm which specialises in working with charities) published a really helpful report on Payment by Results contracts recently:
Payment by Results Contracts: a legal analysis of terms and process
A lot of the related press coverage pushed the predictable “Payment by Results” doesn’t work message.
The report itself presents a much more complex – and interesting – picture.
The report has a sound basis, its findings are built on an analysis of a dozen anonymised PbR contracts submitted by charities and covering a range of different sectors: worklessness, offending, troubled families etc.
[mks_dropcap style=”squared”]T[/mks_dropcap]he report found a lot of poor contracting practice and highlights the main recurring issues:
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- Sometimes the contract focus is not on outcomes (the main reason for PbR commissioning) but just includes multiple targets relating to payment mechanisms
- The impact on the provider market of a PbR approach is often neglected – for instance can voluntary sector providers cope with delayed cashflow?
- Contracts are often very prescriptive – the point of PbR is to encourage innovation, the focus should be on outcomes, not on how to achieve them
- Too many targets in contracts
- Targets set that are outside providers’ control (where a sub-contractor providing a specific service is made responsible for an overall outcome)
[mks_dropcap style=”squared”]T[/mks_dropcap]he report’s authors – David Hunter and Ruther Breidenbach-Roe make a series of sensible conclusions. They note that many of the problems they identity are unsurprising since PbR is in its infancy across most public service markets.
They note that many of the problems are inherited from previous poor contracting practice and suggest a fundamental failure on the part of commissioners to involve potential providers at the design, commissioning and negotiation stages of contracting.
They make a blunt and helpful recommendation to charities.
They say that voluntary organisations should seek to engage with commissioners in advance of procurement to steer the content of PbR contracts and that, if commissioners resist this, providers should consider not bidding for these contracts.
The report acknowledges that the PbR approach has become a bit of a fashion item for some commissioners and recommends that PbR:
“should only be implemented when it is known to be the most appropriate mechanism to secure the Commissioner’s clearly articulated goals.”
The report notes a damaging trend of commissioners just using PbR to shift the risk onto providers.
This denies PbR’s potential to stimulate service innovation and deliver quality outcomes.
The report concludes by making a strong call for commissioners and providers to explicitly look at evaluating and improving the use of PbR in public sector contracts.
Don’t forget to check out my [mks_button size=”medium” title=”Free Payment by Results resource pack” style=”squared” url=”https://www.russellwebster.com/pbr-resource-pack/” target=”_self”]