The mantra of SIBs and DIBs examined in some detail today: pay for success…
When Govt Pays For Success, Not Services
govexec.com
Since the world’s first pay for success project launched in the United Kingdom three years ago, the idea of governments “paying for success” using innovative public-private partnerships has sparked the development of pilot projects around the world. New York City launched the first project in the United States in 2011, Massachusetts will launch the country’s first state-level project (and the world’s largest to date) later this year, and President Obama recently proposed more than $500 million to support pay for success, or PFS, projects in the 2014 federal budget.
What are pay for success contracts, social innovation financing and social impact bonds, and why should government leaders care about this rapidly growing field?
An evolution in the pay for performance movement, “pay for success” is the general term for performance-based contracting between governments and social service providers, in which government only pays providers if target outcomes are achieved — reduced recidivism or improved health outcomes, for example — as opposed to providing cost reimbursements. Where traditional performance-based contracts merely delay cost reimbursements until governments are able to certify a service has been provided, PFS contracts delay government payment until success has been determined. In other words, PFS contracts allow government to invest in what is currently working to address our nation’s most pressing issues, instead of spending trillions of dollars on what may have once worked, or what we hope will work.