So far the discussion on this blog about Pay For Success has focused on the challenges associated with results based funding of social programs. These challenges are common to philanthropic and government funders. But Pay For Success also faces challenges unique to government. Reader Daniel Stid, a Bridgespan employee who writes a blog for them about the impact on nonprofits of government fiscal problems, adds this comment to the debate:
“I’ve really appreciated the discussion this week on “pay for success” and concur that this is a promising but very new idea so we shouldn’t kill the seedling by continually pulling it up out of the ground to examine it.
The question is, how can we help it take root as an experiment that we can learn from? In this regard I am struck by how the discussion of this approach, as with other outcome- or performance-based contracting schemes typically focus on the challenges in the social sector of delivering (identifying and tracking the right outcomes to measure, avoiding creaming, etc). But there are as many if not more barriers on the government side of these contracts that also need to be overcome.
One of the biggest obstacles here for example is the fact that while government agencies might say they want to contract and pay for outcomes, they don’t want to give up the specification and tracking of inputs and outputs along the way toward those outcomes. And in many areas (e.g., child welfare) they are obliged by law and policy and public scrutiny to insist on inputs and outputs.
It is also much easier for government contracting officers to specify and count beds filled and people served than it is for them to assess whether the people in those beds end up stably housed or sober or employed two or three years down the road, hence the attraction to government of traditional input/output vs. outcome/success based contracts.
And then there is the broader problem of how the government is organized, in very siloed agencies, and that the savings arising from success in the application of one prevention program may well accrue down the road in the budget of another agency, thereby making it all the more challenging to align the incentives and planning for government (whether it be at the federal, state, or local level) to contract so as to pay for success, as reasonable as it might seem to do so.
One potentially highly leveraged investment a philanthropist could make in this regard would be to support a government body in taking stock of and developing and documenting ways to overcome these barriers. It might seem counterintuitive for philanthropy to invest in government capacity-building in this regard, but given the fiscal reckoning that will be unfolding for the foreseeable future at all levels of government this type of investment is not likely to be made internally with public funds. Outside support in developing and disseminating this research would also provide continuity over time as particular administrations and political support for this idea might wax and wane.”