Review of Payment by Results and Social Impact Bonds
PERU has an ongoing project to monitor and review the development of Payment by Results and Social Impact Bonds, primarily in the UK. This project, funded internally has run, on an informal basis since 2010 when the newly elected UK Coalition Government signalled in the Coalition Agreement, that it intended to make use of Payment by Results in a number of social policy areas. We have produced periodic publications analysing both the use of PbR and SIBs in particular sectors and their use across the UK.
What are Payment by Results and Social Impact Bonds
Over recent years, there has been increasing interest in Payment by Results (PbR) as a model for commissioning services in the public sector. A PbR contract links payment to the outcomes achieved, rather than the inputs, or outputs of a service. By making some or all of payment to a service contingent on delivering agreed outcomes, PbR supposedly reduces ‘micro-management’ on the part of the commissioner, encourages innovation and transfers risk away from the branch of government commissioning the service towards the service provider or investor (in the case of SIBs) because government will only pay if outcomes are achieved. A Social Impact Bond (SIB) is a class of PbR contract where the finance needed to make the contract work is provided, not by the service provider, but by private investors. To date, these have usually been social investors: investors who consider both social and financial returns. Social Impact Bonds are closely associated with a broader ‘social investment’ movement.
What is the need?
The UK National Audit Office undertook an extensive review of PbR in 2015 and a number of evaluations of PbR programmes in the UK have been published, but most of these are implementation evaluations undertaken in the early stages of PbR programmes. Various reviews of the early use of SIBs in the UK, US (Archer-Rosenthal 2016) and worldwide (Gustafson-Wright et al. 2015) have been undertaken and Social Finance keep a register of SIBs. But, there are still relatively few empirical studies of PbR and SIBs and theoretical work is only just starting to be published. There is a need for more empirical and theoretical work in this field.
What are we doing at the moment
Book on Social Impact Bonds and Paymenet by Results
We are completing a book that will be published by Policy Press in early 2018 titled Payment by results and social impact bonds: Outcome-based payment systems in the UK and US. The book was coauthored by
- Chris Fox (PERU)
- Kevin Albertson (PERU)
- Chris O'Leary (PERU)
- Gary Painter (University of Southern California)
With additional material from Jessica LaBarbera andKimberly Bailey (Nonprofit Finance Fund).
Structured review of evaluations of PbR and SIB in the UK
We completed a structured review of 46 empirical evaluations of PbR and SIB published in the UK between 2010 and April 2017. The review is available to download below. Some results from the review appear in a book on PbR and SIB and others in an academic paper.