In the UK, the Cabinet Office announced that it will direct GBP 30 million toward social impact bonds that will aim to improve a set of social outcomes for 14-24-year-olds.
I have three observations on the announced programs.
1. Peterborough does not appear to have chilled the UK market.
This funding package was announced around the same time as the announcement that the UK government will be changing the Peterborough SIB because its Transforming Rehabilitation initiative makes it impossible to evaluate performance in the third cohort of that pilot. If these changes to the Peterborough SIB arise from a government negative opinion of the program, it would have been unlikely to announce this fund.
2. Government still using both SIBs and payment by results.
This funding will be “delivered through social impact bonds,” not through the more general payment by results approach. According to the Civic Society article: “”Bids will need to come from providers of services and the schools they will be working with alongside investors to provide up front funding to deliver interventions.”
Does this mean the UK government prefers SIBs to payment by results? That is, does the UK government prefer a payment arrangement that includes an investor in the original design of the program, rather than leaving it up to the service provider whether it raises capital or finances the program itself?
The Transforming Rehabilitation initiative, which the UK government recently unveiled for the entire country, will contract providers through payment by results rather than through social impact bonds. (Specifically, the government says: “New payment incentives for market providers to focus relentlessly on reforming offenders will be introduced, giving providers flexibility to do what works and freedom from bureaucracy, but only paying them in full for real reductions in reoffending.”)
This could mean that the government thinks that SIBs work better in addressing some social issues while payment by results works better in other issues. It could also mean that the government is unsure which approach works best and is still experimenting.
In the US, governments also seem to be experimenting with different designs. New York State’s request for proposals for the recidivism and employment pay for success contract asked only service providers to apply. Intermediaries were not invited to apply separately from providers the way they were asked to do in the Massachusetts RFP. Service providers were free to ask intermediaries to join their proposals, but they were not required to do so. The results from the pay for success RFP released here by the Nonprofit Finance Fund and Irvine Foundation indicate that intermediaries were not required to apply with service providers.
3. Groups of government agencies are best fit to execute SIBs and payment by results programs.
The announcement says that this program has “over 7 central government departments involved in the 2 programmes.” This cross-agency collaboration has been vital to the development of SIBs in the UK, the US, and will likely remain important for future projects that aim to save money by investing in preventative services. For example, Harvard’s social impact bond lab director Jeffrey Liebman says that such collaboration in the US save money for the federal government in “Supplemental Security Income, Disability Insurance, Medicare, and Medicaid.”
Michael Belinsky 