Outcomes-based Commissioning
We improve the provision of social services by managing the financial and operational implementation of innovative projects between service providers and outcome payers.
Since the foundation of maze in 2013, we have been working with a range of partners, such as the Calouste Gulbenkian Foundation and the Portuguese Government, to foster the adoption of outcome-based contracts in social services.
In 2014-15, we helped the creation of the first public structure using European Union Structural Funds, whose mission is to promote social investment in the country: Portugal Inovação Social (EMPIS) mobilised €150 million for different social finance instruments to enable social organisations in accessing financial and non-financial support.
A significant part of the social finance instruments launched by Portugal Inovação Social are outcome-based. These instruments have the objectives of:
- Ensure that investees are focused on outcomes;
- Foster outcome-based funding amongst the public sector;
- Link funding to the achievement of pre-established and measurable outcomes.
/w=3840,quality=90,fit=scale-down)
Designed to improve social services
Social services are public services implemented by public sector organisations – at the central or local level – or by other organisations – on behalf of the public sector – across various thematic areas to support targeted segments of the population. These services include social housing, social protection, children services, elderly care, health services, as well as areas such as mobility, food security, legal support, amongst others.
It is the responsibility of a democratic state to ensure the equitable provision of social services in a way that reduces inequality and addresses underserved and vulnerable communities. So, how can outcomes-based commissioning help societies deliver more equitable outcomes?
Understanding outcomes
An outcome, in the context of social services, is what changes for an individual when a service is provided. For example, an elderly person that accesses care services provided by a public sector organisation benefits from a positive health outcome. In opposition, a pregnant woman that cannot access healthcare throughout her pregnancy benefits from a negative health outcome.
Outcomes-based Commissioning
Outcome-based commissioning is a mechanism whereby service providers (those that implement a social service) are contracted based on the achievement of certain outcomes. This can entail tying outcomes into the contract and/or linking payments to achieving these outcomes. If the outcomes are verified through an independent impact assessment, the outcome payer (normally the public sector) pays for such outcomes accordingly.
Which instruments exist?
There are several outcomes-based commissioning instruments. At maze, we have been working in the following two:
Social Impact Bonds (SIBs)
A public contracting instrument where investors provide upfront funding for the deployment of a specific social service initiative designed to deliver better outcomes than the public sector is already providing. If outcomes are achieved, the outcome payer - typically the public sector - will pay back investors the upfront capital, and sometimes with a return. We have successfully managed five SIBs.
Income Share Agreements (ISA)
A form of education financing wherein repayments are based on a student’s future income depending on pre-established positive employability outcomes. An ISA provider gives the student money to pay for their education, and the student contractually agrees to pay the provider a percentage of their future salary for a set period of time. Student Finance, invested by MSM is an ISA provider.
So what?
Traditionally, public contracting of social services is linked to inputs or activities. This means that such services are negotiated based on financial needs, staffing, number of activities developed, or number of people participating. For example, in Portugal, social organisations serving homeless people are financed based on the number of beds provided in shelters and not on the number of homeless people who can access housing and leave the streets.
Linking funding to outcomes is an effective way to align incentives of service providers, beneficiaries and funders. It also gives autonomy to organisations to experiment, innovate, and improve existing solutions that tackle social issues more effectively whilst being remunerated accordingly.
Outcome-based contracting is still in its infancy, and there is a long way to go in providing literacy and decreasing complexity around this topic. However, the wider adoption of outcome-based contracting will have a positive systemic impact on social services.
At maze we believe that governance and financial mechanisms that place outcomes and users at the centre are pre-conditions to unlock public systems that enable more sustainable and inclusive societies.
It is often difficult for impact ventures like us to manage and communicate the impact resulting from the work we do, especially when deploying an innovative solution in an area where change can be hard to accept. The rigorous performance management process that maze developed with us has made us more capable to robustly discuss issues such as impact evidence and cost-benefit comparisons, especially with the public sector. Carmelita Dinis, Executive Director in Movimento de Defesa da Vida