Fraser Battye - Assessing risks and Payment by Results

Payment by results: risky
business or a land of opportunity?

NCVO Sustainable Funding Conference 2012

Fraser Battye
28th November 2012

This presentation is a whistle-stop tour of a
complex topic. It’s in two parts

1) What is PbR? 2) Issues raised for the VCS

icfi.com | ghkint.com

PbR is a form of outcomes-based commissioning

(Largely) past ‘Old’ (!) ‘New’
model of commissioning commissioning
provision
State sees a need State sees a need
State sees a need State commissions State commissions
State works out the service
what to do ‘Outcome’ based
Monitoring of inputs
payment
State provides and outputs
service

Fundamental point: PbR is not
perfect, how does it compare 1) What is 2) Issues
icfi.com | ghkint.com alternatives?
relative to PbR? raised

So the intention is to focus on the difference that
services make - not on what is done

Inputs Outputs Outcomes

Resources needed Services provided Results: changes in
/ consumed condition / outlook /
People supported knowledge etc

An attractive proposition: only paying
insofar as services are effective

1) What is 2) Issues
PbR? raised

At heart, the thinking behind PbR is simple:
incentives matter

Change in Change in
PbR policy commissioning provider
/ contracts incentives

Improved Change in
Better VFM outcomes for service
users delivery

PbR? raised

PbR is being used as a mechanism for public
service reform

“...it is not enough to pay someone
to provide a service with the only
recourse being that if they fail they
will not be re-awarded the contract.
In these cases it makes sense to
build in an element of payment by
results to provide a constant and
15 references tough financial incentive for
to ‘payment by providers to deliver good services
results’ throughout the term of the contract.”

PbR? raised

PbR is being tested in a range of policy / service
areas

London
Smoking Reducing
Cessation Peterborough
Reoffending
Prison (SIB)
Programme

Children’s
Centres Pilots Work
Drug
Programme
Rehabilitation

Troubled
Families ESF Physical Activity
Programmes

PbR? raised

‘PbR’ describes a range of different models
(which can be blended)
Results for... Payments on... Accounts for... Incentives for...

...a %
...populations ...outcome ...systems
increment

...individuals ...output ...the whole ...individual
contract staff

PbR? raised

The debate on PbR is theory-rich and evidence-
poor...it can be rather polarised
"Payment by results should be "The NAYJ does not however accept that
implemented across the public sector a case has been made for the benefits of
without exception – where it exists PBR and is concerned the introduction of
already, it should be made more the profit motive and market mechanisms
forceful and sophisticated, where it may have potentially deleterious effects
does not exist, it should be on the experience of, and outcomes for,
introduced with very limited children who come to the attention of the
transitional periods." youth justice system.“

KPMG ‘Payment for Success’ National Association for Youth Justice
position paper

"Our review of UK and international research evidence found few rigorous evaluations
of PbR and no complete, systematic analysis of its effectiveness.”
Audit Commission

PbR? raised

PbR raises a series of important considerations
for the VCS

 For any given service, what do we mean by ‘result’?
How is this to be measured?
 Are your commissioners properly equipped for PbR?
 Are you? PbR needs good outcome data
 What about cash flow (post-outcome payment) and
rates of success (no outcome, no payment)? Can risk
be properly priced in?
 Is the VCS destined to life at the end of a supply chain,
or is there the willingness / capacity to lead?

PbR? raised

ICF GHK has undertaken substantial work on PbR (advisory and
evaluative); please get in touch if you would like to know more:
icfi.com | ghkint.com fraser.battye@ghkint.com / 0121 2338900

Fraser Battye - Assessing risks and Payment by Results

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