1. AM 6
Assessing risks and payment by
results
Chair: Fiona Sheil, Public Services Officer, NCVO
National Council for Voluntary Organisations
Sustainable Funding Project

2. Fraser Battye
Principle at GHK Consultancy
National Council for Voluntary Organisations
Sustainable Funding Project

3. Payment by results: risky
business or a land of opportunity?
NCVO Sustainable Funding Conference 2012
Fraser Battye
28th November July 2012

4. 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

5. 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
icfi.com | ghkint.com alternatives?
relative to 1) What is PbR? 2) Issues raised

6. So the intention is to focus on the difference that
services make - not on what is done
Inputs Outputs Outcomes
Resources Services provided Results: changes in
needed / consumed condition / outlook /
People supported knowledge etc
An attractive proposition: only paying
insofar as services are effective
icfi.com | ghkint.com 1) What is PbR? 2) Issues raised

7. 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
icfi.com | ghkint.com 1) What is PbR? 2) Issues raised

8. 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.”
icfi.com | ghkint.com 1) What is PbR? 2) Issues raised

9. 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
icfi.com | ghkint.com 1) What is PbR? 2) Issues raised

10. ‘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
icfi.com | ghkint.com 1) What is PbR? 2) Issues raised

11. 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
icfi.com | ghkint.com 1) What is PbR? 2) Issues raised

12. 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?
icfi.com | ghkint.com 1) What is PbR? 2) Issues raised

13. 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

14. Marcus Roberts
Director of Policy, DrugScope
National Council for Voluntary Organisations
Sustainable Funding Project