Outcome Based Government

By Toby Eccles and Sarah Doyle

A few weeks back we were at a retreat for Social Impact Bond Developers on an Island on the Muskoka Lakes in Canada. It was a sensational venue (thank you to the Breuninger and BMW Foundations, and the MaRS Centre for Impact Investing) and a really interesting few days. One of the topics that a small group of us spent some time thinking about was: What does Outcome Based Government look like? Social Impact Bonds are a really interesting model for a range of opportunities, but they are still a specialist subject that will only ever affect a modest amount of overall funding. There is however a need for a much greater proportion of government spending to use some of the elements that SIBs encourage. In particular:

  • Deciding what you are trying to achieve and how you are going to measure it before you start;
  • Benefiting from the combination of outcomes data and flexible contracting to use rapid iteration and adaptation models to test, learn and improve services on a continual basis;
  • Transparency on what has been achieved;
  • Explicitly analysing interactions between the outcomes you are trying to achieve and other parts of government expenditure, and measuring their impact on each other.

These would have some fairly profound implications. Examples might be:

  • The expectation that, wherever feasible, any policy idea would be treated as a hypothesis or series of hypotheses to be tested in an experimental way, informing future decisions on the potential to expand funding or commit to a wider roll out. This would potentially allow more policy ideas to be tested, with only a selection implemented on a wider scale;
  • Government would over time learn the actual cost of its services and external service providers at producing certain outcomes, making it easier to compare;
  • There would be a much clearer understanding of what works and whether a given initiative had been successful;
  • Budgets being set including both funds and measurable outcomes (tied to specific funding streams), at a sufficient level of granularity to demonstrate success or failure. This could happen at multiple levels of government, both for departments and within departments.
  • Service providers would benefit from longer-term contracts, increased flexibility to adapt over the course of the contract with a view to delivering on outcomes, and a reduced reporting burden regarding day-to-day operations and interim outputs.
  • New partnerships would be incentivized within government, cutting across traditional silos, and outside of government, where a consortium of service providers (generally coordinated by a prime contractor) may have a better chance of delivering on target outcomes.
  • For it to work there would need to be at the least an independent entity defining, or assessing or auditing the outcomes that government is using, to ensure rigour and accountability, and avoid politicization.

This is in part about better measurement, but it is also understanding that we live in a complex world, that we can’t produce predictable outcomes simply by better planning, that instead we need to create feedback loops, gather information, and adapt accordingly. In short we need social services to have a rigorous model of learning that generates knowledge that can be built upon and improved. The path to getting there is not straightforward. It strikes me that there are at least four products that alongside the SIB can help move government along this path:

  • Support bringing outcomes into the budgeting and financial planning and management processes;
  • Help bringing outcome elements to contract renewals in such a way as to drive improved services;
  • Procurement and contracting models that build in feedback loops and an expectation that the contract will adapt over time, rather than stay the same;
  • A better model for outcome work at scale than the present large scale national or state-wide procurement process that we are seeing with the likes of the work programme or transforming justice. This would involve developing a model that allowed feedback and learning, starting experimentally in two or three areas. For example one could create a framework of sought after outcomes and maximum values that can be paid for them, a referral methodology, and an initial community of providers. Thereafter the providers can be added to, say annually, and the outcome values can also be changed according to what outcomes are generated for what value. There would be transparency in terms of what providers are doing and the outcomes they are achieving. Toby will be writing more on this soon.

Would this work? What else is needed? All thoughts welcome!

PS This is intended as a starter for discussion. There are plenty of areas of government where an outcomes approach may be inappropriate. There are also plenty of poor ways of introducing outcomes that simply become target cultures with strange perverse incentives, or the creation of meaningless numbers outside of government control. Previous attempts have tended to create top down targets as a way of managing from the centre, rather than as a way of creating feedback loops from the outside. We hope to explore some of these challenges and issues in future blogs.

Thanks to Peter Barth @ Third Sector Capital, and Caitlin Reimers @ Social Finance US for a great conversation…



One thought on “Outcome Based Government

  1. Toby–Thanks for this excellent summary of questions! I am the founder and President of Impact4Health, LLC based in California–one of the few enterprises working on SIBs/PFS focused on funding healthcare solutions. You’ve raised excellent questions here and I want to add one more: SIBs cannot remain the purview of a handful of specialists and consultants. The communities that need the services and interventions must have access to these new financing strategies. Unfortunately, the complexity of these deals is daunting even for the well informed and this is creating a remarkably difficult scenario: It is going to take a long time before Social Finance, Third Sector Capital Partners, Instiglio and me(!) a long time to reach the communities that need this effort the most. I am about to release a white paper on the importance of engaging the 750 Community Foundations in the US in the effort to make SIBs a scalable solution. I will share this with you when it publishes but the emphasis of the document is that if SIBs remain a cottage industry for a handful of us—we have done nothing more than to add one more option for funding that remains out of the reach of nonprofits and NGOs or local governments who expected more of us. Maria Hernandez, PhD

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