As governments and service providers around the world learn from the early years of Social Impact Bonds, a wider outcomes-based contracting landscape is emerging. Originally published in Pro Bono News.
If there’s one thing most people in the social sector agree on, it’s that they want to “make a difference”. This underpins the desire to move from a focus on outputs (where we may not have evidence about whether we are making a difference), to a focus on outcomes that matter to the social service user.
Not-for-profit boards are starting to drive an outcomes focus because part of good governance is to know whether the organisation is doing something that works. An ideal social service system ensures all participants are aligned around improving outcomes for those who need it.
Yet, the social service system is still a long way from that goal.
There are plenty of pitfalls in this transition to outcomes: debates about what and how to measure; costs of data collection; worries about unintended consequences and cherry picking; and the political hurdles in shifting resources to prevention. Yet while difficult, these are technical problems that can be solved with good outcomes-based contract design and a collaborative, co-design approach with government.
We recently attended the ICS (Institute for Child Success) Pay for Success Conference in North Carolina – a conference to support outcomes-based learning with a focus on early childhood disadvantage. We heard from an early intervention project successfully preventing at-risk kids from requiring costly special education services at school. We heard of the shift of $100 million of social service spending to an outcomes basis in the state of Rhode Island. We learned about a project that prevents hospitalisations of high risk asthma patients through allergen removal in the home – saving lives and money. These are some of the dozens of projects in operation now that are based around outcomes.
The ‘artist formerly known as a Social Impact Bond’ is back. And with a new name.
The Victorian State Government has just announced its second formal round of outcomes-based funding opportunities. And, regardless of name – these are serious opportunities to co-design fully-funded investments into service interventions that really work to close gaps for cohorts of disadvantaged Victorians.
The Government’s Statement of Intent, issued Friday 29 June 2018, is critical reading. It indicates that the Department of Treasury & Finance wants proposals from those who work in the following policy areas:
Just as with the first round of opportunities that delivered two contracts – one through Sacred Heart Mission and the other through Anglicare/VincentCare, to be considered for this round you’ll need to be well prepared.
The key things you’ll need to cover in your application are listed here:
For the second year running, the Turnbull Government has provided funding for the growing ‘social impact investing’ market. Scott Morrison’s second and third budgets have now promised a total of $28.5 million over ten years for this emerging area of policy interest.
Here is the spending breakdown over the forward years of the budget:
As you can see, not all of the promised funding hits over the coming four years - $8.3 million is pushed into the ‘out years’ (aka the ‘Never Never’), while the bulk of the funding falls in the coming three financial years and for the trials themselves.
Social Impact Bonds (SIBs) are a powerful new tool to align the interests of social organisations, governments and investors around proven social impact. While this form of funding is still in its early stage, there are some principles that are emerging. It is clear that a SIB will not be appropriate for all social programs - the need for robust proof of impact attributed to the intervention, and the involvement of investors and multiple government departments makes SIBs complicated instruments.
We encourage social organisations to think about the future of outcomes-based funding for programs. With new SIB funding rounds opening up, social organisations are asking - do I have the right kind of program and support to be successful in applying for a SIB?
There are several key dimensions to consider before beginning your application for a SIB.
> A vision
What is it that you are trying to achieve and for whom? A SIB is a long, challenging process, so your senior management need to have a clear and unified vision of why you want to proceed. While this will help sustain you when the complexity is greatest it will also help you convince Government that your organisation – your intervention – is ready to be taken through this process.
> A clearly defined problem
SIBs allow you to create, fund, measure and adapt an existing or new service response to a specific health or social need and for a specific cohort of people. The organisation needs to be very clear about the target cohort for the program. Develop a view on why, where and how the existing sets of services are inadequate. Demonstrate (ideally with existing evidence) how your proposal will solve the problem. Ideally, you have an existing intervention that you wish to ‘scale’ through a SIB, although this is not essential.
Latitude Network was the advisor to Sacred Heart Mission in the negotiation for Victoria's first social impact bond announced in December 2017. The article below first appeared in Pro Bono News.
Sacred Heart Mission (SHM) will deliver the state’s first SIB with the Victorian government, expanding the welfare not for profit’s successful Journey To Social Inclusion Program (J2SI).The Victorian government allocated $1.2 million for a targeted program in March to end long-term homelessness following a pilot of J2SI, agreeing to contribute a third of the overall $3.69 million cost of the three year program.
A SIB is a partnership with government, the social services sector and investors to create positive change for communities and individuals and has been used worldwide to address complex social issues. SHM said unlike traditional SIB capital raising, a portion of the funds would be sought from philanthropy. SHM general manager of business, Catherine Harris told Pro Bono News that the SIB was “departing from the standard capital raising process”.
Latitude Network is excited to announce that we are supporting Sacred Heart Mission in negotiating one of Victoria’s first Social Impact Bonds (SIBs). Sacred Heart Mission was one of two organisations successful in applying to the Victorian Government to enter negotiations to conclude SIB contracts this year based on expanding its Journey to Social Inclusion program, which is setting a new benchmark for addressing long-term homelessness in Australia.
Social Impact Bonds are being explored by commissioning agencies around the world in an attempt to find more effective ways of funding social and health services. SIBs (also known as ‘Pay For Success’ or ‘Payment by Results’ contracts) are part of an emerging set of funding mechanisms which aim to pay for service outcomes instead of service outputs – something the Productivity Commission discussed in depth in its recent report into competition, contestability and informed user choice.
Russ Wood is leading this work for Latitude, and is acting as strategic adviser and project manager through the ‘Joint Development Phase’ of the SIB which is expected to run until the end of 2017.
If your organisation is interested in exploring which programs might be suitable for outcomes-based commissioning such as Social Impact Bonds, then let us know - we'd be happy to share our learning. Just email us.