Contracting for social impact Paul Riley Outcomes UK
Introduction • Public sector contracting for social impact • Social Impact Bonds • Case studies • Opportunity specific learning • Common themes • Q&A
Personal experience • > 30 years supply chain management in a range of sectors • Both up and down the supply chain • PFI tenders and contract delivery • 15 years in health and social care sectors • Led and won 3 social impact PbR tenders in the UK to date • Led tenders for similar contracts in Ontario and South Australia • Currently supporting business case development in USA & Japan
Public sector contracting for social impact • Increasing social challenges • Reducing public spending • DWP Payments by Results • Outcomes based commissioning • Centre for Social Impact Bonds • Social Outcomes Fund, CBO Fund & Life Chances Fund
Social Impact Bonds “... a SIB is a public-private partnership which funds effective social services through a performance-based contract. SIBs enable federal, state, and local governments to partner with high-performing service providers by using private investment to develop, coordinate, or expand effective programs. If, following measurement and evaluation, the program achieves predetermined outcomes and performance metrics, then the outcomes payor repays the original investment. However, if the program does not achieve its expected results, the payor does not pay for unmet metrics and outcomes .” Social Finance ( 2016 )
Social Impact Bond model Commissioner Governments Better social outcomes and Donors Capital flows Young People in care Social Investor Intermediary Service Providers Impact-driven Impact-driven investors organisations 6
Case Study 1 - Birmingham City Council Need: • Cohort 1 - Reduce number of children and young people unnecessarily entering care (200 p.a.) • Cohort 2 - Reduce number of young people unnecessarily in children’ homes (up to 80). Procurement process: • PQQ & Competitive Dialogue • Requirement considered on a ‘black box’ basis • Contract with single entity - service provider to find social investment partner(s) and intermediary Procurement objectives: • One contract for both cohorts • 100% payment by results • Payment outcome – placement stability and well-being indicators • Contract horizon – 2 + 2 + 2 years • No guarantee of referral volumes to the services
Case Study 1 – End result • Awarded contract for cohort 2, with no award for cohort 1 • Using existing local infrastructure & own service intervention model • Set up own Intermediary and contracted with internal supply chain • Single payment outcome for remaining in foster care for 12 months • Well-being outcomes tracked as non-payment measures • Payment = 67% fee for service and 33% PbR for fostering stability • Contract horizon = 4 + 2 years • No guarantee of referral volumes to the services • Social investor = working capital and took performance and referral risk • Commissioned independent evaluation by University of Oxford
Case Study 1 – Specific learning • Value of fully utilising ‘dialogue’ process where complex risks • Identifying the right social investor as early as possible • Social investors demand even more rigour on evidence of service intervention than public sector commissioners • Being prepared to take more control through setting up own Intermediary was the right thing to do • Simple, single payment outcome not always optimum • Benefit of commissioning independent evaluation
Case Study 2 – Ontario Government Need: • Call for proposals in any of the following policy areas: youth at risk; homelessness & social housing; and reducing unemployment. Procurement process: • Open call for EoI, market event, proposal submission and presentation, short-listing and negotiation • Agnostic on nature of service intervention • Contract with single entity - service provider to find social investment partner(s) and intermediary Procurement objectives: • Maximise % payment by results • Payment outcomes – a mix rather than a single outcome • Contract horizon – 4 + years • Looking for breadth and depth of reach and impact
Case Study 2 – End result • Proposed a similar model to Birmingham SIB in the greater Toronto area • Selected for presentation but not shortlisted for negotiation • Policy areas selected by Ontario Government related to social housing and homelessness • Feedback that it was the best written submission, but not big enough reach and social investor not lined up
Case Study 2 – Specific learning • Understanding whether the right stakeholders benefit • Understanding the full set of decision criteria in a political environment • Understanding the cultural/values perceptions of you as an organisation • Overestimating the transferability of solutions to different jurisdictions
Case Study 3 – South West Unitary Council Need: • Reduce number of children and young people unnecessarily entering care (60 p.a.) Procurement process: • OJEC notice, Market event, PQQ & Competitive Dialogue • Quoted an example Evidence-Based Intervention but open to alternatives • Prepared to contract on a tri-partite basis if needed Procurement objectives: • 100% payment by results • Payment outcomes – staged payments for stability in family plus family functioning payments • Contract horizon – 4 + 2 years • Low guarantee of number of referrals to service
Case Study 3 – End result • Awarded contract with 100% score across quality and price • Using innovative mix of evidence-based interventions • Utilising own Intermediary and contracted with internal supply chain • Graduated outcome payments over 2 years for family stability, plus family functioning outcome payments • Contract horizon = 5 + 2 years • Significant guarantee of referral volumes to the services • Tripartite contract • Social investor & ourselves providing working capital and sharing risk/ reward • Local authority commissioning independent evaluation
Case Study 3 – Specific learning • Value of developing relationships with client advisory organisations • Lining up social investor prior to tender and involving in the whole process • Taking control of the ‘dialogue’ process sessions • Challenge of modelling success and failure rates with a mix of evidence based interventions • Commissioning the independent evaluation ourselves
Case Study 4 – Southern Unitary Council Need: • Reduce number of children and young people unnecessarily entering care (120 p.a.) Procurement process: • OJEC notice, Market event, one stage open procurement • Quoted an example Evidence-Based Intervention but open to alternatives • Single contract to Council’s standard conditions of contract Procurement objectives: • 100% payment by results • Payment outcomes – staged payments for stability in family plus family functioning payments • Contract horizon – 3 + years • No guarantee of number of referrals to service
Case Study 4 – End result • Utilising own Intermediary but contracting with local supply chain using Council’s preferred EBI • No guarantee of referral volumes to the services • Contract horizon remained 3 + 2 years • Not prepared to use Cabinet Office SIB template contract • Did not tender • No contract award as no compliant bids received
Case Study 3 – Specific learning • Despite having a good solution that has a strong probability of winning, it can still be the right decision not to bid • If those controlling procurement process do not understand complexities of significant PbR contracts then low probability the right solution for everyone • Just because a commissioner holds a market event and requests your views, it doesn’t mean that they listen • Commissioners do not always realise the increased levels of risk for a provider in significant PbR versus fee for service contracts, and that risk often has to be costed
Common themes • Impact of procurement process • Evidence base for service intervention(s) • Achieving critical mass • Time and resource commitment • Relationship with social investors • Understanding the eco-system the contract operates within • Risk allocation, mitigation and management • Perverse incentives • Not losing sight of the social impact we’re intending to make
Contracting for social impact Business opportunity with benefits for all. But need to understand the expectation of central government of being an agent of change. “Social Impact Bonds are designed to help reform public service delivery.” Cabinet Office (2012)
Discussion email: paul.riley@outcomesuk.com mob: 07473654198
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