Let's make outcomes based commissioning the new norm

In his Autumn Statement 2015, the Chancellor made £105m available to stimulate new social impact bonds (SIBs), tackling at a local level the priority issues of youth unemployment, mental health, and homelessness.

As a leading practitioner of social investment, involved in three SIBs, two of which have successfully concluded, and one of which is still ongoing, Impetus-PEF are encouraged by this commitment to impact focussed investment.

However we would like to see a wider application of the Social Outcomes Fund – which was set up in November 2012 'to provide a ‘top-up’ contribution to outcomes-based commissions (payment by results or SIBs) that are designed to deal with complex and expensive social issues' – so that innovative programmes for at risk 12-16 year olds can be trialled, and for more funding to be available for programmes for 16-18 year olds.

The majority of the £105million will sit within the Cabinet Office, and may be leveraged by further investment at a local level where projects are delivered. Over the longer-term, Impetus-PEF would like to see outcomes-based commissioning increasingly ‘mainstreamed’ across Whitehall departments so that the majority of relevant public services can be commissioned in this way. However there is some risk aversion on the part of the commissioners in trying a new approach in a constrained fiscal climate, coupled with some commissioners not having the necessary freedom to commission on an outcomes basis.

As funding for outcomes-based commissioning increases, so must the efforts of the sector to learn from SIBs to date so that future versions will build on successes, and not repeat mistakes. The Rikers’ Island Jail SIB in New York City failed when it became apparent that the intervention was not preventing young people from committing further crimes and being sent back to prison. The SIB could be viewed as a success as the failure of the programme was quickly identified and stopped, and no government money was spent on this failure.

With several of the Department for Work and Pension’s (DWP) Innovation Fund commissioned SIBs completing in 2015, and with more expected to publish their results in early 2016, there will be plenty of opportunity for self-reflection and we look forward to presenting our findings in 2016.

One SIB commissioned under the Innovation Fund is youth charity ThinkForward’s, which has reported both positive social and financial outcomes. Funded by Impetus-PEF and Big Society Capital this SIB enabled over 1,000 disengaged young people in London’s most deprived boroughs to improve their educational attainment and employability skills significantly.

Through the ThinkForward SIB, 90% of young people aged over 18 progressed into further education, employment or training. These are remarkable outcomes given that these young people were predicted to drop out of education or be unemployed and have had to overcome chaotic personal situations, with few or no positive role models in their lives. The success of the ThinkForward SIB has demonstrated its validity as an investment vehicle, in that it can deliver both a sound financial and social return, whilst for ThinkForward, long term funding enabled them to focus on delivering consistent results to those that need help the most.

One of the areas of SIB operation currently under review is how social outcomes are measured, as this is critical to determining whether commissioners’ outcomes have been achieved, and therefore, whether investors get their money back.

The majority of the 20+ UK SIBs have, or are, using the ‘rate card approach’ – which specifies the desired outcomes and a price the government is willing to pay for that outcome. The United States, encouraged by its federal agencies, followed the UK’s lead in developing SIBs, but has more commonly used something called the ‘impact measurement approach’ – which is determined through the comparison between the outcomes of program participants and a comparison group generated through either a randomized controlled trial or quasi-experimental design.

There are trade-offs to both the rate card and impact measurement approaches – it is quicker and easier to get a SIB off the ground using the rate card, without the need to recruit and run a control group, but the chance of over-paying for outcomes that may have been reached without the programme is higher with rate cards.

As funders, managers and charities digest the news that outcomes based commission has received a much welcomed boost, the devil will be in the detail. Only when the Cabinet Office provides a more detailed outline of how the funding will be allocated, coupled with an increasing awareness of SIB delivery, will the sector fully mobilise and place impact at the heart of its approach.

Photo credit: Andrew Analore