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Pay-for-Success Funding: Risks & Rewards for HSOs

Explore the benefits and challenges of pay-for-success funding arrangements for human service organizations. Learn about the transformation of federal grants into performance-based contracts.

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Pay-for-Success Funding: Risks & Rewards for HSOs

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  1. Government Pay-for-Success Funding Arrangements: Risks & Rewards for Human Service Organizations (HSOs) Lawrence L. Martin, Ph.D., MSW, MBA Professor of Public Affairs University of Central Florida (Orlando)

  2. Overview • Pay-for-success and performance-based contracting (PBC) • Two approaches to PBC - Public management approach - Evaluation approach • Risks & rewards for human service organizations (HSOs) • Transforming federal grants into PBC

  3. Pay-for-Success • Pay for results • Results based funding/financing • Outcome funding • “Social Impact Bonds” (*) • Others (compensation is related to performance)

  4. Performance-Based Contracting (PBC) • Ifgovernment funding is involved and ifcompensation is tied to performance then it is PBC • Pay-for-success is PBC • Difference between grants & contracts - Grants are assistance - Contracts are buyer/seller relations

  5. Two Approaches to PBC

  6. Two Approaches to PBC • Public Management Approach - New Public Management/GPRA & GASB SEA reporting - Tying compensation to performance • Evaluation Approach - Program evaluation & EBP - Tying compensation to outcomes

  7. Public Management Approachto PBC Service: State of Oklahoma Supportive Employment (Job Training & Placement Services)

  8. Evaluation Approach to PBC(Utah High Quality Preschool Program

  9. Risks & Rewards for HSOs • Public Management Approach: - Best suited to the ongoing delivery of established human services utilizing established service delivery methods. - Assumption: HSOs have good service utilization, performance and cost data. - Audit exposure: When compensation is tied to performance, the performance is auditable.

  10. Risks & Rewards for HSOs • Evaluation Approach: - Best suited for research and development (R&D) type activities involving new interventions, programs or service delivery methods, and where existing interventions, programs or service delivery methods are being applied to different target groups or in different settings. - More complex, more actors, incompatible with government procurement regulations. - Separation of compensation from performance?

  11. Transforming Federal Grants into PBC? • Title 2 –Grants and Agreements. Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. (Short Name = “Uniform Guidance”).

  12. Turning Federal Grants into PBC? • The “Uniform Guidance” calls for: - inclusion of outcome performance measures in all federal grants. - outcome performance measures may reflect the preferences of the fed gov. - Financial data must be related to performance (?????) - Fixed amount awards may be used (compensation is tied to performance)

  13. Transforming Federal Grants into PBC? • The GAO and the OMB said 11 years ago that: the lessons learned from performance-based contracting are going to be used to restructure the federal grant system. Government Accountability Office (GAO) (2006). Grants management: Enhancing performance accountability provisions could lead to better results. GAO-06-1046. Washington, DC: Author.

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