In 2013, the Big Lottery Fund launched the £40m Commissioning Better Outcomes (CBO) fund. Along with the Cabinet Office's £20m Social Outcomes Fund (SOF), this freed up a pot of money to help public sector commissioners explore the idea of using social impact bonds and other outcomes-based contracts – where they commit to paying a certain amount for particular social outcomes – as a way to deliver better local services.
CBO allows public sector organisations to apply for up to £150,000 of development funding to obtain technical support that can help them develop an outcomes-based contract. The Big Lottery Fund will then ‘co-commission' around 15% of the outcomes paid for as part of the programme – which could amount to as much as £1m.
However, the deadline for Expressions of Interest (EoI) expires at the end of June; and at time of writing, a sizeable portion of this money remains unspent.
With all the upheaval and uncertainty created by the General Election, it's possible that potential commissioners just haven't had the bandwidth to explore the idea.
But it's hard to escape the conclusion that the target audience is still not sufficiently convinced by the idea of commissioning for outcomes. Can it really help deliver better solutions to complex social problems, at a time when budgets are shrinking?
We make no claim to be impartial here. Bridges' Social Impact Bond Fund, a £25m vehicle raised from a group of social investors, has now invested into 22 impact-driven organisations delivering outcomes-based contracts for 15 different commissioners around the UK. We've done so because we believe that these programmes are a potentially powerful way for governments to improve outcomes, promote innovation, enhance demand management, achieve better value for money, and reduce risk in their commissioning of public services.
This view has already received widespread support from across the political spectrum in Westminster. And it's starting to take hold with a number of Local Authority commissioners, too: Essex, Manchester, Birmingham and Cardiff have all launched outcomes-based contracts to help vulnerable children. The NHS Newcastle Gateshead Clinical Commissioning Group has also just launched one that employs social prescribing to help people with long-term health conditions.
What's more, we're starting to see concrete evidence that outcomes-based contracts really work. Teens & Toddlers and Career Connect were among the first cohort launched by the DWP, with the aim of helping vulnerable young people in the North-West improve their school engagement and employability. Both have delivered better-than-expected outcomes over the last three years –creating tangible savings for the public purse. As a result, both have just been re-commissioned to deliver new programmes on a larger scale (at a discounted rate).
Clearly, however, there's still a negative view of outcomes-based commissioning in some quarters.
In our experience, there tend to be three main objections. Some assume that it's not possible to quantify the monetary value of social outcomes in this way. Some argue that outcomes-based contracts are too complicated and time-consuming to arrange. And some believe that there's just no place for incentivising results in public service provision.
Identifying and quantifying the right outcomes in the first place is obviously not straightforward; nor is constructing an outcomes-based contract. But that's exactly where initiatives like CBO and SOF come in. As well as funding for technical support, the Cabinet Office can provide a template contract, building on what has been used elsewhere; and the more of these contracts we see, the easier they'll be to structure (as we've found with Teens & Toddlers and Career Connect).
As for the principle: it's worth emphasising that many charities and social enterprises are already embracing outcomes-based contracts – because they believe it gives them greater flexibility, more room to innovate and longer-term contracts. And these organisations have an explicit social mission lock, reducing the risk of perverse incentives that can sometimes be found in payment-by-results contracts.
Maybe you still have doubts about the principle of paying for outcomes; maybe you still think it's too complicated or too time-consuming in practice. Maybe you're right. But there's a growing body of evidence to suggest that this isn't necessarily the case.
So if you look across the range of services you're currently delivering – whether that's around children in care, or homelessness, or health – and you think there's a chance that paying for outcomes and focusing on early intervention might help you deliver better results, why not make the most of this opportunity to explore the idea in more detail? Get your EoI in to the CBO before the end of June, and you could get your hands on the resources you need to make an informed decision.
Andrew Levitt is an investment director at Bridges Ventures, where he's responsible for investments into Social Impact Bonds
Case Studies:
Birmingham Residential Migration Programme
This pioneering outcomes-based programme was commissioned by Birmingham City Council, to support children growing up in residential care homes. It aims to provide therapeutic foster care for 115 young people across Birmingham, helping them to move out of residential care homes and into stable family placements where their life outcomes will typically improve.
Outcomes for Children, a social enterprise within Core Assets Group, will deliver its Residential Migration model – a structured intensive foster placement specifically designed for young people transitioning from residential care to a family. A skilled and experienced foster carer is supported with a wrap-around team of professionals; the intervention is delivered through a phased approach that lasts for one year, and can be tailored to fit the needs of each individual child. So far, seven children have moved into a stable family home since the programme launched.
The contract is designed to be outcomes-based, ensuring that the provider (which is supported by social investors) will only be able to recoup their costs if the placements are ultimately successful. Birmingham City Council makes a placement payment each week, but a larger success payment for each child is made if – and only if – the foster placement succeeds. If successful, the Council will achieve a powerful positive impact among their looked-after children, and make significant savings from their costly residential care budget.
Ways to Wellness:
Ways to Wellness is a new programme designed to improve the health outcomes of over 11,000 people in Newcastle-upon-Tyne suffering from long-term conditions like diabetes, asthma, chronic obstructive pulmonary disease and heart disease.
People who suffer from these conditions represent a sizeable resource challenge for the NHS, currently accounting for about 70% of all health spending. There are as many as 40,000 in the Newcastle area alone.
Ways to Wellness is based on the concept of ‘social prescribing': the use of non-medical interventions to achieve sustained lifestyle change and improved self-care. Patients are referred directly onto the programme by their GP, with the aim of enhancing their ability to manage their illness through healthier behaviours, increased community participation, and better access to specialist health services. Over time, the idea is that this will improve their quality of life, while also reducing the demands on NHS primary and secondary care.
Ways to Wellness is being commissioned by the NHS Newcastle Gateshead Clinical Commissioning Group as an outcomes based contract, with support from the Big Lottery Fund's Commissioning Better Outcomes and the Cabinet Office's Social Outcomes Fund. The commissioners will only make payments if specific social outcomes are achieved, including the achievement of cost savings to the NHS Clinical Commissioning Group.
It also involves an unprecedented partnership between the CCG, local GPs, and the four social sector organisations who will deliver the services (who were selected following a procurement process): Changing Lives, First Contact Clinical, HealthWORKS Newcastle and Mental Health Concern.
