Key questions when procuring for a social impact bond (SIB)

While SIBs can be brought to government through unsolicited proposals (in jurisdictions that allow this), most governments will procure for a SIB by going to market and asking for organisations to respond. (This approach to market is usually called a tender or Expression of Interest or Request for Proposals or something else with a different name but similar meaning.)

The question is, what to procure for?

  • an outcome?
  • an intermediary?
  • a service provider?
  • ideas for procurement?
  • ideas for SIBs that could be constructed in the future, should procurement proceed?
  • an organisation to tell government what to procure for?

The first step for government is clarifying its objectives in pursuing a SIB. SIBs are a catalyst for change, but different governments use them to change different things. (See analysis of stated objectives for the first few SIBs.) The objectives of government will make a big difference to how procurement is approached. For example, if a key objective is rigorous measurement of attribution, then a large population and randomised control trial might be required. If a key objective is to adequately fund small providers in remote locations to work together to help their communities, then ‘roadshows’ for awareness, accessible information and additional resources for capacity building might be part of the procurement process. If long-term funding for outsourced social programs is a big change for government, then it may require legislative change or significant work with internal government stakeholders to understand and manage perceived risks.

The main decisions government will need to make in deciding a SIB are:

  • Social issue area / Contracting department
  • Payment metric e.g. number of reconviction events or number of days happily employed
  • Maximum budget OR value per payment metric
  • Period of time over which budget will be deployed
  • Cohort / Referral mechanism

These decisions can be made before an approach to market, or after responses have been received. Some jurisdictions have asked their markets to suggest responses to almost all the above decisions, and some have made almost all of them internally before approaching the market.

The final decision is which organisation to contract with, which is usually (but not always e.g. Peterborough, Saskatoon) the result of a procurement process.

I haven’t spoken to anyone so far who thinks their procurement process was perfect, so let me know if you find one where all stakeholders agree it’s good!

Governments going to market with as much of the draft contract as possible may help speed and clarify the process. A lot of the contract will be relevant to most situations, so provision of basic clauses provides clarity and allows negotiation time to be focused on the issues that are new.

The following questions might be useful for governments to ask themselves when approaching procurement:

  • What are we trying to achieve or test?
  • Does it matter how much investors stand to return?
  • Does it matter how many organisations are involved in delivering the SIB and what their relationship is?
  • Does it matter how money flows?
  • What really matters to us?
    • service improvements in difficult areas?
    • innovation in services for populations of service failure?
    • a service model that can be used in other locations or service areas?
    • savings?
    • a shift of focus into preventative services?

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s