Something old or something new?

Emma Tomkinson Social Impact Bonds, Social Innovation, Social Investment & Finance

The social investment market is characterised by new organisations, new programmes, new models of financing, and new cohorts of service users. There is great value in demonstrating the social return of something new, but the risks associated are inherently greater. Investors may therefore require a higher financial return. Investors in innovation often receive valuable media attention, as new programmes are more newsworthy.

Some social programmes have been robustly evaluated as to their effect. These evaluations can cover applications of the programme in different places and to different intervention groups. The culture of developing, defining and trade-marking a social programme such that it has training and resources and can be delivered across contexts is more apparent in the US. With these types of programmes, investors are likely to perceive less risk, as they have data relating to previous effect sizes and the proportion of programmes that achieved them. They also have the organisation that developed the programme providing training, resources and support to the service providers.

The words ‘evidence’ and ‘innovation’ are both commonly used by all parties when justifying involvement in a social impact bond (SIB). In all SIBs, there is likely to be innovation around the partnerships that are formed, the way services are delivered and the people services are delivered to, and the basis on which Government pays – outcomes, There is also likely to be more evidence gathered about the outcomes of a programme than has previously been collected or made publicly available. SIBs are paid for on an outcomes basis, which means that service delivery organisations are free as to how services are delivered. But this is not always the case.

The Peterborough SIB collects performance management data and uses this to improve its services as the SIB progresses. Contracts are renegotiated with service providers annually and changed to better deliver the outcome of reduced reoffending. The NY City SIB for young offenders on Rikers Island is developing a new programme, but its primary component is Moral Reconation Therapy, a model of Cognitive Behavioural Therapy, that has been well researched and has an evidence base. The Essex SIB will deliver Multi-Systemic Therapy and Manchester City Council is looking to provide Multi-dimensional Treatment Foster Care. These programmes also have an evidence base.

So can you have a greater impact if your SIB delivers a programme that is already well-evidenced or can you have a greater impact if your SIB delivers something completely new?

In The Good Investor, Hornsby and Blumberg (2013) argue that potential social return is greater for programmes that have yet to establish an evidence base.

“Investments that lie on the higher sections of the curve are likely to be increasingly characterised by less well tested, less evidenced approaches, but which are innovative, and present the potential for high levels of impact generation (e.g. through effecting a game-change in the prevailing dynamics). Investments that lie on the lower sections of the curve are more likely to be in established approaches and fields of operation, where investors know more what they are going to get, but the impact that stands to be generated is comparatively modest”.

Good Investor

NESTA conceptualises the impact objectives of its funds in its report Standards of Evidence for Impact Investing using the diagram below. They aim to invest in early-stage innovations where both impact risk and potential impact is high, and then reduce impact risk as they scale effective programmes by increasing available evidence (Puttick and Ludlow, 2012, p.7).

Nesta

It should be noted that well-evidenced programs are not spread evenly across areas of social need, thus reliance on evidence – or programme outcomes that are easily or cheaply evidenced – could create a bias towards investment in certain social issues.

In their 2012 report, From potential to action: Bringing social impact bonds to the US, McKinsey gives three primary benefits of SIBs, one of which is:

“SIBs are a tool to scale proven social interventions. SIBs could fill a critical void: other than market-based approaches, a structured and replicable model for scaling proven solutions has not existed previously. SIBs can give structure to the critical handoff between philanthropy (the risk capital of social innovation) and government (the scale-up capital of social innovation) to bring evidence-based interventions to more people. SIBs can do this by aligning incentives among a broad set of stakeholders and shifting financial risk away from government” (p.7).

The McKinsey perspective may be reflective of a culture of evaluating and comparing social programmes in the US, such that it is possible to chose from a range of proven social interventions to bring to scale. The role of philanthropy as the ‘risk capital of social innovation’ may also apply more to the US than other jurisdictions. The cultural and political contexts of SIB development seem to be driving different assumptions concerning the impact of evidence-based versus innovation models. There may emerge an overwhelming conclusion as to which is the more attractive for a SIB model, but it may be more appropriate for each SIB to respond the objectives of its stakeholders.

Can I SIB this?

Emma Tomkinson Social Impact Bonds, Social Innovation

SIBsAs interest in SIBs grows and the number of SIBs increases, it can be interesting to explore what could potentially be contracted using a SIB structure.

Can SIBs only be applied to services? If a SIB was used to purchase goods, what would it add? Most payments for goods occur after goods are delivered and deemed to be of a satisfactory standard, which is usually only a short period of time after they have been requested. Grey areas like infrastructure or consulting project might be more interesting to consider. Government has experimented with several variations of performance-enhancing contracts for infrastructure projects including Public-Private Partnerships and bonus payments for on-time completion. However we have yet to see Government tender not for an output, such as a highway or rail line, but for an infrastructure outcome without e.g. the construction of a transport solution so that people in A can get to B at any time of day in less than 30 minutes. Perhaps due to the allocation of land for infrastructure projects, this is something we will never see. Consulting projects are sometimes contracted on the basis of the receipt of a good, such as a report. Will we ever see consultants paid for outcomes such as the improvement in a process if recommendations are accepted and implemented, or the increased confidence of the commissioner to make a decision, or the increase in public understanding on a topic after publication?
Can SIBs only be applied to services with a social impact in the country they are delivered? The name certainly suggests a focus on social impact. There has been discussion of ‘environmental impact bonds’ and there is a history performance-based contracts in environmental management. Social Finance has begun work on ‘development impact bonds’ for the distribution of overseas aid. The Greater London Authority homelessness SIB also makes payments for accommodating homeless people in the countries from which they came.

Can SIBs only be applied to prevention and early intervention? Certainly a shift of funding towards prevention and early intervention services was a key focus in early publications about SIBs, and has been used to justify all SIBs established so far. But does that mean that a SIB could not be used to deliver acute care? The line between prevention and acute care isn’t always so easy to draw. One area that could be suitable for a SIB is palliative care, where the delivery of medical services in the home might be more desirable for the patient and less expensive. It could be argued that these services ‘prevent’ a patient from requiring hospitalisation which is typically regarded as acute care, but palliative services delivered in the home may also be considered acute care. Prison is usually considered ‘acute care’, yet the manager of Her Majesty’s Prison Peterborough has suggested that all prison contracts be made on the basis of a single reoffending outcome, which could easily be structured as a SIB. It could be said that the SIB model will only work financially if the cohort receiving services are predicted to have high future costs to Government, but a SIB could also work if the cohort has high alternative costs to Government, should the SIB not be delivered.

Can SIBs only be applied in a service ‘gap’? There are several reasons it is easier to introduce a SIB into a service gap. It might make it easier to convince government officials to accept the programme, easier to measure a result, easier to deliver and easier to attribute a result to a particular service. But a SIB could be used to deliver an existing contract. The contract could be redesigned with payments based on outcomes that may or may not represent an improvement in the service, depending on how well current services are perceived to be delivered. Or one (or more) of a number of similar contracts could be delivered via a SIB, with payments based on equivalent or improved outcomes.

Do SIBs have to make savings? SIBs may be more attractive to Government or other commissioners if they produce savings. As seen above, however, a commissioner may recontract a service with a SIB in order to improve or account for the outcomes of the service, rather than to create savings.
Can SIBs only be applied to service areas where there is an evidence base? The evidence base of similar programs in a service area enables investors, commissioners and service providers to estimate the potential range social outcomes for their SIB and likelihood of achieving them. They will also use the evidence base to form eligibility requirements for the SIB, to design the most effective service possible, estimate the cost of services, choose partners and providers, and design the measurement system. But SIBs may provide an unprecedented opportunity for Government to try new services or new delivery organisations that don’t have the evidence base, as they only pay if they produce the desired outcomes.

Can SIBs only be applied to a large cohort? If the payments made by Government are based on the outcome difference between cohort and a comparison group, then the group needs to be large enough for this measurement to be statistically significant. That is, there is a high degree of confidence that the effect was due to the services delivered. This was a consideration in the development of the Peterborough measurement system. Subsequent SIBs have introduced smaller cohorts with payments made on individual outcomes as they happen, with payment size reflecting the historical likelihood of outcomes occurring without services.

Can SIBs only be applied to service areas where commissioners want to spend AND investors want to invest AND service providers want to deliver services? Absolutely, the only real constraint to a SIB is that all parties agree to it. This assumption is closely related to the definition of a SIB. There may be service areas that will never be attractive to one or more of these parties. As more SIBs develop, it will be interesting to discover which services these are and monitor any adverse effects on these services and the people who benefit from receiving them. In order to secure the participation of all three parties, they will need to be confident that the SIB will achieve its desired outcomes. It will be easier to agree a SIB if it includes:
• High likelihood that the cohort will want to engage with services
• Eligibility or referral criteria that are clear and objective
• An outcome that can be objectively measured
• A close relationship between the outcome and costs to Government
• Sufficient data to predict the outcomes for the cohort with and without effective services
• A small cost of intervention in relation to potential benefits to Government

Social impact bonds: different places, different motives

Emma Tomkinson Social Impact Bonds ,

 

world map
[Map sourced from www.freeworldmaps.net]
While all jurisdictions that have publicly expressed interest in SIBs recognise a range of common objectives, each has different drivers and emphases. Common objectives across jurisdictions include increasing focus on prevention and early intervention, allowing Governments to only pay for proven services and building a social finance market. But Australia is highlighting the benefits of measurement, while the UK is using SIBs to enable voluntary and community organisations to access Government contracts and in the US SIBs are being promoted as a means of scaling evidence-based programmes.

 

At last November’s Social Finance Forum in Sydney, speakers involved in developing social impact bonds (or social benefit bonds as they call them) highlighted the benefits of “innovation, capacity building and using data to measure and improve service outcomes” (Tomkinson, 2012).

In the UK, however, the benefits of social benefit bonds as currently defined by the Centre for Social Impact Bonds are:

• they allow commissioners to attract private investors to fund early and preventative action on complex and expensive social problems
• they enable new services to be tried without commissioners having to pay if they don’t work
• they can help services to adapt so that they have a greater emphasis on prevention
• they can allow greater flexibility for those providing the services to adapt and change the service according to their experience
• they can help charities and social enterprises bid for and manage ‘payment by results’ (PbR) projects – projects where the government pays the provider of the service for the results achieved

There’s much less emphasis in the UK on SIBs’ measurement of outcomes as a means for Government to become more accountable for its spending and increase the evidence base for its wider programmes. There is a transparency and accountability agenda in both jurisdictions, but SIBs have not been promoted as central to this movement in the UK.

In Australia, there’s much less emphasis on SIBs as a means for social purpose organisations to attract funding, perhaps because of the larger size of some charities in Australia and their history of winning Government contracts.

In the US, there seems to be a focus on the use of SIBs as a way to bring evidence-based programmes to scale. This has not been promoted as a key driver for interest in either the UK or Australia, although all jurisdictions have acknowledged that savings can only be realised when effective programmes are implemented at scale.

McKinsey in the US presents SIBs in their 2012 Report in terms of scaling programmes. “SIBs are structured to get proven solutions to scale with no risk to public budgets—governments pay for the solutions only if they work. But despite this risk shifting, a SIB’s structure involves several actors—each charging a fee or return. As a result, this tool is a more expensive way to scale programmes than if government simply contracted directly with a service provider”

Excerpts from public releases in several jurisdictions are presented below.

The Peterborough SIB was initially promoted with an emphasis on:
• Service reform: “As part of our radical approach to rehabilitation we are considering a range of payment by results schemes like the Social Impact Bond” (MOJ and Social Finance, 2010)
• Collaboration and innovation: “They will enable foundations, social sector organisations and government to work together in new partnerships to define social problems and transform the way many social outcomes are achieved.” (Social Finance, 2009)
• Involvement of voluntary and community sector organisations in delivering public services: “We want to actively involve individuals and voluntary and community organisations” (MOJ and Social Finance, 2010)
• Increased funding for social purpose organisations: “The Social Impact Bond has the potential to unlock an unprecedented flow of finance for social sector organisations” (MOJ, 2010)
• Aligning incentives: “The Social Impact Bond aligns the interests of government, charities, social enterprises and socially motivated investors around a common goal” (MOJ and Social Finance, 2010)
• More effective services: “Reducing reoffending is one of the Government’s highest priorities” (MoJ, 2010)
• Prevention: “The SiB is designed to fund preventative approaches to social issues” (Social Finance, 2010)

The briefing pack for the New York City SIB put forward the following benefits:
• A focus on outcomes: “Investing in outcomes to improve the lives of those in need”
• Efficiency of funding: “Government is able to preserve public resources for successful interventions while still encouraging innovation in a time of fiscal constraints. Savings can be recaptured and reinvested into a permanent funding stream for the programme”
• More effective services: “Accelerate adoption and implementation of promising programmes”
• Accountability and evidence: “Brings added discipline to measuring outcomes for government programmes because there is an upfront agreement on how to measure success”
• Increased funding for social purpose organisations: “Nonprofit providers receive a committed funding stream not subject to budget cuts”
• Social investment: “Can produce financial returns for private investors, who assume the risk while achieving a public good”
• Increased funding for social programmes: “Taps into new funding opportunities”
• Risk transfer: “Taxpayers only pay for interventions that work”

The Essex County Council SIB was released with the following justifications in the press release:
• Service reform: “Social Finance hopes that the Essex Social Impact Bond will catalyse systemic change in public services for vulnerable adolescents”
• More effective services: “new social care model to deliver improved services and support for our most vulnerable young people”
• Sustained funding for service providers: ‘Stable funding from the Social Impact Bond allows us to work with Essex County Council over the longer term to produce real results that will benefit children, families and communities”
• Innovation: “Essex has always strived to be innovative and forward thinking and it is this attitude that has allowed us to explore social investment.”

The Government of New South Wales, Australia, has outlined its interest in SIBs on its website.

“• A focus on outcomes rather than outputs: Under traditional purchaser-provider arrangements, Government payments typically attach to units or blocks of service rather than the outcome the Government is seeking to achieve. In contrast, SBBs provide a direct financial incentive to focus on and improve the outcome in question. This change benefits both the Government and providers: the Government gets better outcomes, while providers are relieved of burdensome reporting to Government about service inputs and outputs, and instead are free to focus on delivering the outcome in a way that best suits their own approach and preferences.
• Additional resources towards early intervention: Releasing Government funds for prevention and early intervention can be difficult when resources are oriented towards acute and crisis services. SBBs allow an expansion of investment in early intervention through the use of upfront private funding. If successful, this reduces later demand for acute services and frees up Government funds, part of which can then be used to repay investors.
• Innovation: Payment for results, rather than delivery of a prescribed service, frees service providers and investors to explore different ways of achieving better results. Providers have the flexibility to change service delivery approaches or experiment with a number of approaches at the same time. Investors have an incentive to work with providers to drive performance; for example, by encouraging providers to abandon approaches that are not achieving results and supporting them to find and implement new approaches.
• Improving the evidence base: SBBs will be more attractive to investors if they are backed by evidence that indicates that the proposed interventions will be successful. Further, the link between payments and results necessitates the robust measurement of outcomes. These features increase locally relevant evidence and data for future policy makers. By improving measurement in these areas, the Government believes that other social policy areas will benefit as well.
• Accountability and transparency: The focus on clear outcomes measurement in SBBs ensures that there is clarity about what NSW Government funding is achieving, and when.”

Lower crime AND incarceration?

Emma Tomkinson Criminal Justice, Evidence-based policy , , , ,

prison bed

A bunch of very effective and well-evidenced programs from the US.

I had the good fortune to attend a presentation by Mark Kleiman, given to the members of the NSW Government Better Evidence Network in late 2013. I was incredibly impressed. This was the best presentation on evidence-based criminal justice programs I’ve ever seen.

As the Ministry of Justice in the UK consults on their new approach to probation, I think it’s timely to check out the parole approaches promoted by Kleiman.

Basically, Kleiman argues that parole systems offering severe, delayed punishment are ineffective and the approaches that work are “swift-certain-not-severe”. Read his article A New Role for Parole – he says it so well I find it hard to add anything!

I’ll throw in a quote and let you research the details of these programmes yourself.

The best-publicized program built on this set of principles is the HOPE program in Honolulu, which requires random drug tests of probationers and, for those who fail, an immediate short stint (typically two days) in jail, with no exceptions. The SWIFT program in Texas, the WISP program in Seattle, the Swift and Sure program in Michigan, and Sobriety 24/7 in South Dakota all work the same way, and all have the same results: drastic reduction in illicit-drug use (or, in the case of 24/7, alcohol abuse), reoffending, revocation, and time behind bars.

There’s nothing surprising about the fact that this approach works—it’s simply the application of well-known behavioral principles to a fairly straightforward problem. What is surprising is how well it works. In Hawaii, HOPE clients are mostly longtime criminally active drug users with a mean of seventeen prior arrests. A drug treatment program would be delighted if it could get 20 percent of such a population into recovery—and most would quickly drop out and go back to drug use. But in a carefully done randomized controlled trial with 500 subjects, eight out of ten assigned to the HOPE program finished the first year of the program in compliance and drug free for at least three months, with no rearrest. Most of them either never had a missed or dirty test (which would have led to a forty-eight-hour jail stay) or had only one such incident. That suggests that more than mere deterrence is at work; HOPE clients seem to be gaining the ability to control their own behavior.

Crowd funders: investors, philanthropists or consumers?

Emma Tomkinson crowdfunding, Social Investment & Finance

kickstarter I was interested to see the article Collusion pen for iPad ‘unusable’ in the Sydney Morning Herald the other day. The article detailed the disappointment of backers of the Collusion pen app who’d pledged support for the project on Kickstarter, one of the most popular and successful crowd funding internet sites.

On Kickstarter, individuals pledge sums of money to projects they’d like to see developed. The pledge is essentially a donation, but many projects offer a reward to those pledging a certain amount of money. This reward is often the product of the project, in this case, the Collusion pen and app.

Kickstarter’s website says “Backing a project is more than just giving someone money, it’s supporting their dream to create something that they want to see exist in the world.” Crowd funding is often included in the social investment spectrum. It’s a way to enable innovative ideas and organisations to get off the ground. But like all start-ups, risks are high. These are people who by definition have not done this thing before. There are no guarantees that they’ll be able to make their vision a reality, and there is no recourse for their investors if they don’t.

The Sydney Morning Herald article portrays the Collusion pen as a product of purchase, with the backers featured coming across like angry consumers betrayed by false advertising. The article refers to an ‘investigation’ by CNN Money Why 84% of Kickstarter’s top projects shipped late that shows many Kickstarter projects are not completed within their deadlines. I’d be surprised if they were! If you add optimism bias to the development of a new product, many first-time project managers and the steep learning curve of new regulatory environments then it’s not surprising that those posting their projects on Kickstarter fail to underestimate the timescales and risks.

The article also refers to ASIC guidance on crowd funding. I’m pleased to see that this has been developed, but really disappointed that it only contains warnings for investors and details of custodial sanctions for people breaking the law. Likewise, the Australian Government’s Money Smart advice on Crowd Funding focusses only on protecting the investor/donor.

I’d like to see the Australian Government develop guidance for those seeking crowd funding for their projects too. Simple, reliable guidance on these pages would help legitimate projects to negotiate their legal requirements and promote best practice. Creating an environment in which innovation is supported and encouraged is vital to our economy. Kickstarter investors are supporting a vision, not simply buying a product. Although, as a quote in the CNN article reminds us “Kickstarter is not a store, but boy, it sure feels like a store to the people who back it.”

Do Social Impact Bonds (SIBs) work?

Image Emma Tomkinson Social Impact Bonds ,

Do Social Impact Bonds (SIBs) work?

I’ve heard this question asked (and answered) quite a lot recently.
Every time, I just think ‘work at what?’

Does a SIB work if it manages to get three parties in a room to sign a contract and agree on a price for one outcome? Therefore, can a SIB be said to have worked before it begins to operate?
Does a SIB work if outcomes are improved for the beneficiaries involved? If money flows from governments to investors?
Does a SIB work if a service provider has correctly under-estimated its ability to change an outcome?
Does a SIB work if the majority of people involved in it report a positive experience?
If governments save money?
If governments get better value for money?
If service providers feel they are better able to pursue their mission?
If we learn?
If we change?
Or perhaps SIBs work if we don’t need them anymore in 5 years!

I’ve listed below 22 reasons that have been given for SIBs as they have been announced around the world. Success could be defined by any of these points.
Better programs and better results for the people who participate in them
1. Improving results for beneficiaries by focussing on outcomes rather than outputs
2. Improve the likelihood of delivering real and sustainable solutions to important social challenges
3. Making effective interventions available to far more people in need than the number that can be reached through traditional state contracts and philanthropy
4. Harnessing the innovation capacity of both investors and service providers for publicly funded services
5. Adding discipline to measuring outcomes for government programs because there is an upfront agreement on how to measure success
6. Improving the evidence base for social services, by mandating measurement and publication of outcomes
7. Accelerating the adoption and implementation of promising programs
8. Accelerating the expansion of evidence-based programs delivered by effective nonprofits
A social finance market
9. Unlocking funds to tackle social issues
10. Growing the social finance and social business sector
11. Providing new financial instruments to harness private investment for the benefit of the community
12. Enabling investors to achieve financial returns and social impact
Government
13. Increasing funding for prevention and early intervention programs in a sustainable manner
14. Improving accountability and transparency for publicly funded services
15. Allowing governments to accept and measure new ideas from external providers, only paying for the ones that deliver
16. Saving Government money
17. Lowering risk for government
18. Savings can be recaptured and reinvested into a permanent funding stream for the program
Service providers
19. Increasing accessibility of payment by results contracts
20. Giving nonprofit providers a committed funding stream not subject to budget cuts
Collaboration
21. Aligning the interests of beneficiaries, nonprofit service providers, private investors, and governments
22. Facilitated coordination with organisations working on overlapping problems

Do SIBs work? What do you mean when you say “Do SIBs work”?

Public trust and confidence in charities only 6.6%?

Emma Tomkinson Across the sector, Australian Not-for-profit Reform , , , , ,

The UK Charity Commission is one of the models feeding into the nearly-established Australian Charities and Not-for-profits Commission, so we learn from the triumphs and failures that have come before us. Here’s a lesson: always check your units!

The Charity Commission Annual Report includes “Our performance this year“, which reports against a range of inputs and outputs. And I congratulate them for leading by example and doing this. It’s very clear and accessible. There is one outcome for 2011-12:And the results are (final two column headers are 2010-11, 2011-12):Does that look a little low to you? They’re obviously improving, but 6.6% ain’t a whole lot of trust! Let’s check out the source…

Here is the extract from Ipsos MORI’s 2012 report for the Charity Commission – note the question at the top. (The Annual Report above looks like it used the 2010 data.)Ok, that’s enough of the point and laugh. I would absolutely recommend reading the full Ipsos MORI report – there are further questions on what respondents trusted charities to do, why they trusted them more or less and how much this was affected by their own engagement with the charity sector.

I’m so glad they gave charities 6.7 out of 10, not 100 – that’s a little more optimistic!

Ministry of Justice (UK) innovation pilot invites the market to design new financing mechanisms

Emma Tomkinson Social Impact Bonds, Social Innovation, Social Investment & Finance , , , , ,

This pilot was put on hold (indefinitely) by the new Justice Secretary as he introduced his widespread probation payment-by-results program

In August 2011, Minister for Prisons and Probations, Crispin Blunt MP introduced the innovation pilot programme with

It has, for too long in my view, been held that Whitehall knows best.  I can only imagine how dispiriting it must be for well-intentioned organisations to try to influence the government and come up against what must sometimes seem like an impenetrable barrier…  The government has listened and is not shying away from creating a market for public service delivery that is open to this innovation. 

The briefing presentation that went with this includes:

  • a request for proposals that are of sufficient size for payment and evaluation, focus on outcome measures, create incentives to intervene with the entire cohort and use measurement as a trigger for payments
  • an intention for at least one pilot to result
  • an allocation of £20m for success payments
  • outlines of Peterborough SIB and Doncaster Prison payment by results contracts

Following this, in December 2011, the Ministry of Justice (UK) released an open tender asking organisations to propose both innovative funding and service delivery models to tackle reoffending called Payment by results – innovation pilots. These pilots are on top of six other payments-by-results pilots they are running.

What’s interesting about this?

  1. This is the first tender I’ve seen where a government is open to market suggestions for financing mechanism to reward outcomes. We might see new payment by results mechanisms.
  2. Prior to this, the only government organisation to run a competitive process for a Social Impact Bond had been the NSW Government with their Social Benefit Bonds Trial. This tender goes beyond that and is open to any payment by results financing model.
  3. Innovation = new = increased perceived risk. The Ministry of Justice has a decade-long history of tying payment rewards and penalties to their prison management contracts and was the first government organisation to implement a Social Impact Bond. It also broke ground with its Doncaster Prison payment-by-results contract, where 10% of contract payments are tied to a single reoffending indicator. It will be interesting to see how the risk of new financial mechanisms may be reduced, for example by cornerstone payments or existing programs with strong evidence behind them. Or the risk of new programs may be offset by a more established financial mechanism.
  4. Justice is leading the field in payment by results initiatives around the globe. Employment services contracts used to be the most innovative. Which service area will be next to emerge and how far can payment by results be feasibly extended?

The official tender information on Payment by results – Innovation pilots was released in December 2011. Prequalification questionnaires were submitted in January 2012 and organisations then engaged in developing proposals.

Both lots contain the text:

We seek to develop the market for payment by results through innovative forms of finance and strong involvement from voluntary and social enterprise organisations, including smaller organisations and; as part of the payment by results programme of pilots learn what works and develop a broader evidence base to support design of future policy.
Contract duration is dependent on proposal details. We expect pilots to run for no less than 2 years and no more than 6 years. Up to 20 000 000 GBP has been identified for rewarding successful outcomes of innovation pilots. This funding for outcome payments is for the whole innovation pilots programme. The potential for a small amount of start up funding or working capital is also available. MoJ will consider providing working capital, the precise amount to be negotiated as part of the contracting process.

Lot 1 is looking for programs for short term prisoners that are an

innovative approach to tackling re-offending of offenders who have served a sentence imposed by a Court and have been released from sentences of less than 12 months.

And Lot 2 asks proponents to define their cohort for an

innovative approach to tackling re-offending of offenders; we will accept proposals that focus on offender cohort and any size cohort.

The tender will be awarded to

the most economically advantageous tender in terms of the criteria stated below:

1. Operational service delivery. Weighting 20

2. Commercial financial. Weighting 203. Partnership & stakeholders. Weighting 15

4. Commercial legal. Weighting 10

5. Supply chain management. Weighting 10

6. Implementation. Weighting 107. Human resources & organisational change. Weighting 5

8. ICT & information security. Weighting 5

9. Continuous improvement. Weighting 5

50% of profits or 100% of profits to charity? Same, same but different?

Emma Tomkinson crowdfunding, Great ideas for socially responsible living!, Judging social organisations on their financial data, Social Investment & Finance , , , , ,

My previous blog on the Australian/US collaboration Who Gives A Crap : toilet paper that builds toilets outlined their catchy campaign and their social enterprise commitment to give 50% of their profits to the charity WaterAid. There are some negative comments on their home page about why you should buy toilet paper from an enterprise that keeps half the profit. I haven’t checked on Kleenex’s home page, but I wonder if they get any stick for keeping profit…

Well another Australian toilet paper social enterprise came to my attention today. Looloopaper is a subscription-based provider that gives 100% of their profits to charity! First comment: subscription is a good model to minimise risk and keep storage costs down. Second comment: 100%! Awesome! I’m in!

But is it possible that the team behind Who Gives A Crap and Looloopaper keep the same proportion of your well-spent toilet paper dollar, despite Looloopaper giving TWICE the proportion of profits to charity? Well, if Who Gives A Crap operates on an equity model (good for start-ups because the team only get paid once there are profits to pay them with) their 50% of profits is their income. But if Looloopaper has their team on salaries, then they get paid before profits are calculated. Different model, massively different perception!

Either way, buying from either of these gems will mean much more of your toilet paper profit goes to charity than ever before. And if you just want to donate to the toilet cause, I can’t vouch highly enough for Jack Sim’s fantastic World Toilet Organization.

How can people with more information be both more confident and more wrong?

Emma Tomkinson Decision Science, Evidence-based policy , , , , ,

I become truly frustrated when faced with someone who insists they are an expert in something they know absolutely nothing about. As a believer in evidence, my first instinct is to provide them with more information, but perhaps this isn’t always a good idea.

The overconfidence effect is a decision-making bias where a person’s confidence about a decision is greater than their accuracy when making it. A great article by Hall, Ariss and Todorov (2007) The illusion of knowledge: When more information reduces accuracy and increases confidence asked participants to predict and bet on basketball games and found that increasing information didn’t cause the expected effects. Their findings have implications for settings such as political campaigns, where the decision to provide voters with an abundance of accurate information countering the false claims may not have the desired effect. Nyhan and Reifler’s paper When Corrections Fail: The Persistence of Political Misperceptions describes this ‘backfire effect’ in which corrections to mock news articles reinforced belief in the original, incorrect version.

So sometimes holding back on the evidence lesson is a good idea with an ignorant audience. And perhaps if I’m so sure I’m right, I might have it so wrong I should be keeping my mouth shut anyway!