The Peterborough Social Impact Bond (SIB) conspiracy

If you think Social Impact Bonds are the biggest thing to hit public policy EVER, then you were probably horrified at the cancellation of the final cohort of the flagship Peterborough SIB. How is it possible? What does it mean?

Since the news was broken in April this year (2014), I’ve had questions from as far afield as Japan and Israel trying to discover the UK Government’s TRUE agenda. More recently, at the SOCAP Conference in San Francisco in August, it was raised again. Eileen Neely from Living Cities, which has provided $1.5 million in loan financing for the Massachusetts Social Impact Bond was discussing “shut down risk: what happens if one of the parties decide they don’t want to play.”

She said, “In the Peterborough deal in the UK, the government decided that they weren’t going to play any more… so there’s some who say ‘Oh it’s because it wasn’t going well’ and others are saying ‘It was cos it was going too well’ so whichever it is, they decided that they weren’t going to do it, that they weren’t going to go into the next cohort, so what does that mean to the investors?” Eileen made it quite clear “I haven’t talked to any of the participants there, I’m just outside, reading the articles and the blogs …”

I thought it was about time we summarised the evidence for those who continue to ask these questions. Continue reading

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

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

How do you know when outcome change can be attributed to your intervention?

It was exciting to read the new working paper Addressing attribution of cause and effect in small n impact evaluations: towards an integrated framework by Howard White and Daniel Phillips. While it would be ideal that all the interventions we design would have the number of participants (n) and impact that would give us a statistically significant result at a high level of confidence, there are many reasons that this doesn’t happen. For payment-by-results contracts, in particular social impact bonds, attributing an impact to an intervention is a pre-requisite for the transfer of public funds. Also, funders the world over are attempting to identify the impact they are making across their portfolios, to increase the effectiveness of their investments. White and Phillips produce a fantastic summary of methods and examples that seek to attribute change to a cause. While their framework of small n methods is useful, it’s their up-to-date literature review that I find most useful.

The paper is published by 3ie: International Initiative for Impact Evaluation. 3ie have developed a database of policy briefs, impact evaluations and systematic reviews. They’re governed and staffed by a trans-global team, and while focussed on international development, their evaluation work is certainly relevant for interventions that alleviate disadvantage at a local or national level.