Pay for Success contracting offers governments a leadership tool to overcome three common barriers – lack of performance assessment, under-investment in prevention, and inability to collaborate effectively with service providers around improving systems. Most importantly, it is a way of binding government agencies and providers together in a multi-year data-driven effort to improve service delivery and thereby make progress on a difficult social problem.
Pay for Success contracting (PFS) using social impact bonds uses performance contracts combined with operating loans to allow governments to pay based on the outcomes achieved by a service rather than on the quantity of services-- e.g., paying for the number of ex-offenders prevented from returning to prison, the number of unemployed individuals who succeed in finding stable employment, or the reduction in low birthweight births rather than the number of individuals treated.
The Government Performance Lab supported the design and launch of the first two state-level PFS projects and has provided technical assistance on nine launched PFS projects in the U.S.
