11/11/2018 6:37 PM Government Pay-for-Success Funding Arrangements: Risks & Rewards for Human Service Organizations (HSOs) Lawrence L. Martin, Ph.D., MSW, MBA Professor of Public Affairs University of Central Florida (Orlando) © 2007 Microsoft Corporation. All rights reserved. Microsoft, Windows, Windows Vista and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries. The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

Overview Pay-for-success and performance-based contracting (PBC) 11/11/2018 6:37 PM Overview Pay-for-success and performance-based contracting (PBC) Two approaches to PBC - Public management approach - Evaluation approach Risks & rewards for human service organizations (HSOs) Transforming federal grants into PBC © 2007 Microsoft Corporation. All rights reserved. Microsoft, Windows, Windows Vista and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries. The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

Pay-for-Success Pay for results Results based funding/financing 11/11/2018 6:37 PM Pay-for-Success Pay for results Results based funding/financing Outcome funding “Social Impact Bonds” (*) Others (compensation is related to performance) © 2007 Microsoft Corporation. All rights reserved. Microsoft, Windows, Windows Vista and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries. The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

Performance-Based Contracting (PBC) 11/11/2018 6:37 PM Performance-Based Contracting (PBC) If government funding is involved and if compensation is tied to performance then it is PBC Pay-for-success is PBC Difference between grants & contracts - Grants are assistance - Contracts are buyer/seller relations © 2007 Microsoft Corporation. All rights reserved. Microsoft, Windows, Windows Vista and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries. The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

Two Approaches to PBC Public Management Approach Evaluation 11/11/2018 6:37 PM Two Approaches to PBC Public Management Approach Evaluation Type of Service All Prevention Type Parties Gov & HSO Gov, HSO , Investor, Evaluator, (Intermediary) Financing Ex Anti HSO Ex Anti Investor (*) Funding ExPost Gov to HSO ExPost Gov to Investor Value Base Efficient, Quality & Effective Service Delivery Search for Effectiveness Performance Measures Output, Quality, Outcome Outcome Standard of Performance Achievement of Output, Quality, Outcome Documentation of Cause & Effect Relationship Government Procurement Conforms Does Not Conform HSO Financial Risk Moderate - High Low (*) © 2007 Microsoft Corporation. All rights reserved. Microsoft, Windows, Windows Vista and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries. The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

Two Approaches to PBC Public Management Approach 11/11/2018 6:37 PM Two Approaches to PBC Public Management Approach - New Public Management/GPRA & GASB SEA reporting - Tying compensation to performance Evaluation Approach - Program evaluation & EBP - Tying compensation to outcomes © 2007 Microsoft Corporation. All rights reserved. Microsoft, Windows, Windows Vista and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries. The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

Public Management Approach to PBC 11/11/2018 6:37 PM Public Management Approach to PBC Performance Measure Type of Compensation (% of Fee) Determination of Need Process 10 Vocational Preparation Job Placement Output Job Training Job Retention 15 Job Stabilization Quality/Outcome 20 Case Closed Outcome 25 Service: State of Oklahoma Supportive Employment (Job Training & Placement Services) © 2007 Microsoft Corporation. All rights reserved. Microsoft, Windows, Windows Vista and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries. The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

Evaluation Approach to PBC (Utah High Quality Preschool Program 11/11/2018 6:37 PM Evaluation Approach to PBC (Utah High Quality Preschool Program Type of Service Prevention (Preschool) Parties Gov = State of Utah Contractors: HSOs & School Districts Financing Goldman Sacks & Pritzker Family Foundation Funding State of Utah, United Way of Salt Lake Outcome Performance Standard (for full payment) 90% of children will avoid special education services later Independent Outside Evaluator Utah State University Government Procurement ??????????? HSO Financial Risk Low © 2007 Microsoft Corporation. All rights reserved. Microsoft, Windows, Windows Vista and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries. The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

Risks & Rewards for HSOs 11/11/2018 6:37 PM Risks & Rewards for HSOs Public Management Approach: - Best suited to the ongoing delivery of established human services utilizing established service delivery methods. - Assumption: HSOs have good service utilization, performance and cost data. - Audit exposure: When compensation is tied to performance, the performance is auditable. © 2007 Microsoft Corporation. All rights reserved. Microsoft, Windows, Windows Vista and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries. The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

Risks & Rewards for HSOs 11/11/2018 6:37 PM Risks & Rewards for HSOs Evaluation Approach: - Best suited for research and development (R&D) type activities involving new interventions, programs or service delivery methods, and where existing interventions, programs or service delivery methods are being applied to different target groups or in different settings. - More complex, more actors, incompatible with government procurement regulations. - Separation of compensation from performance? © 2007 Microsoft Corporation. All rights reserved. Microsoft, Windows, Windows Vista and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries. The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

Transforming Federal Grants into PBC? Title 2 –Grants and Agreements. Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. (Short Name = “Uniform Guidance”).

Turning Federal Grants into PBC? The “Uniform Guidance” calls for: - inclusion of outcome performance measures in all federal grants. - outcome performance measures may reflect the preferences of the fed gov. - Financial data must be related to performance (?????) - Fixed amount awards may be used (compensation is tied to performance)

Transforming Federal Grants into PBC? The GAO and the OMB said 11 years ago that: the lessons learned from performance-based contracting are going to be used to restructure the federal grant system. Government Accountability Office (GAO) (2006). Grants management: Enhancing performance accountability provisions could lead to better results. GAO-06-1046. Washington, DC: Author.