Frank Curran
Director
SP Solutions
22 Sep 2011

Laurence Demarco is right to point out that picking the easiest clients with whom to work (so called "cherry picking") is an intrinsic risk that needs to be considered when designing a PbR contract. Where I disagree with him however is the assumption that cherry picking is inevitable in a PbR contract. There are a number of ways in which this risk can be mitigated. The approach taken in the Peterborough SIB, quoted by Russell Webster is one way; the tiered payments in the Work Programme contracts is another

There are all sorts of logistical and process issues to be overcome to design effective PbR contracts e.g. there are real concerns about how small VCS organisations can participate in such arrangements as Darren Willbourne points out. However, the reality, as pointed out by Phil Caroe, is that PbR and SIBs constitute a potentially significant funding stream for certain types of activity. In a context where direct funding from the taxpayer for many activities has reduced and is certain to reduce further PbR needs to be looked at very closely: the realiity is that some (many?) services of value will not be funded in the future or at all other than on a PbR basis

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Russell Webster
21 Sep 2011

There is a lot of talk about avoiding cherry picking and the Peterborough One Project - the only major social impact bond funded project in the country is required to work with all released prisoners and measured on how well it does across that all cohort.

There are a lot of concerns about PbR, some of which are discussed here: http://bit.ly/ocMMo1

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Phil Caroe
Chief operating officer
Allia
20 Sep 2011

When it comes to evaluating the social impact bond model there are two key questions:

Could social impact bonds skew the not-for-profit sector and the priorities of funders towards those social outcomes that are most easily achieved and which create the largest savings (and hence the biggest financial returns to investors)? The answer of course is yes, this is a possibility. There are countless social outcomes that cannot be achieved on a payment-by-results model and we must be careful to avoid creating a culture that evaluates social action on a financial rather than a moral basis.

However, could social impact bonds result in significantly greater levels of funding flowing into the sector meaning that more people's lives are changed for the better? Yes, I believe they could.

Too often it seems that only one side of the equation is focused on, meaning that social impact bonds can be either presented as the panacea for all social problems or a total disaster for society. In my view they are neither. They are another useful tool to be used amongst a variety of different funding approaches that can help to make a greater difference in the lives of particular groups of people.

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Jay Kennedy
Head of Policy
Directory of Social Change
20 Sep 2011

At DSC we've been saying this - and saying it's outrageous - in the media, at speaking events, and directly to ministers for at least two years - since it first started to clearly evolve as a tenet of Conservative Party policy.

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Carl Allen
20 Sep 2011
Response to [Jay Kennedy]

The government is focused on the not-for-profit sector, not the charity sector.

So perhaps DSC has been speaking in vain and/or to the wrong audience.

And by way of note, payment by result model when the quality of the incoming material includes material that cannot be procesed by standard processes is a evil variant of the cost plus profit model.

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