June 29, 2011 at 1:39 am #134118
This article from boston.com explains how Massachusetts is exploring a 'pay for success' model, also known as "social impact bonds."
This model allows the government to contract out work to a nonprofit, with the stipulation that a specific target must be reached over a certain period of time. For example, reduce recidivism rates by x percent over 6 years. If the goal is reached, investors get their money back. If the goal is exceeded, investors can gain a bigger profit. However, if the goal isn't reached, the government is not required to pay the investors anything.
What do you think? Is this a viable model? Or is it too risky?
June 29, 2011 at 12:45 pm #134126
Oh my gosh, Mohammed Yunus spoke about something like this in his Nobel acceptance speech a few years ago! At the time I thought it was the coolest idea I'd ever heard, and I still think it's really interesting and creative. I'm not saying it will definitely work, but it's fantastic states are thinking about new ways to approach social service provision.
June 29, 2011 at 2:37 pm #134124
I think this has the potential to be viable, though it would take a few pioneers to show that it works first before others get on board. Either way, I think this is a really interesting model for a public-private partnership, and it seems like all the incentives are there for all parties to try to exceed the goals being set.
June 30, 2011 at 1:35 pm #134122
Success will depend on how goals are measured. For example, a goal could be to reduce recidivism by x percent over 6 years...but how is recidivism measured and how do you know if your program made the specific impact or if it was another program. Our military has this problem with incentive contracts also. For example, the program managers overseeing the program will recommend maximum incentive pay,ents just to keep strong relations with a contractor. I imagine something like this will emerge unless all measurements are pass/fail criteria. If there is room for argument, the contractor -- rightfully or wrongly -- will probably get the benefit of the doubt and get maximum payments.
June 30, 2011 at 8:48 pm #134120
Since we seem to be becoming a "debtor nation" faster than one can blink - any hybrid program that brings innovative ideas that work should certainly be welcomed with open arms by our nation's lawmakers. Great idea.
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