- July 21, 2015
Below is a blog ATQ wrote for the Commissioning Better Outcomes (CBO) Evaluation site. ATQ is working with Ecorys on the CBO evaluation and co-wrote the Deep Dive report referred to.
How do we improve the health of individuals, in a way that prevents health issues arising in the first place or getting worse? And how can Social Impact Bonds (SIBs) be developed in health and other areas where the benefits are longer term, with less immediate results and savings to the public purse?
These questions were at the heart of an event held last Friday (10 July) in Birmingham. It brought together a range of stakeholders with a strong interest in improving the nation’s health, especially through the use of SIBs.
The event was hosted by the Big Lottery Fund, whose Commissioning Better Outcomes (CBO) Fund looks set to play a major role in encouraging more SIBs in the next few years. It was held to discuss a new SIB which breaks new ground in health and has just been examined in depth as part of the evaluation of…
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- January 15, 2014
Now that we are in a New Year, it’s apparent that both government and opposition are already thinking about the next election, and starting to make policy announcements and commitments. For those of us who are focused on the world of government commissioning and contracting, one of the intriguing aspects of the next election is what an incoming government (if different) will do about this government’s major contracts for the delivery of public services.
Contracts which straddle governments are nothing new, of course, but what has changed is the type of contracts and the extent to which they impinge directly on policy. While the outsourcing of any service can be controversial, in general few people tend to get too worked up these days about a contract for the delivery of back office support processes or information technology. A new government will almost certainly continue such contracts largely unchanged, at least until the contract ends or reaches a suitable break point.
But in recent years, we have started to see governments use the private and third sectors to deliver social policies which a new government may want to change radically, or discontinue altogether. The two obvious and large areas where this may be the case in 2015 are employability support and offender rehabilitation. A brief look at both these areas shows some of the tricky dilemmas that are likely to arise for both the current government and the opposition.
To take employability first, the use of external contractors to deliver policy in this area is long established, and we have already seen what can happen to contracts after a change of government. When the new government entered power in May 2010, it implemented the Conservative’s proposals for the Work Programme. Since this was effectively an extension – to more client groups and with a larger role for external providers – of the Labour government’s Flexible New Deal (FnD), the policy was in the same “direction of travel”, as the saying goes. But even so, all the existing contracts had to be terminated and an entirely new procurement process started. So there was a significant cost – in both time and money – to put in place a very similar set of policy tools.
Since then the Work Programme has been heavily criticised by the opposition, and it can hardly leave it in place and untouched if elected. But the cost of contract termination means that it may well continue the Programme at least until current contracts expire in March 2016 – although it will need to make clear its intentions well before that.
Offender rehabilitation is different, because there is no cross-party history of using external providers in this sector on a large scale. The previous government dabbled in this area, but had little in place by way of contracted out provision. In opposition the Labour Party seems to be broadly in favour of policies to reduce reoffending and rehabilitate offenders, but is strongly opposed to the means this government has adopted to achieve it, through its Transforming Rehabilitation proposals, which involve a mixed economy of public, private and voluntary sector provision that effectively outsources much of the current Probation Service.
So both government and opposition have big challenges ahead. The government plans to have Transforming Rehabilitation contracts in place by April 2015, and knows that, with the next election fixed for May of the same year, it cannot afford any delay. If contracts are not in place, it will be easier (though by no means painless) for a new government to reverse or significantly modify the policy.
However the opposition also has difficult issues to wrestle with. If the government does meet its timetable, new Labour Ministers will have to decide whether they want to incur another large bill for contract termination, or can live with and try to modify the contracts to meet their policy objectives. And as the election looms Labour will come under pressure to set out clearly what its policy is in this area – in a way that it probably would not have to do if private and third sector providers – and their investors – were not gearing up to deliver services.
In the longer term and if (as seems likely) the use of external providers in complex policy areas continues and grows, there are some bigger questions for government as a whole about how we avoid undermining the democratic process. Politicians will rightly complain if their ability to change policy which is contentious is unduly constrained by the decisions of predecessors effectively to outsource delivery of said policy. But those who are being asked to invest heavily in new provision – whether as providers or financiers – will be very reluctant to do so if there is no guarantee of continuity beyond each election cycle. Some may say of the latter “so be it and good riddance” but most will not.
What may happen is one of two things, or possibly both. First, more contracts will be awarded that are coterminous with general elections – something made easier if we stick with fixed five year terms. The second is that all parties will have to seek broader consensus on policy and the means to deliver it, before major programmes of service delivery outside the public sector are implemented. This may be no bad thing, and has some precedent in our approach to major infrastructure projects, such as the 2012 Olympics and, more recently, HS2. However since some in the Labour Party have been making noises about withdrawing support for HS2, a project which they first proposed, the auguries for the development of such consensus may not be that encouraging.
- October 1, 2013
Last week I went to the Local Government Association’s headquarters in Smith Square for the launch of the Commissioning Better Outcomes Fund. This is a new £40 million fund from the BIG Lottery, and aims to encourage and support commissioners (and especially local authorities) who want to explore the use of Social Impact Bonds (SIBs) to achieve better social outcomes and ultimately reduce costs.
The new fund is intended to be complementary to the Cabinet Office’s existing £20m Social Outcomes Fund, which means there will be around £60 million available to support new SIBs (less a bit that the Cabinet Office has already committed to existing projects). The two Funds have a slightly different focus, but essentially aim to provide some part funding for SIBs in order to improve their financial viability – especially if the commissioner does not think they can cash enough savings from the SIB to make it self-funding.
What is exciting about the new fund is that part of it (between £3m and £4m) has been earmarked for development grants through which commissioners can buy in the specialist advice they might need to get a SIB of the ground – for example, to carry out feasibility work. There will be a common expression of interest process for the two funds, and if an EoI is accepted a commissioner can then apply for a grant to do the more detailed work needed to submit a full application to one of the Funds – and hopefully get a significant contribution to the funding of the project as a whole.
Having been involved in the development of SIBs and similar social investment backed initiatives for around three years now, we think this is a potentially game-changing development. Many commissioners would like to explore the use of SIBs, but in the current financial climate, the cost of initial feasibility work and specialist advice and support is a significant barrier.
The only snag is that, as a first step, commissioners will need to have done some prefeasibility work and got to the point where they have a proposition that will get through the expression of interest process. The good news is that many local authorities and other commissioners already have ideas for improving outcomes in such areas as looked after children, family intervention, adult social care and the new challenge of preventative health interventions. The initial work to turn such ideas into credible propositions should not be too onerous, in our experience, and advisors such as us are available to help. With the opportunity to access development grants downstream, the time is right to turn concepts into reality.
If you would like to know more about how ATQ could help you make an expression of interest to the new funds, potentially at no cost to you, please contact us via our website here.
- August 6, 2013
Some advocates and supporters of social impact bonds appear to have shifted their position on the importance of cashable savings. My colleague (Eileen Robinson) attended a seminar a few weeks ago where a spokesperson from Social Finance argue strongly that SIBs did not need to be underpinned by cashable savings. Now an interesting piece by Adrian Brown has argued that a strong focus on cashable savings is holding back the development of SIBs and the social investment market generally. He argues that SIBs should be mainly about innovation, not about financial returns.
Simply put, the case for identifying cashable savings is that they enable SIBs to be self funding – effectively an extension of the invest to save principle. This was always one of the main attractions of the SIB approach, especially for a government looking for solutions to unprecedented financial pressure on public services. The case against – eloquently put by Adrian Brown – is that an over-emphasis on the cashability of savings may restrict both the outcomes that might be funded through a SIB, and the total funding made available. In essence, commissioners may look for projects simply because they enable savings to be cashed, rather than because they achieve the most important outcomes, or enable them to test new ways of doing things.
I have no problem with the argument that we should not obsess about cashable savings, or that we should focus mainly on the value of the outcomes to be achieved. However, I am concerned that we risk throwing the baby out with the bathwater if we start to argue that cashable savings are not important. Here are three reasons why I think they should remain at the centre of thinking.
First, while some commissioners may want to use SIBs solely to test innovation, most cannot afford to do this. Their main motivation is to find ways to fund outcomes that would otherwise not be funded – and usually to fund preventative or early intervention which reduces the need for (more expensive) crisis intervention. Not all the savings achieved will be cashable, but some will be, and often enough will be cashable to make the whole project viable.
Second, there are some outcomes which are socially worthwhile and do achieve early, cashable payback. This is particularly the case when dealing with an existing issue which imposes high costs, such as children in residential care, and vulnerable adults with high care needs. If interventions can be commissioned which enable such groups to live in the community, there are likely to be improved outcomes for them as individuals AND cashable savings to pay for the services. In these cases, what’s not to like?
The final argument is about the rigour that a SIB or PbR process imposes on commissioners. Adrian Brown suggests that instead of trying to match outcomes to savings, commissioners should “regularly look across the portfolio of services they buy and ask themselves which are the least effective. Decommissioning these services frees up current spending that can be used to fund SIBs in policy areas where innovation is most urgently needed”.
But we see little evidence that commissioners have either the data available, or review processes in place, to enable them to do this rationally. In our experience of working with commissioners over the last three years, a key benefit of the SIB development process is that it allows the commissioner to consider in detail what it costs to provide a service, what is the impact of that service – in both financial and non-financial terms – and whether an alternative service will achieve better returns – both social and financial. And if their financial analysis shows that they can improve outcomes to the point where they can decommission a service to achieve cashable savings, that is surely better than making less well informed and perhaps arbitrary decisions about what services should no longer be funded.
So if commissioners want to see SIBs as a way to test innovation and have the funding to use them in that way, fine by me,. If they want to use them to save money and introduce much greater rigour into their commissioning processes, why not?
- March 7, 2013
Last Monday the Cabinet Office launched “What Works” a new initiative to improve evidence-based policy development. The Cabinet Office Press Release, with detailed documents attached, is here. A useful summary from the Guardian is here.
As the press release explains “The What Works Network, a key action in the Civil Service reform plan, will consist of two existing centres of excellence – the National Institute for Health and Clinical Excellence (NICE) and the Educational Endowment Foundation – plus four new independent institutions responsible for gathering, assessing and sharing the most robust evidence to inform policy and service delivery in tackling crime, promoting active and independent ageing, effective early intervention, and fostering local economic growth.”
In simple terms, the aim is to do for evidence-based programmes and interventions, what NICE does for drugs. If NICE approves a drug or treatment, the NHS will prescribe it (provided local commissioners can afford it). If an intervention has a similar seal of approval, commissioners and others are more likely to use it.
As the Guardian observes, this has been something of a pet project for the Cabinet Secretary, Sir Jeremy Heywood, since he was merely head of the Cabinet Office. It is an important element in payment by results and social impact bonds, where it is hard to design such schemes (and especially assess the risk for providers and investors) if you do not have a reasonable confidence that the interventions proposed will improve outcomes and achieve the results required.
But it seems to me that this has much wider implications. First, as critics have already observed, it should make it harder for ministers to base policy on whim or ideology. There is a long standing joke among Whitehall watchers that Ministers prefer policy-based evidence making to evidence-based policy-making – i.e. getting the facts to fit the policy rather than the other way round. If the new policy centres do start to become as established as NICE, this will probably be harder to do.
But something else that intrigues me is whether it will become much more the norm to attach a monetary value to social policy. This is very much the way that NICE works – which leads to increasing controversy when it rules against the use of an expensive drug that might extend the life of a loved one for a few weeks or months, on the grounds that it is not worth the money.
In social policy, there is still a strong view among many providers that we should not concern ourselves with whether something works in financial terms, but should intervene simply because it is “a good thing” or “the right thing to do”.
I have always found this a difficult argument to sustain if the thing that is being done requires public money. There are only two reasons for any intervention which requires investment by the state. It achieves a better result – for the person themselves and/or for society as a whole – than doing nothing. This requires measurement against what would have happened without the intervention, through some form of control or baselining.
The other is that doing something costs less than doing nothing, usually because it avoids higher costs later. On almost a daily basis, it seems that we have a new study or report which argues the case for public investment on these grounds. Yet many of those who advocate such policies seem reluctant to go the extra mile and resist attempts to properly measure the value that they add in financial terms.
But if “What Works” mirrors existing, similar work in the US – notably by Washington State Institute for Public Policy – it will become very much about this intervention costs X and saves Y, that intervention costs A and saves B – as well as about whether it is effective in reducing or solving a social problem.
No, we cannot reduce everything to pounds and pence. But if the public sector is being asked to put money to work to make things happen, It seems reasonable to ask for some evidence that those things add value.
- February 13, 2013
There is a famous, almost certainly apocryphal, story about a 19th century recipe for cooking jugged hare. Before getting into the detail of how to cook it, the recipe advises the reader: “First, catch your hare”
I’m reminded of this when I read some of the advice that is starting to become widely available on how to build a case for investing in better social outcomes. The advice usually relates to social impact bonds (SIBs) or payment by results (PbR) – but it also comes up in the wider context of making the case for any early or preventative intervention which reduces service demand.
Some of this advice is excellent, and nearly all of it is useful. But what most of it has in common – and why it reminds me of the challenge of catching a hare before you can cook it – is that it tells you what to do but is often short on detail of how to do it. For example, there is advice to collect data on costs and benefits, undertake cost benefit appraisal, build a financial model, estimate whether savings are cashable, etc. But more detailed guidance on how you do these things is thin on the ground. Basically, much of the guidance is saying “First, build your business case”
At ATQ we have been through this pain. In a previous life we worked alongside the Cabinet Office with four local authorities on the feasibility of using payment by results or social impact bonds to fund interventions for troubled families. The effort involved in testing the feasibility of intervention – and whether it was wholly or partly self-funding as result of future savings – was, to put it mildly, significant. And at every stage of the process, we kept saying to ourselves – we must make sure we record how we did this, so that others can benefit from what we have learnt and do not have to do the same things from scratch.
So last week (somewhat later than we had originally intended) we published a joint Cabinet Office/ATQ guide to building a business case for intervention which improves outcomes. You will find this on the Cabinet Office website as a How to Guide for commissioners of Social Impact Bonds, and on our website as a Payment by Results Toolkit. But both these short titles are somewhat misleading. The methodology and tools we used do not work only in a PbR or SIB context. They can also be used whenever a public sector body wants to know whether and how costs will change if it takes action which addresses a social problem and ultimately reduces service demand. They should help anyone facing these challenges to:
- identify what data they need to undertake a cost appraisal;
- collect that data in a structured way; and
- model and analyse the data once they have it (especially if they use the financial model we are making available).
We are not saying that the methodology we worked out is the only one available, or that we have all the answers. Much good work is being done by many public sector bodies, such as local authorities which have been involved in Whole Place Community Budget pilots or are at the forefront of work with troubled families. And the tools do not solve the basic challenge of collecting good data – though the Cabinet Office and others are working on making better data available
But, hopefully, they will help at least some of those who are grappling with these challenges and finding it a bit like chasing a hare round a field.
- January 25, 2013
We are now a bit more than half way through this Parliament, and right on cue a debate has started about whether the civil service is fit for purpose, in need of radical reform, and a block on wider change across government. The BBC ran a series of reports leading up to a programme in Nick Robinson’s Decision Time series; the PM’s former advisor Steve Hilton has weighed in (and is said to have left for the US in frustration at the way his blue sky thinking was frustrated by the bureaucracy); and Tony Blair has added his six penn’orth.
It’s hard to discern what the advocates of reform actually want (as opposed to what they don’t like), but is seems to centre on the need for a new government to be able to bring in its own team of committed advisors, rather than rely on the standing civil service machine.
As a former civil servant who has since worked closely with civil servants – at all levels – for more than 20 years I confess I find some of the arguments of both sides unconvincing. The defenders of the status quo argue that:
- There must be evidence and new Ministers cannot expect the civil service to implement change unless and until the case for it is proven by that evidence. This argument has been strongly pushed by former Cabinet Secretary Lord (Gus) O’Donnell – notably on Robinson’s programme. My response is: if only! Examples of policy being implemented – and maintained – in the absence of (or in the face of evidence are too numerous to mention. To take one example, how many people could seriously argue that current policy on the classification of prohibited substances is based in evidence? If you think it is, just ask Professor David Nutt.
- Hand-picked advisors who came in on a change of government would be cronies and yes men, telling Ministers what they wanted to hear. This might happen, but is it not equally likely that a trusted advisor would be more willing to give challenging advice when it was needed – and more likely to be listened to if they did? And is it seriously being suggested that no civil servant ever trims their advice to suit their audience; or that civil servants – alone in the corporate world, in any sector – are always willing to challenge fearlessly those who have power, authority and influence over their careers?
But the advocates of change are also on shaky ground. They argue that:
- The bureaucracy hinders change and swamps everyone in paperwork. This might be true but is that solely the fault of the civil service? In my experience decisions can be made very quickly in central government, certainly much quicker than they can in local government, for example; and if decisions on major policy change have got slower across government it is often because there is more legislation to consider – such as that governing equality and human rights. If we think such legislation is a good thing (and most do) then Minister have to be doubly sure they have complied with it – because lf not, a legal challenge will follow rapidly.
- The permanence of civil servants is a block on change, and means they can out-think and out manoeuvre “here today, gone tomorrow” Ministers and their political advisors. There is some truth in this, but how permanent are civil servants these days? Research by the Institute for Government shows that only two Departments have the same Permanent Secretary (sic) that they had in May 2010, and that turnover across departments at all levels is also considerable. My impression of working with civil servants in recent years is that they often become expert in complex areas and then move on. Arguably they could do with a bit more stability – and a few more wise old heads – not less.
- It is very hard to bring in expert advice from outside. The only sense in which this is true – on which I do agree with Lord O’Donnell – is that Ministers have cut back drastically on the use of external consultants. But it is much easier than it used to be to move in an out of the service, and many of the excellent civil servants I have worked with in the last few years have come into the service relatively late in their careers from other sectors. And it doesn’t seem to be that difficult for Ministers to bring in selected advisors when they want or need to.
So in short I think we need seem more careful thought on what the problem is (if there is one) and how it might be solved. Perhaps the study currently being conducted by the IPPR, on international civil service models from which we might learn, will suggest some answers.
- January 14, 2013
The CBI put on an interesting conference on 14 January on payment by results in public services. The Public Services team at the CBI should be congratulated for organising such an interesting event, which had strong presentations from a range of practitioners in the PbR space, top and tailed by two major attractions – Will Cavendish from the Cabinet Office public sector reform implementation team and no less than the Secretary of State for Justice, Chris Grayling.
As noted in our last blog the proposals in Transforming Rehabilitation will have a major impact on the sector and it was fascinating to hear about them direct from the Secretary of State. He made a number of points but two – which were not explicit in the consultation paper – stood out.
The first was about reputation management. Mr Grayling made it clear that he expected bidders for the new PbR contracts to be fully aware of the damage they could cause to themselves and to the programme as a whole if their performance or practices led to criticism and bad publicity in this very sensitive area of public policy. It would thus be an explicit requirement for bidders to demonstrate how they would manage reputational issues. This will no doubt be a challenge for all bidders and especially for some public service providers who have been in the public eye for the wrong reasons in the last few months.
However I think Mr Grayling and his officials will also have an important role to play. He made the very valid point that prisoners who are being managed by the probation service today, sometimes commit serious crimes, and that this will still happen when they are managed by external providers. The key question is: will such an event be reported – or scrutinised – differently than it would be today – because different standards apply when services are contracted out? If it were (and we strongly suspect it would be) then one hopes Ministers and officials will not leave it entirely to providers to defend the policy
The second was about delivery and contract structures. Mr Grayling made clear that he was not wedded to the prime contractor model, and especially would not be impressed by bidders who relied wholly or almost entirely on specialist sub-contractors to deliver the service. This seemed to me to be a clear warning that the managing agent model adopted by some primes to deliver the Work Programme would not be looked on favourably – and that bidders would have to be delivering at least some of the services directly – using in-house as well as third party expertise.
- January 9, 2013
Today sees the launch of the new Justice Secretary’s plans for a substantial expansion in the use of payment by results (PBR) for the management and rehabilitation of offenders. These have been eagerly awaited and much anticipated since the Ministry of Justice (MoJ) paused previous plans to pilot PBR in a number of areas in last November.
The plans are, as always promised, subject to consultation (though only for six weeks!) and much detail has still to emerge. But it is clear that the proposals will be radical and will have huge implications for both Probation Trusts and for third and private sector providers of rehabilitation services.
The plans deserve careful analysis once more detail emerges but my initial reaction – as when the plans were first trailed in November – is that there is risk in such a radical change. Some have welcomed the new Justice Secretary’s clear desire to “get on with it”, but there were good reasons for the pilot-based approach which the MoJ was previously taking. This was not so much because otherwise the government would be taking “a reckless gamble with public safety” as the Labour Party has already alleged, but because the evidence base for the effectiveness of intervention in reducing re-offending was, and remains, poor. Without better evidence (which the pilots aimed to capture), it may be very hard to persuade many providers – already bruised by their experience of the Work Programme – to take part.
There are also many major challenges ahead for Probation Trusts – who will need to radically reorganise, and possibly mutualise or form joint ventures so they can bid for contracts; and for the MoJ commissioning team – who need to decide how they measure success in reducing reoffending, and for example whether they use “binary” or more complex measures which take account of success in reducing the severity or frequency of offences.
It’s going to be an interesting few weeks and then many months in the Justice sector!
- November 28, 2012
On November 23rd the Cabinet Office launched two initiatives designed to stimulate the market in social impact bonds (SIBs) and similar payment by results (PBR) schemes: the Centre for Social Impact Bonds (an online resource for those considering how to do this stuff); and the Social Outcomes Fund – which may be of more interest to commissioners and others since it involves government putting up some money to stimulate the market in SIBs.
We played a small part in the development of the Social Outcomes Fund, since it was one of the recommendations made in the report we co-authored with the Cabinet Office (in a previous life) on the feasibility of applying SIBs/PBR to troubled families. The principle of a SIB is that interventions to solve a social problem are funded from future savings to the commissioner and others. One of our findings was that it is difficult to persuade those who benefit from a successful SIB or PBR scheme and are not the main commissioner to make a contribution.
This was also the experience of Essex County Council when trying to get contributions to its SIB aimed at keeping older children out of care or custody (the launch of which, along with another SIB aimed at homeless rough sleepers in London, was also announced at the same event)
So the purpose of the fund – as made clear by Ministers at the launch event – is to enable those wanting to set up a SIB to apply for the fund if they cannot get contributions direct from other bodies. The Cabinet Office also hope that the Fund will help grow the market for SIBs and similar schemes – which have been slower to take off than many hoped Other sources of funding are starting to emerge which have similar aims – such as the impending Results Fund being set up by Big Society Capital.
In our view (we could hardly say otherwise) the Social Outcomes Fund is undoubtedly a good thing. The developing debate is whether SIBs and similar schemes will ever get to the sort of scale where they can make a real difference to social outcomes and – by extension – start to really impact on the costs of social problems. The general view at the launch from all sides (investors, commissioners and policy makers) seemed to be that things have moved on a good deal over the past couple of years, but there is still a way to go.