Presidential 2016: Performance Based Leadership- The Future of Pay for Success

In cities across the nation, Third Sector Capital Partners, Inc. (Third Sector) is leveraging Pay for Success to develop performance-based leadership by embedding data-driven decision-making into government contracting, and allowing communities to focus on delivering outcomes versus services. For example, in Cuyahoga County, Ohio (Cleveland), hundreds of struggling families within the child welfare system concurrently face housing instability and as a result their children may experience prolonged out-of-home placement with foster care families. As the child welfare system prioritizes treating the children, the caregivers are sent to navigate the homeless system as individuals. An unfortunate result is that sometimes caregivers are unable to secure appropriate housing for their full families, and their children remain with foster care families over 30% longer than other children in care. This costs the county millions of dollars each year and, more importantly, keeps families apart.

Before pursuing Pay for Success contracting with Third Sector, Cuyahoga County did not have enough evidence or momentum to make policies around this issue. In fact, County staffers were unaware of the extent of the homelessness-foster care overlap until they analyzed their data across both systems with support from Third Sector and Case Western Reserve University.

Under Pay for Success, a performance-based contracting methodology where government pays for demonstrated outcomes, Cuyahoga County had the opportunity to analyze data to understand the overlap between homelessness and the child welfare system, and to therefore focus and coordinate additional resources to these families. The use of integrated data systems and collaboration across departments allows the service provider, Frontline Service, to treat the family unit across systems, rather than treating each individual family member separately, and to adapt its programming to meet its goal of reducing days of foster care placement.

More than a contracting solution, Pay for Success is a framework to connect vast amounts of government data and facilitate the development of meaningful policy change across a variety of issue areas, from homelessness to health, juvenile justice to job training. In contrast to the majority of government contracts, these projects require the use of data to target those individuals most in need of services, and release taxpayer funds only when specific outcomes have been achieved based on rigorous evaluation. Examples of outcome goals include reduction in days of incarceration for juvenile offenders in Massachusetts and increased months of stable housing for chronic homeless individuals in Santa Clara, California. Wherever a government is willing to tie taxpayer dollars to demonstrated impact, Pay for Success contracting can facilitate the use of data analytics to drive government resources towards results-based social programs.

Performance-based leadership within government is not a fad, it is a movement. There are 11 active Pay for Success contracts across state and local jurisdictions, and more than 50 feasibility studies in development across a wide variety of issue areas. By lifting up tangible examples of Pay for Success contracts from communities like Cuyahoga County, OH, America Forward, a Coalition that Third Sector is a part of, has educated policymakers in Congress and in the Administration, and provided pathways to action through support for enabling legislation in the Workforce Innovation and Opportunity Act (WIOA) and the Every Student Succeeds Act (ESSA).

America Forward has also translated Federal government performance language back to local jurisdictions, educating them on the new flexibility and funding that may be available to explore and implement performance contracting. For example, America Forward’s role in defining the Pay for Performance authorities in the Workforce Innovation and Opportunity Act

led Third Sector to launch a competition exclusively for state and local workforce boards to implement Pay for Performance flexibility—turning legislation that fosters innovation into execution on the ground. America Forward’s work in Washington, DC is a catalyst for Third Sector’s local government projects as we both seek to strengthen this movement to drive government resources towards positive outcomes.

As we decide in the coming months who will lead our government as the next President, we should also make a decision about the kind of government we need. Whether under Pay for Success, or another name, our team at Third Sector believes that we need to change how government does business by using contracting to connect resources with results. It is important for the next President to understand that not every performance initiative is specifically about Pay for Success contracting, and that you need several key ingredients to ensure procurement reform will yield results, including:

1. Data Analytics — not just the presence of data, but the ability to connect data across systems, and leverage it by using analytics to provide feedback to providers and government agencies for improved contract monitoring;
2. Flexibility — policymakers should shift their focus from compliance towards creating a policy environment that fosters innovation and offers greater flexibility for providers to adapt programmatic interventions to achieve outcomes that are tracked real-time in our communities;
3. Procurement Reform – we must connect performance and outcomes, as measured by real-time data, with government payments. By embedding data collection and feedback within contracting, government can both support continuous improvement and increased provider performance, as well as drive informed decision-making on how to allocate resources.

At Third Sector, we sincerely hope the next President prioritizes linking one of a government’s most powerful tools—its allocation of allocates billions of taxpayer dollars a year—with measurable results for communities. Procurement reform is not glamorous, yet it is essential to building a government that delivers for the people. The time for “government-as-usual” has passed, and we need performance-based leadership.

Read more about how social innovators in the America Forward Coalition, like Third Sector, are solving America’s biggest problems in communities across the country every day in our briefing book, Moving America Forward: Innovators Lead the Way to Unlocking America’s Potentia, and join the conversation. Follow @3SCapital and @America_Forward, and tell us how Pay for Success and data analytics are improving outcomes in your community using #AFPresidential16