Introduction

Pay for Success (PFS) programs in the US have similar features to PbR programmes in other parts of the world. PFS ties payment for service delivery to the achievement of measurable outcomes. Projects are often accompanied by a form of social innovation financing, also known as a Social Impact Bond, in which investors provide upfront financing for the delivery of services and are repaid only if the services achieve a pre-agreed set of positive outcomes. In the US the development of PFS has been influenced by both the development of similar tools in the UK (see Chapter Three) and performance management tools in the public sector (Van Dooren et al, 2015). At the same time, the primary impetus for the adoption of these tools has been to increase the speed of social innovation in certain social sectors and to determine the extent to which the risk of exploring new approaches to increasing social benefit can be shifted away from the public sector. The trials, challenges and lessons learned from early attempts at PFS innovation in the US – while far from conclusive – offer hints at the future of PFS and the broader movement towards outcomes-based funding. This movement seeks to deliver high-quality, effective social services to individuals in need and their communities.

Extent and trends

As of 2017, 20 PFS projects are delivering services in the United States and there are over 50 additional projects in development. To date, the project development timeline has been about two years, on average.

Projects to date have clustered primarily in three issue areas: criminal justice and recidivism, early childhood education and wellbeing, and homelessness. This reflects several characteristics of the PFS model as it was originally framed: to provide upfront sources of capital to fund preventive or early intervention services with the potential to interrupt entrenched cycles of negative social and economic outcomes, and by doing so, to realise cost savings to the public sector. Recidivism and homelessness have emerged as leading PFS issue areas because of the high cost associated with frequent and repetitive use of jail, prison, emergency rooms and shelters, and baseline outcomes that are bad enough that even marginal change is notable.