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Frequently asked questions

Frequently asked questions about the GO Lab and outcome based commissioning

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Chapter 1

About the GO Lab

1 min read

What is the Government Outcomes Lab?

The Government Outcomes Lab (GO Lab) is a new centre of academic excellence for innovative government commissioning. Through rigorous academic research, the GO Lab seeks to deepen the understanding of outcome based commissioning and provide independent support, data and evidence on what works, and what doesn’t. The GO Lab is funded through a partnership between the Blavatnik School of Government at Oxford University and HM Government.

Why has the Government Outcomes Lab been set up?

Outcome based commissioning has emerged as an innovative way for governments around the world to achieve better social outcomes through collaboration with the private and not-for-profit sectors. While numbers of, and funding for, outcome based approaches have increased over recent years, research has not kept pace with this speed of growth. Much is still unknown about whether outcome based commissioning will meet its promise. The GO Lab will harness expertise from across Oxford University, to deepen the understanding and existing research on outcome based commissioning. It will also build on the evidence base and evaluate the effectiveness of this model versus alternatives,and to support local governments who are thinking of using an outcome based approach.

Is the Government Outcomes Lab an independent organisation?

The GO Lab is funded through a partnership between the Blavatnik School of Government and HM Government. It is part of the Blavatnik School of Government and is located at the School in Oxford. The GO Lab undertakes independent applied research into innovative government commissioning that meets the University of Oxford’s highest standards of research integrity. The GO Lab harnesses expertise from across the University and works with HM Government to increase the impact of the partnership.

What team within HM Government is supporting this partnership?

The Centre for Social Impact Bonds is a multi-disciplinary team and part of the Government Inclusive Economy Unit at the Department for Digital, Culture, Media and Sport. The team provides expert guidance on developing SIBs, shares information on outcome based commissioning and supports the growth of the social investment sector.

What organisations does the GO Lab engage with?

The objective of the GO Lab is to develop world-leading research to deepen the understanding of outcome based commissioning, including its effectiveness. To achieve this, the GO Lab engages with a wide range of stakeholders and partners from across the public, voluntary and private sectors. Read more

Chapter 2

Outcome based commissioning

1 min read

What is commissioning?

Commissioning is the process of planning, agreeing and monitoring public services. Over the past decade, the role of commissioning as a driver of quality, efficiency and outcomes for people has become increasingly important in central and local government organisations in the UK.

What is outcome based commissioning?

The term "outcome based commissioning” refers to a way of commissioning public services which allows government to pay only when specific outcomes are achieved by a service. The focus on outcomes can help public authorities enhance service quality and the productivity of public spending by clearly defining the expected outcomes, monitoring them and paying only when they are achieved.

What are some examples of outcome based contracts?

Outcome based contracts are in operation in a number of different policy areas, across both local and central governments. Examples of outcome based contracts in the UK include:

  • Career Connect, a charity providing career-focused guidance, advice and support across Greater Merseyside. Their service was commissioned as an outcomes contract by the Department of Work and Pensions in 2012 and again in 2015. The charity has financed ones of its programmes via a social impact bond, which has supported 3,928 young people.
  • Ways to Wellness, a new service for people in the west of Newcastle whose lives are affected by certain long-term health conditions. The service is supported by an outcome based contract with the Newcastle Gateshead Clinical Commissioning Group, calculated on the basis of long-term savings through reduced use of hospital services. Ways to Wellness is funded through a social impact bond and aims to support 11,000 people over seven years.

Chapter 3

Social impact bonds

2 mins read

How do social impact bonds fit into outcome based commissioning?

Social impact bonds (SIBs) are a form of outcome based commissioning that involve external investors. All social impact bonds involve an outcome based contract between the commissioner and delivery agency, and possibly further outcome based contracts between other parties. Research from the GO Lab focuses more broadly on outcome based contracts and innovative public sector commissioning, including (but not limited to) social impact bonds. In a conventional outcome based contract, service providers carry a financial risk, if outcomes are not achieved, and might struggle to find the up front capital to deliver a project. In a SIB, the social investor(s) steps in to take on the financial risk and will provide the up front funding to service providers to set the project up.

 

Why use social impact bonds?

Government is increasingly looking to test innovative approaches to managing demand, improving value for money and tapping into new sources of funding, such as social investment.

The social impact bond model has emerged in response to these challenges, and it builds on the government’s commitment to foster more cross-sector collaboration with the voluntary and the private sectors to tackle complex social problems. In this context, SIBs can be seen as a funding mechanism that allows VCSE organisations to deliver a payment by results contract without shouldering financial risks, whilst also unlocking private capital, as well as the expertise of social investors.

Unlike other public service commissioning models, the measurement of social outcomes is a necessary component for a SIB, since this functions as the trigger for payments by the commissioning authorities and is the basis on which investors are repaid. As such, SIBs are seen as an innovative tool for delivering better social outcomes whilst ensuring value for money for public spending.

What level of political support is there for social impact bonds?

SIBs started as a Labour project under Gordon Brown, grew under the coalition government and continue to have political support. SIBs seem to enjoy cross party support, as the potential benefits of SIBs appeal to politicians across the political spectrum. A timeline mapping the key government strategies and activities in relation to supporting the development of social impact bonds is available here.

What is the evidence around the impact of SIBs as a tool for improving social outcomes?

The social impact bond landscape has evolved significantly over the past seven years, and evidence is starting to emerge around the use and impact of social impact bonds. A number of qualitative evaluation studies have been conducted so far, but only a few SIB projects have been subject to a robust impact evaluation. Encouragingly, the final evaluation of the Peterborough One Service SIB, published in July 2017, showed that the project reduced reoffending of short-sentenced offenders by 9%, leading to the investors being repaid in full. Importantly, these evaluative results show that the One Service was indeed a successful intervention, but do not provide conclusive insight on the unique contribution of the SIB approach.

Due to the limited evidence, at present, the approach can be seen as promising, but unproven. The GO Lab at the University of Oxford has been set up to critically assess the emerging evidence.

To access existing evaluation reports and get updates on the GO Lab’s work on evaluating the impact of SIBs, please visit our Publications Library.

Chapter 4

Social investment

3 mins read

What is social investment and who are the investors?

Social investment is the use of repayable finance to achieve a social, as well as financial, return. The UK is widely recognised as one of the most advanced social investment markets in the world. In 2016 the Government published its strategy on supporting the social investment sector in the UK, committing to use social investment as a way to transform public services.

Social investors can be individuals, institutional investors, dedicated social investment funds and philanthropic foundations, who invest through their endowment. More information about social investment in the UK can be found on the Good Finance website.


Why is the term “social impact bond” still being used, if SIBs are not technically bonds?

The term “social impact bond” has been used in the UK for the past seven years, and changing the terminology now will likely lead to confusion among stakeholders. A glossary of other key words often used in this field is available here.

Why should local authorities provide payment for outcomes through SIBs and why not grants?

Unlike grants, as a funding mechanism, SIBs ensure that government only pays for desired outcomes achieved by a service. SIBs have the potential to improve collaboration across different sectors, foster innovation and channel investment into preventive services. There is a growing appetite for socially-motivated investors to use their capital as a driver of sustainable growth, directed towards investments that have a positive impact on society. SIBs enable government at both central and local level to access this growing impact investing market.

However, social impact bonds are not suitable for all social policy areas and services. A mixture of grants and social investment will likely continue to play a key role in government funding.

Why would local authorities use a SIB in place of a payment by results (PbR) contract?

Public authorities interested in commissioning SIBs should always start by undertaking an evidence-based options appraisal of all available funding models. Depending on the local context, the problem that is being addressed and the provider market, a commissioner may well decide that it is more appropriate to use other commissioning mechanisms such as a grant, a fee-for-service contract, or PbR.

Reasons for using a SIB over standard PbR contracts are as follows:

  • In a conventional PbR contract, service providers are only paid when they achieve the outcomes: it is the service provider that carries the financial risk if outcomes are not achieved. Consequently, it can be a challenge for service providers to find or cover the up-front capital to deliver a project at scale. With SIBs, the social investor bears the financial risk and provides up-front funding to service providers to set up the project.
  • Depending on the type of investor and their way of working, the involvement of investors can bring additional capacity and expertise in project management and data analysis that local VCSE organisations might lack. Some of the VCSE organisations that have worked with social investors have reported that they valued this input from social investors and that it contributed to building their expertise in house.
  • The combined expertise of commissioners, providers and investors creates partnerships that actively work together to find solutions to social problems.

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Instead of using a social investor, could the Government (or the service provider) not borrow money at a cheaper rate?

For many authorities, a lack of funding or resource capacity is a significant inhibitor of developing new approaches to services. Authorities might not be able or willing to invest in the first instance due to limited access to finance or the difficulty of accepting the project’s risks.

 

Only paying when outcomes have been achieved means that the working capital required to set up and run the services sits outside the public purse in the first instance and it is paid back only in case of success. This makes SIBs a more attractive funding mechanism than obtaining loans from mainstream banks and other conventional lenders. Moreover, some social investors work closely with investees, providing management support and specialist expertise, as well as financial resources.

 

The costs of developing and implementing a SIB should be carefully considered against the value that the proposed service will create. Commissioners should consider the overall costs and benefits, seeking guidance from resources offered by the GO Lab and the Centre for Social Impact Bonds in order to do so. 

How much return on investment does a commissioning authority have to pay?

Social investors seek blended social and financial returns, and the potential to make a profit on the initial investment is intended to compensate investors for the performance risks they take on under a SIB model. SIB commissioners can put a cap on the maximum amount of outcome payments they are willing to make. Rates of return vary widely, and the government is committed to encouraging more transparency in the system around the rates of return.