The Netherlands is a fruitful breeding ground for social outcomes contracts (SOCs), also known as outcomes-based contracts (OBCs). With 18 SOCs in place, it is a frontrunner on continental Europe. In this blog, Ruben Koekoek (Co-Founder and Managing Director at Social Finance NL, and former GO Lab Fellow of Practice) argues that to take the next step and create social impact at scale, the Netherlands needs to structurally incorporate the social outcomes contracting methodology into its policies and institutions.
The Dutch landscape
The Netherlands has gone through a social outcomes contracting cycle that resembles a number of other countries. In the first stage of the cycle, SOCs were met with great enthusiasm from the national government, local authorities and impact stakeholders. The first SOC in Rotterdam was covered on the main news channels and was front page news. Many (local) politicians, bankers and consultants were keen to copy the alleged success, leading to SOCs springing up all over the Netherlands. SOCs were regarded as a holy grail solution to many social challenges.
However, in the second stage of the SOC cycle in the Netherlands, criticism started to arise. This was both ideological – the market should not have a role in funding social services – and practical: it takes too much time and money to design, launch and monitor a SOC. Despite this debate, more pilots arose in the Netherlands. Most were local and focused on labour market participation, but the Ministry of Justice (recidivism) and the Ministry of Defence (integration of injured soldiers) also experimented with the instrument.
In the Netherlands we see a consensus among practitioners that a well-designed SOC can align incentives of the contracting parties around social outcomes, can provide a clear way to determine success, and can encourage innovation and prevention to achieve social outcomes, but this remains unproven.
How can we integrate the benefits of SOCs into policies for impact at scale?
Currently, the challenge is to leave this second phase, consisting of critical debate and pilots, and enter the third phase. In this phase, social outcomes contracting is not considered a panacea for all social challenges, but we begin integrating the benefits of SOCs into our policy design and procurement standards. How can we use the learnings from the SOCs to work towards a more results-based and effective government and social sector?
First, we should make defining and measuring the intended impact of social programmes mandatory. Before new laws are approved by Parliament, the responsible minister should define the intended outcomes of the law and how these will be measured during the first five years the law is in place. In some countries (such as the Netherlands) this is already compulsory, but compliance is often poor.
Second, we should install a central unit in government focused on SOCs. The government should have a central unit which has the knowledge and capacity to assist procurement departments to act as an outcome payer in different social outcomes contracts. They can provide templates and evaluate whether the SOCs are designed in a way that maximises the chances of success. This unit should be agnostic about the sector or theme and should have the ability to be engaged in SOCs across a range of policy areas. In the UK, the Cabinet Office played an accelerating role during the early years of SOCs. Alternatively, the Treasury Department could be well placed to take the lead.
Third, both local and federal actors should be financially incentivised by national government to make proper use of the SOC method. Ideally, outcomes which are achieved locally are paid for by local outcome payers (such as municipalities), and the savings at the central level are directed back to the local outcome payer, for example through an outcome fund.
Finally, this technical and financial support should be given only if the parties involved in a SOC are willing to share the data and are open to independent evaluation. Only with these conditions in place can a SOC result in policies and interventions which are more evidence based and hence result in better social outcomes in the future.
Not another pilot!
In the Netherlands, as in many countries in continental Europe, the time for pilots is over. We need to stop using social impact bonds and other SOCs for the good of single commissioners or private investors. The SOC should be anchored as a tool in our national body of laws, procedures and procurement standards. We need to use the approach as a general attempt to improve the way we govern and solve social issues more effectively.