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Overview

3 minute read

What is an outcomes fund?

The term ‘outcomes fund’ has been applied in a number of ways, but in this guide, an outcomes fund is defined by three characteristics:

  1. Dedicated funding to pay for social outcomes
  2. Intention to issue multiple separate outcomes-based contracts
  3. Open to the involvement of impact investment

Development and operation of an outcomes fund

A simplified operational process for outcomes funds follows four key stages

  1. Outcomes funding is designated and the objectives of the outcomes fund are established
  2. Call for outcomes-based project proposals
  3. Selection of successful outcomes-contract projects
  4. Payment is made for the achievement of measurable social outcomes

The outcomes fund administrator is the team or organisation that operationalises and takes responsibility for these stages.

The global landscape of outcomes funds

17 outcomes funds were launched worldwide between January 2011 and November 2021, seeking to address a diverse range of social issues. Nine of these were in the UK, with others in Europe, Asia, North America and sub-Saharan Africa. The first outcomes fund was launched in the UK in 2011 (the Department for Work and Pensions Innovation Fund) and the UK is the host of the largest number of outcomes funds internationally. The smallest outcomes fund by value of announced outcomes funding (standardised in USD) is the Brabant Outcomes Fund (NL, $1.15 million) and the largest is the Life Chances Fund (UK, $109.6 million).

Why are outcomes funds used?

Outcomes funds facilitate the establishment of multiple outcomes contracts and as such, the proposed benefits for using outcomes funds mirror many of the justifications that underpin the use of outcomes-based contracting for social programmes and public services. Outcomes funds are increasingly seen as a route to scale for outcomes-based contracts and impact bonds, increasing the value of funding, the number of contracts and stakeholders to them, and the number of service users reached by outcomes-based programmes. Other justifications for the use of outcomes funds include economic efficiencies and redirecting funds from ineffective projects to those that achieve demonstrable, measurable results, and accelerating learning about innovation interventions and/or outcomes-based funding itself.

Outcomes fund components

Outcomes funds may be classified according to five key components:

  • “What?” – Policy area and outcome measure
  • “Who?” – Cohort of participants
  • “How much?” – Outcome pricing
  • “When?” – Outcome verification
  • “With whom?” – Co-funders, investors, evaluator

Emerging outcomes fund models

Building on these five components, four emerging clusters of outcomes funds have been provisionally identified, based on the degree to which the dimensions are prescribed centrally by outcomes fund administrators (‘outcomes fund defined’) vs. open to definition by other market actors like service providers or co-funders of outcomes (‘applicant defined’).

Prescriptive outcomes funds (including investment) aim to both drive improved outcomes for a particular policy area and target population and build the market for investor-backed outcomes-based contracts (impact bonds). Example: The UK Innovation Fund

Policy prescriptive outcomes funds are tightly focused on delivering improved outcomes for a specific, pre-defined sector and target population. Metrics, outcomes pricing and evaluation methodology are often defined by outcomes fund administrators. The involvement of a third-party investor is not required. Example: The Ghana Education Outcomes Fund

Ecosystem building outcomes funds aim to incentivise new stakeholders to use outcomes-based contracting to address a range of complex social issues. They often co-fund outcomes payments alongside other government bodies. They sometimes require the involvement of third-party investors. Example: The UK Commissioning Better Outcomes Fund

Evidence-base strengthening outcomes funds primarily aim to build the evidence base around novel interventions, or scale the adoption of evidence-led interventions to deliver better social outcomes. They tend to be flexible in terms of outcomes measures, but may have strict evaluation requirements in order to strengthen and inform future policy and programmes. Example: US Social Impact Partnerships to Pay for Results Act (SIPPRA)

Considerations for future outcomes fund designs

Administration

Outcomes funders must ensure that various core capacities – the ability to pool funds, create demand for outcomes, and give assurances around risk management – can be fulfilled across the life of the fund. Administrators must be able to designate outcomes funding, call for outcomes-based project proposals, select successful proposals, and ultimately make payment for the achievement of measurable social outcomes.

Clear objectives and appropriate design

The design of a particular outcomes fund should be guided by its objectives. Therefore, those designing an outcomes fund must be clear about what these objectives are, and hence how the key components above should be structured to achieve them. However, it is also important to note that the typology of outcomes funds developed here is neither exclusive nor necessarily exhaustive. Funds may take hybrid approaches – for example, they may at once try to build evidence and ecosystems. In addition, there may be new design arrangements which fall outside of the scope of the emerging clusters identified here.

What is an outcomes fund?

1 minute read

The term ‘outcomes fund’ has been applied in a number of ways, but most have three defining characteristics:

  1. Dedicated funding to pay for social outcomes – Outcomes funds pool funding to financially reward the successful delivery of outcomes. Disbursal of funding is contingent on results. Payments from an outcomes fund only occur if specific criteria, agreed ex ante by the funders, are met. Outcomes funds are not investment funds: there is no expectation of being repaid. For example, Bridges Fund Management’s ‘Social Outcomes Fund II’ is an investment fund and is not an outcomes fund under this definition.
  2. Intention to issue multiple separate outcomes-based contracts – Outcomes funds intend to initiate and support multiple, independent outcomes-based contracts either directly with service providers, and / or by co-funding outcomes in contracts issued by other commissioners.
  3. Open to the involvement of impact investment – Outcomes funds acknowledge that, to enable outcomes-based, rather than input- or activity-based payments, service providers may need to access funding to pre-finance the delivery of interventions aiming to deliver results. Sometimes providers can cover these upfront costs themselves, but often pre-financing will need to be provided by third parties. In outcomes funds, this third party may include impact investors. Impact investors provide pre-finance in the form of at-risk capital. Investors will want their principal and a financial return repaid if outcomes are successfully delivered. Outcomes funds allow for this kind of ‘outcomes-based investment’ to be used. Outcomes contracts that involve impact investment are known as ‘impact bonds’ (see Figure 1).
Relationship between outcomes fund and supported outcome contracts
Figure 1 - Relationship between outcomes fund and supported outcome contracts. Outcomes funds issue, or provide funding towards, multiple outcomes-based contracts, not all of which may involve independent investors

Key stages in the development and operation of an outcomes fund

1 minute read

Key stages in the development and operation of an outcomes fund

A simplified operational process for outcomes funds follows four key stages:

  1. Outcomes funding is designated and the objectives of the outcomes fund are established – One or more actors (public, private and/or philanthropic) allocate funding to the operation of an outcomes fund. This is money that will mainly be used to pay for social outcomes, allowing funders to act as outcomes payers.
    The objectives of the outcomes fund will inform key considerations in the design and operation of the outcomes fund – for example, how many outcomes contracts are to be supported, and which metrics will be used to assess the achievement of desired social outcomes. The scale and nature of the resultant outcomes-contract projects can be shaped through the administration of the outcomes fund. Some of the key choices for the administration of outcomes funds are described below in section three (five components for outcomes fund-to-outcomes contract design).
  2. Call for outcomes-based project proposals – Service provider(s), social investor(s), intermediary organisations and/or a partnership of several actors are invited to apply to the available funding with proposals for social outcomes-contract projects where funding will be conditioned on outcomes performance.
  3. Selection of successful outcomes-contract projects – Outcomes fund administrators select proposals which become outcomes contracts to be implemented.
  4. Payment is made for the achievement of measurable social outcomes – If social outcomes are achieved through the proposed service, contractors receive payments contingent on the achievement of specified outcomes.

The outcomes fund administrator is the team or organisation that operationalises and takes responsibility for these stages. The administrators of outcomes funds need to take a view on what constitutes an appropriate ‘outcomes-based’ contract or project. Decisions need to be made as to the characteristics of applicant projects which are deemed acceptable to serve as outcomes-based contracts into which the fund will direct outcome-contingent payments.

The global landscape of outcomes funds

3 minute read

17 outcomes funds were launched worldwide between January 2011 and November 2021. Nine of these were in the UK, with others in Europe, Asia, North America and sub-Saharan Africa. The visualisations and figures throughout this report are prepared using an open access INDIGO outcomes fund dataset available here. The authors compiled this dataset using publicly available outcomes fund documentation, such as calls for proposals and ‘expression of interest’ invitations. Where key information was absent or further detail was required, documentary analysis was supplemented with key informant interviews conducted during summer 2021. We include outcomes funds that have reached operation by November 2021. That is, we restrict our focus to funds that have been, or are currently, open for applications at November 2021.

The first outcomes fund was launched in the UK in 2011 (the Department for Work and Pensions Innovation Fund) and the UK is the host of the largest number of outcomes funds internationally (nine outcomes funds to date, but note that not all UK-labelled funds are UK-wide and some are applicable only in England). The outcomes fund tool has also been applied in Portugal, the Netherlands, and USA. Since 2020 the approach has also been applied in Latin America (Colombia 2020) and Sub-Saharan Africa (Ghana and Sierra Leone 2020).

OFs2.png
Figure 2 - Outcomes funds worldwide showing the geographic focus for outcomes payments. Source: GO Lab INDIGO outcomes fund Data Set (November 2021).

The outcomes funds launched to date have varied significantly in terms of the amount of outcomes funding available (shown in Figure 3). The smallest outcomes fund by value of announced outcomes funding (standardised in USD) is the Brabant Outcomes Fund (NL, $1.15 million) and the largest is the Life Chances Fund (UK, $109.6 million).

Announced value of outcomes funds in USD
Figure 3 - Announced value of outcomes funds in USD. Source: GO Lab INDIGO outcomes fund dataset (November 2021)

* N.B. Announced value may not reflect committed outcomes funding which may be greater or smaller. The announced value of an outcomes fund may exclude additional technical assistance costs and funding for evaluation (and hence the value of the fund may be larger than that announced). Alternatively, a fund may be under-committed or selected outcomes contracts may not call on the full value of potential outcomes payments (thus the fund value may be smaller than announced). The conversion to USD was performed using the exchange rate at the release date for Expression of Interest or equivalent.

Existing outcomes funds have sought to address a diverse range of social issues. Some outcomes funds are focused on a single issue and have tended to focus on employment, education or health. The three largest outcomes funds launched to date (two in the UK, one in the USA) are multi-issue funds that seek to co-fund outcomes-based contracts alongside local government agencies across a range of social outcomes according to locally-defined needs. Figure 4 shows the connections between each outcomes fund (left axis) and the Sustainable Development Goals (SDGs) that each fund pursues. The classification of funds to SDGs is based on researcher interpretation of each outcomes fund’s documentation, as not all funds are explicit on the alignment with SDGs. Beyond ‘partnerships for the goals’ (SDG 17), ‘decent work and economic growth’ (SDG 8); ‘reduced inequalities’ (SDG 10); and ‘quality education’ (SDG 4) feature prominently in the landscape of outcomes funds to date.

One outcomes fund has a structure that enables it to operate internationally, with outcome payments capable of being paid in multiple countries. The Education Outcomes Fund (EOF) is an independent trust fund hosted by the United Nations Children’s Fund (UNICEF) and aims to work with a range of government partners across North Africa and the Middle East to improve learning and employment outcomes for children and young people. To date, EOF has announced outcomes funds in Ghana and Sierra Leone.

Sustainable Development Goal focus of outcomes funds launched by November 2021
Figure 4 - Sustainable Development Goal focus of outcomes funds launched by November 2021. Source: GO Lab INDIGO outcomes fund dataset (November 2021)

Why are outcomes funds used?

1 minute read

Outcomes funds facilitate the establishment of multiple outcomes contracts (see Figure 1) and as such, the proposed benefits for using outcomes funds mirror many of the justifications that underpin the use of outcomes-based contracting for social programmes and public services. Outcomes-based contracts – including impact bonds – are used on the understanding that they can deliver a range of benefits including improved efficiency, cost effectiveness, innovation, accountability, systems-level planning, and responsiveness. While the potential of outcomes-based contracts to respond to a range of implementation, co-ordination, and accountability challenges has been widely acknowledged, standalone contracts can be expensive and time-consuming to design and launch. This has limited their use to date.

Outcomes funds are increasingly seen as a route to scale for outcomes-based contracts and impact bonds, but scale has been defined in a number of different ways. These include:

  • The value of funding committed to an outcomes fund;
  • The financial value of individual outcomes-based contracts issued by an outcomes fund;
  • The number of outcomes-based contracts issued by an outcomes fund;
  • The number of contractual stakeholders involved in outcomes-based contracting; and / or
  • The number of service users reached.

Our research indicates that the definition of scale applied to any given outcomes fund may be influenced by outcomes funders’ motivations for creating an outcomes fund. Outcomes funders generally include one or more of: central or local government; bi-lateral or multi-lateral donor agencies; and philanthropists or philanthropic foundations. Reasons given for creating outcomes funds include:

  • Reducing the time, cost and complexity of creating outcomes-based contracts and impact bonds;
  • Building the impact investment market;
  • Expanding the use of outcomes-based contracting;
  • Encouraging cross-sector partnerships for social impact;
  • Generating economic efficiencies in social interventions (achieving more with less);
  • Redirecting funds away from projects that – based on objective data – are ineffective and into projects that achieve demonstrable, measurable results;
  • Accelerating learning about outcomes contracts; and / or
  • Accelerating learning about effective interventions for addressing complex social issues.

Five components for outcomes fund-to-outcomes contract design

3 minute read

Outcomes fund administrators play an important role in defining what appropriate outcomes contracts look like and selecting and/or developing the outcomes contracts that will be funded. Some outcomes funds identify the outcomes contracts that they will fund via a procurement exercise. Others shape and design outcomes-based contracts collaboratively with service providers and other stakeholders.

Our research has revealed some preliminary clustering of outcomes funds in terms of how tightly key features of eligible outcomes contracts are prescribed ex ante by fund administrators. These features can be thought of in terms of five key components of the outcomes-based contracts that are issued by outcomes funds.

Five key components for outcomes fund-to-outcomes contract design
Figure 5 - Five key components for outcomes fund-to-outcomes contract design
  1. What? This relates to how the outcomes fund defines the target policy sector and contractual outcome measures of the resultant outcomes contracts. In some outcomes funds this may be highly prescribed – for example, the fund administrators may stipulate a pre-specified set of outcome indicators like “sustained employment for at least six months” in order to trigger payment for the outcomes contracts. The Innovation Fund rate card described below is an example of this approach. In other outcomes funds this may be much more loosely defined – for example, the policy sector may be “complex social issues” and applicants may have the freedom to propose suitable outcome measures.
  2. Who? This relates to how tightly the target population is defined by the outcomes fund. In some funds this may be highly specified – for example, out of school primary school aged children in rural areas of specified districts. In other outcomes funds the intended population to be supported through the outcomes contract may be loosely defined, or not defined at all.
  3. How much? This relates to how the price per outcome or method for outcome pricing is prescribed by the outcomes fund. In some outcomes funds, there may be a consistent pricing approach – a clearly defined process, or a rate card specifying acceptable maximum and minimum tariffs – applied to all outcomes contracts. A rate card is a published, pre-specified list of outcome measures that the outcomes fund aspires to achieve and the monetary value that fund administrators are willing to pay for each outcome. In other outcomes funds, service providers, investors and / or local co-funders of outcomes may be invited to propose an appropriate outcomes price with no fixed parameters from the outcomes fund administrators.
  4. When? This relates to how the timing and basis for triggering outcomes payments is set by the outcomes fund. In some outcomes funds, this may be tightly defined – for example a centrally-administered annual evaluation of contractual outcome indicators across all contracts will be measured against an experimental control group. In other outcomes funds, service providers, investors and / or local co-funders of outcomes may be invited to propose an appropriate approach for verifying whether and to what extent contractual outcomes have been achieved.
    There are important connections and co-dependencies between ‘what’, ‘how much’ and ‘when’ and these dimensions will need to be considered carefully by outcomes fund administrators.
  5. With whom? This relates to whether the contractual stakeholders are prescribed by the outcomes fund administrators. In some outcomes funds, the participation of local co-funders of outcomes; independent impact investors; and / or independent evaluators may be required in addition to suitably qualified service providers. There may also be an expectation for the legal form or sector of the provider organisations (e.g., from the charitable or social sector). In other outcomes funds the involvement of one or more of these additional stakeholders may be optional and left to the discretion of individual outcomes contract holders.
    Some outcomes funds set out an explicit learning agenda and therefore may bring together a range of organisations beyond the formal contractual stakeholders for the purpose of learning, reflection, and future planning. For instance, some funds have set out the explicit learning objective of providing better evidence on the effectiveness of the impact bond mechanism and evidence of financial savings.

Variation in design choices across these five areas will affect the comparability and nature of the resultant outcomes contracts and may have implications for the extent to which the outcomes fund is able to deliver against its intended purpose.

Emerging outcomes fund models

3 minute read

With only 17 outcomes funds launched to date, it is too early to definitively characterise the different models of outcomes fund and to assess their relative impact. However, our research has identified some early clustering of practices around outcomes funds with common ambitions and approaches for supporting outcomes contracts. The models below characterise tentative patterns of activity seen in the market and offer a way to think about variation in terms of how outcomes funds are deployed. There is currently no evidence to link particular outcomes fund designs to particular types or levels of impact.

Building on the five components of outcomes fund-to-outcomes contract design outlined above, we have characterised four emerging clusters of outcomes funds, based on the degree to which the dimensions are prescribed centrally by outcomes fund administrators (‘outcomes fund defined’) vs. open to definition by other market actors like service providers or co-funders of outcomes (‘applicant defined’).

Dimensions of outcomes fund design
Figure 6 - Dimensions of outcomes fund design

We outline four emerging outcomes fund models below. The hollow markers show, for each dimension, whether this aspect is defined by the outcomes fund administrators (left side) or applicants (right side) within each model. Where a particular dimension is sometimes outcomes fund and sometimes applicant defined by existing outcomes funds within a cluster, the indicator is shown in the middle of the bar. A marker point in the middle of a dimension is also used to indicate a situation where there is partial definition by outcomes fund administrators but where a degree of discretion remains for fund applicants.

Prescriptive outcomes funds (including investment)

The ‘prescriptive’ outcomes fund model, including investment, aims to both drive improved outcomes for a particular policy area and target population and build the market for investor-backed outcomes-based contracts (impact bonds).

Not all UK outcomes funds use this model, but to date we have only seen this model used in the UK. The UK Innovation Fund is an example of this kind of outcomes fund.

The UK Innovation Fund is the first example of an outcomes fund and was launched by the Department for Work and Pensions (DWP) in 2011. This Fund aims to support disadvantaged young people classified as not in employment, education or training (NEET) by helping them participate in education and training to improve their employability (HM Government, 2012). The fund also aims to support the development of the social investment market and test the generation of benefit savings (i.e., a reduction in spend on unemployment insurance) alongside wider fiscal and social benefits. The Innovation Fund pioneered the use of a ‘rate card’ by publishing a pre-specified list of outcome measures that the DWP aspired to achieve in order to advance its policy priorities, and the maximum price it is willing to pay for each outcome (HM Government, 2012). The rate card set out individual participant-level proxy or ‘intermediate’ outcome payments – including educational qualifications, improved school attendance and improved behaviour – known to be linked with employability and therefore expected to improve the chance of a young person entering and sustaining employment (Griffiths et al., 2016). The DWP did not require additional co-funders for outcomes payments and acted unilaterally to pay for outcomes. The requirements for claiming, evidencing and validating Innovation Fund outcome payments were established by outcomes fund administrators and described in guidance notes for providers.

The DWP ran a competitive bidding process through two ‘rounds’ and invited proposals for outcomes contracts that brought together social investor and service provider partnerships (social impact bond contractors) who proposed projects that could achieve the measures set out in the rate card. Ultimately, 10 separate impact bonds were launched under the Innovation Fund.

Prescriptive outcomes fund (including investment) design dimensions
Figure 7 - Prescriptive outcomes fund (including investment) design dimensions

Policy prescriptive outcomes funds

Policy prescriptive outcomes funds are tightly focused on delivering improved outcomes for a specific and pre-defined sector and target population.

Outcome metrics, outcomes pricing and the outcomes evaluation methodology is often defined centrally and applied across all outcomes contracts supported by the fund.

In this model, the involvement of a third-party investor is not stipulated by the outcomes fund administrators but is left to the discretion of applicants. This distinction may be helpful when considering outcomes fund ambitions for the involvement of impact investors.

The planned Ghana Education Outcomes Fund is an example of a policy prescriptive outcomes fund.

The Government of Ghana has received financing from the World Bank to support the Ghana Education Outcomes Fund (EOF) Programme. The programme targets primary school children, with an emphasis on out-of-school children and improving learning outcomes in public schools in rural areas. The Fund only allows applicant discretion with respect to the presence of an impact investor. Proposals led by service providers ­– regardless of how they pre-finance the service – are permitted providing they can evidence sufficient working capital to deliver their services ahead of outcome payments. All other design dimensions are determined ex ante by the fund administrators.[1] For instance, the Fund specifies that eligible schools in rural areas are drawn from the list of schools already enrolled in the Ghana Accountability for Learning Outcomes Project (GALOP), giving priority to schools with high concentrations of out-of-school children. Similarly, the outcomes will be measured through standard literacy and numeracy tests compared to a control group of similar schools not involved in the Ghana EOF Programme, prescribing the presence of an independent evaluator.

[1] This description of the Ghana EOF programme as a 'policy prescriptive outcomes fund' applies to the majority of contract lots. It is our understanding that the urban lot may take a less prescriptive approach.

Policy prescriptive outcomes fund design dimensions
Figure 8 - Policy prescriptive outcomes fund design dimensions

Ecosystem building outcomes funds

Ecosystem building outcomes funds aim to incentivise new stakeholders – particularly other government agencies – to use outcomes-based contracting as a mechanism to drive better social outcomes across a range of complex social issues. They often co-fund rather than fully-fund contractual outcomes payments.

Sometimes these funds also require the involvement of independent impact investors in all outcomes-based contracts.

The UK Commissioning Better Outcomes Fund and Portugal Inovação Social are examples of ecosystem building outcomes funds.

The Commissioning Better Outcomes (CBO) Fund was set up by the Big Lottery Fund (now The National Lottery Community Fund) with a mission to support the development of more social impact bonds. CBO makes funding available to pay for a proportion of outcome payments in social impact bond outcome contracts in complex policy areas. CBO requests full proposals from ‘commissioners’ of public services, for example, local authorities, central government departments or clinical commissioning groups (health service commissioners) who have developed outcomes contracts and where the applicant commissioners will provide the majority of outcomes payments. The applicant commissioners develop their own specifications for outcomes contracts: CBO does not specify the intended participant population or outcomes measures. Development funding is available for technical support, for example, to enable applicants to define the cohort and referral pathway and pricing of outcomes. CBO administration documents stipulate that the funding will “only fund SIBs that have a clear emphasis on improving outcomes for those most in need and that ensure VCSE organisations have the chance to be involved” (Big Lottery Fund & Cabinet Office, 2013, p. 6).

Ecosystem building outcomes fund design dimensions
Figure 9 - Ecosystem building outcomes fund design dimensions

Evidence-base strengthening outcomes funds

Evidence-base strengthening outcomes funds primarily aim to scale the adoption of evidence-led interventions and / or to build the evidence base around interventions to deliver better outcomes for complex social issues.

This form of outcomes fund tends to be broadly defined in terms of sector, outcomes and target population, but may require outcomes evaluation to be independent or have high standards in the evaluation methodology in order to strengthen and inform future policy and programmes.

SIPPRA in the USA is an example of this kind of outcomes fund.

SIPPRA aims to improve lives by redirecting funds into programmes that achieve demonstrable, measurable results. There is an ambition to bring pay for performance to the social sector, scale up effective services by bundling philanthropic and other resources and incorporating rigorous methodologies for assessing impact.

SIPPRA legislation gives state and local governments the opportunity to apply for funding to support evidence-based programmes through outcomes-focused ‘social impact partnerships’. The Notice of Funding Availability outlines a range of clearly defined outcome measures and applicants must target one or more of the identified ‘qualifying outcomes’ measures, for example “increasing work and earnings by individuals in the Unites States who are unemployed for more than 6 consecutive months” (U.S. Department of the Treasury, 2019, p. 5). Moreover, 50 percent of the overall funding must be used for initiatives that directly benefit children. SIPPRA mandates rigorous evaluation by an independent evaluator and all projects are expected to be evaluated with a randomized control trial or a high quality quasi-experimental design.

Evidence-base strengthening outcomes fund design dimensions
Figure 10 - Evidence-base strengthening outcomes fund design dimensions

Considerations for future outcomes fund designs

2 minute read

To operate successfully, outcomes funds must credibly commit to paying for outcomes whilst also opening space for those implementing outcomes contracts to adapt and innovate their services. Gugelev and others (2019) argue that this function calls for a particular fiduciary structure: one that can pool funds, create demand for outcomes and give funders and/or political representatives assurances around risk management. Outcomes fund administrators must assure themselves that these core capacities can be fulfilled across the life of the fund. Fund administrators – either directly or by working with others – must be able to designate outcomes funding, call for outcomes-based project proposals, select successful outcomes-contract projects and ultimately make payment for the achievement of measurable social outcomes.

Beyond this core requirement to administer the payments for outcomes it is important that those designing funds are clear about the outcomes fund’s objectives. If the ambition is primarily to drive better outcomes for a pre-identified policy challenge or particular population, it may be appropriate for the fund administrators to define key parameters around policy area, outcome measures, participant cohort and outcomes verification approach, as seen in the ‘prescriptive’ and ‘policy prescriptive’ outcomes funds described above. This approach may be understood to reduce the per-project transaction costs associated with the development of a one-off outcomes contract arrangement.

Funds that have an ambition to develop evidence – either around the adoption of outcomes contracting or on the effectiveness of given interventions – may focus attention on specified and/or standardised outcome measurement and independent evaluation. Evidence-base strengthening outcomes funds provide some discretion to applicants in targeting specific policy issues and outcome measures but mandate the involvement of independent evaluators. The requirement for a high-quality independent evaluation designed to assess the strength of causal evidence characterises the approach. Such outcomes funds may be regarded as a ‘test and learn’ tool by policy makers, who may intend to embed and scale effective interventions through more conventional policy implementation mechanisms at a future date.

On the other hand, if the aim is to develop capabilities and expand the number of agencies able to use outcomes-based contracting and / or to stimulate outcomes-based impact investment, it may be more appropriate to allow fund applicants to define target populations, outcome metrics and outcome measurement approaches within broad parameters. The requirement for applicants to ‘ecosystem building outcomes funds’ typically relates to the involvement of additional parties in the form of additional ‘co-funders’ who are expected to jointly contribute to the payment for outcomes alongside the initial outcomes fund. By bringing discretion for fund applicants and other parties to tailor the resultant outcomes contracts on dimensions of policy focus, outcome measures, cohort, pricing and verification, these projects may have longer development timelines and there may be limited standardisation across the resultant portfolio of outcomes contracts.

Importantly, this typology of outcomes funds is emergent. The names and clusters of outcomes funds are by no means clear cut nor exhaustive and funds may take hybrid approaches that blur boundaries across the fund types. For example, the SIPPRA outcomes fund is described as an ‘evidence-base strengthening’ outcomes fund but also adopts a co-payment model whereby states or local governments jointly pay for successful outcomes alongside federal government. It therefore also has hallmarks of an ‘ecosystem building’ outcomes fund in line with the fund’s stated ambition to grow the adoption of pay for performance, particularly in the social sector. In future, outcomes funds may evolve and develop with alternate, as yet untested, design arrangements. The ongoing challenge for outcomes fund administrators is to pool funding that can be deployed with a well-developed set of fund objectives and ensure that this maps coherently to the dimensions of outcomes-contract design.

Acknowledgements

1 minute read

This guide is based on Understanding outcomes funds: A guide for practitioners, governments and donors by L. Savell, E. Carter, M. Airoldi, C. FitzGerald, S. Tan, J. Outes Velarde and J. R. Macdonald. It draws on data from the INDIGO Outcomes Fund Directory dataset.

We have designated this and other guides as ‘beta’ documents and we warmly welcome any comments or suggestions. We will regularly review and update our material in response. Please email your feedback to golab@bsg.ox.ac.uk.