Building a business case for payment by results or a social impact bond

There is a famous, almost certainly apocryphal, story about a 19th century recipe for cooking jugged hare.  Before getting into the detail of how to cook it, the recipe advises the reader: “First, catch your hare”

I’m reminded of this when I read some of the advice that is starting to become widely available on how to build a case for investing in better social outcomes. The advice usually relates to social impact bonds (SIBs) or payment by results (PbR) – but it also comes up in the wider context of making the case for any early or preventative intervention which reduces service demand.

Some of this advice is excellent, and nearly all of it is useful.  But what most of it has in common – and why it reminds me of the challenge of catching a hare before you can cook it – is that it tells you what to do but is often short on detail of how to do it.  For example, there is advice to collect data on costs and benefits, undertake cost benefit appraisal, build a financial model, estimate whether savings are cashable, etc.  But more detailed guidance on how you do these things is thin on the ground.  Basically, much of the guidance is saying “First, build your business case”

At ATQ we have been through this pain.  In a previous life we worked alongside the Cabinet Office with four local authorities on the feasibility of using payment by results or social impact bonds to fund interventions for troubled families.  The effort involved in testing the feasibility of intervention – and whether it was wholly or partly self-funding as result of future savings – was, to put it mildly, significant.  And at every stage of the process, we kept saying to ourselves – we must make sure we record how we did this, so that others can benefit from what we have learnt and do not have to do the same things from scratch.

So last week (somewhat later than we had originally intended) we published a joint Cabinet Office/ATQ guide to building a business case for intervention which improves outcomes.  You will find this on the Cabinet Office website as a How to Guide for commissioners of Social Impact Bonds, and on our website as a Payment by Results Toolkit.  But both these short titles are somewhat misleading.  The methodology and tools we used do not work only in a PbR or SIB context.  They  can also be used whenever a public sector body wants to know whether and how costs will change if it takes action which addresses a social problem and ultimately reduces service demand.  They should help anyone facing these challenges to:

  • identify what data they need to undertake a cost appraisal;
  • collect that data in a structured way; and
  • model and analyse the data once they have it (especially if they use the financial model we are making available).

We are not saying that the methodology we worked out is the only one available, or that we have all the answers.  Much good work is being done by many public sector bodies, such as local authorities which have been involved in Whole Place Community Budget pilots or are at the forefront of work with troubled families.  And the tools do not solve the basic challenge of collecting good data – though the Cabinet Office and others are working on making better data available

But, hopefully, they will help at least some of those who are grappling with these challenges and finding it a bit like chasing a hare round a field.

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In August 2018, the Home Office awarded grants to eleven Local Authorities (LAs) across England to deliver Trusted Relationships projects between 2018 and March 2022.  As Implementation Partner for this programme, ATQ provided support to the projects.  We therefore saw first-hand how the projects encountered and overcame their respective implementation challenges.  Our report presents ATQ’s observations and the headlines are:

  • Length and stability of funding is critical. Any support programme aimed at vulnerable people with complex needs will only work if it is designed and funded on a long-term basis – at least three years and preferably longer, as was the case here.  This allows time for programmes to ramp up, overcome teething issues and avoid inefficient and ineffective spending as projects struggle to spend money in a limited timeframe.  More importantly, it gives front line teams the time and space to establish working relationships with both the vulnerable young people that the programme is designed to serve, and the networks of statutory and non-statutory delivery partners that are part of any support service.
  • Flexibility of project design is key. As this programme has shown, there may be common principles underpinning programmes aimed at complex issues but a range of different approaches is possible, and projects should (as these do) reflect local needs and organisational structures, especially if we want to understand better what works best by testing alternatives.  A strength of this programme has been that it has allowed for such difference.
  • Services and interventions need to be co-designed with those they aim to support, within obvious limits. Vulnerable young people need agency rather than top-down solutions to what others perceive as their needs.  Services also need to sit both inside and outside statutory services – inside so that they can facilitate joined-up responses; outside so that they can successfully engage with those who have learned to distrust the system.  It became very clear from direct involvement of young people with our shared learning events and other visits with officials that young people can be and are very articulate about their needs and how support can best be provided.
  • Cross-cutting issues require joined-up solutions. This programme has shown how services targeted at a complex problem that do not fit neatly into public service silos can be the ‘glue’ that binds services together across areas that habitually have a different focus – especially those that treat people as victims needing support and those that treat them as offenders needing sanction and rehabilitation.  Based on our four-year involvement, ATQ would contend that Trusted Relationships has provided this ‘glue’ for an average of around £250,000 per project per year.
  • Understanding why people behave as they do is as important as what they do. The projects have shown the particular value of trauma-informed practice, and understanding how adverse experiences may shape the way people behave, and their willingness to respond to intervention.  In our opinion, this is particularly important in CSE and CCE, where exploitation itself may lead to significant trauma.

The Department for Education has just published the Final Report from a longitudinal evaluation of three SIBs that aimed to improve outcomes for young people leaving local authority care, with a particular emphasis on employment, education and training (EET) outcomes. ATQ Director Neil Stanworth was part of the evaluation team, which has been evaluating the three projects (In South London, Greater Bristol and Sheffield) since 2018.

Commenting on the report, Neil said “We’re really pleased that this report has finally been published, after a number of delays.  It shows how social outcomes contracts can make a real difference to the lives of some very vulnerable young people, and also how social investment funding enables real flexibility in the way complex support is delivered.”

Big Society Capital has just published new research by ATQ into the value of social outcomes contracts and social impact bonds in the UK.  Commissioned by BSC as part of their Outcomes for All report, and based on detailed analysis of 76 contracts implemented since 2010, the research found that outcomes to date had generated benefits worth more than £1.4 billion.

Commenting on the launch of the report, Neil Stanworth of ATQ said:  “We were delighted to be asked to undertake this work for Big Society Capital.  We have been estimating the value created by social interventions for many years, and think it really important that commissioners and policy makers understand just how much public value can be created if poor outcomes such as homelessness or long-term unemployment can be averted.  We hope that our work will contribute to a wider debate on this”

Neil has written a blog on this work which can be found here.

ATQ also co-authored another major report released this week, which summarises findings over the last 3 years from the evaluation of the Commissioning Better Outcomes Fund.  ATQ has been partnering Ecorys UK in conducting this evaluation since 2014.

For further information on either of these reports, please contact Neil at neil@atqconsultants.co.uk

Last week Ecorys/ATQ published our 2nd Update Report on the evaluation of the Growth Fund, tracking its impact over its first 5 years (2015-2020).

We found that the Growth Fund, a blended finance programme between The National Lottery Community FundBig Society Capital and ACCESS – THE FOUNDATION FOR SOCIAL INVESTMENT, has been successful in its aim of making small-scale loans more available to the charity and social enterprise sector. This in turn is strengthening the charities’ and social enterprises’ financial resilience and increasing their ability to support a wider set of people. We also highlight a number of lessons the partnership has learnt along the way, and aspects we suggest experimenting with further in the future.

Follow the links to read Ecorys/ATQ’s Full report and Executive summary, as well as blogs by Access Foundation and The National Lottery Community Fund.

ATQ Directors have been major contributors to two important recent reports on outcomes-based commissioning and SIBs.

The first was commissioned by the Centre for SIBs within the Department for Digital, Culture, Media and Sport and looks at the challenges and benefits of commissioning social impact bonds and the potential for replicating and scaling this type of contract. The report presents practical tips for commissioners to facilitate an easier commissioning process and provides recommendations to government to further the replication and scaling of SIBs in the UK. It was co-authored by ATQ Director Neil Stanworth along with colleagues from Ecorys UK and can be downloaded here. Neil has also written this blog summarising the report’s findings with Rachel Wooldridge from Ecorys.

The other report was a major update on the evaluation of the Commissioning Better Outcomes Fund which ATQ have been supporting, again alongside Ecorys, since 2014. This report draws on a range of other work done as part of the evaluation, including in-depth reviews of specific projects and stand-alone surveys of key stakeholders.  It includes major contributions from both Neil and fellow ATQ Director Edward Hickman, and can be downloaded here.  Another blog by Neil about this report can also be found on the GO Lab website here

ATQ is delighted to have been appointed Implementation Partner for the Home Office’s £13m Trusted Relationships Fund.  The Home Office has awarded grant funding to 11 Local Authorities to deliver Trusted Relationship programmes aimed at young people aged 10 – 17 years old who are vulnerable to sexual exploitation, gang involvement and/or peer abuse.  ATQ, along with our partners for this project, Circles South East, will be providing implementation support and monitoring of all the programmes as well as designing and delivering shared learning events throughout the four year life of the programme (funding for 2020-2022 dependent on the spending review settlement).

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Social Outcomes Contracts (or Social Impact Bonds – SIBs) have been a big part of ATQ’s work since we formed almost exactly 10 years ago, in August 2012.  We are proud to have supported many organisations to set up and implement contracts, and in recent years have become heavily involved in research and evaluation of such contracts through work such as this for the Department for Culture, Media and Sport.

Last week saw the publication of what might be the most high-profile piece of research we have ever done, into the value created by Social Outcomes Contracts (SOCs) in the UK since they first started more than a  decade ago.  Our report was part of broader work by Big Society Capital (BSC) to reflect on and celebrate the growth of SOCs over the last ten years.

The statistic that has gained most attention from our report, and was mentioned at Prime Minister’s Questions last week, is that every pound spent on SOCs in outcome payments has generated more that £10 of value. In other words, and in the technical language of cost benefit analysis, the Benefit Cost Ratio was 10.2.  Even if you accept that some of this value would have happened anyway (as it probably would in some contracts, but by no means all) we are still looking at a return to government and society of many times the initial outlay.

As one of many organisations that have been grappling with SOCs and SIBs, and whether they are value for money for many years, we hope this report will provoke further debate about whether and when such contracts are a useful tool in the commissioner’s armoury. Indeed it looks like that debate has already started, and we are happy to be part of it.  For now, I would offer three observations on this piece of work.

First, our report is and always was intended to be entirely factual.  It takes data on the outcomes that have been achieved by SOCs – as measured and validated by those contracts – and attempts to put a value on them based on the improvements they make to people’s lives. This is not an exact science, and so we were deliberately cautious – see below;  but we are making no judgement on the efficacy of SOCs, and nor are we comparing the performance of projects with each other or with other types of contract.  We have recently made a major contribution to another research report – the third update on the evaluation of the Commissioning Better Outcomes Fund – which does explore the strengths and weaknesses of SOCs in some depth, but this report does not do that.

Second, I am slightly puzzled by suggestions in some quarters that our value estimates are too big, and therefore somehow less credible.  Puzzled because we were deliberately conservative in our assumptions, as we explain in some detail in our report.  This is our usual practice when undertaking cost benefit analysis because we know that inflating ‘savings’ – either consciously or unconsciously – is self-defeating.  Our clients sometimes challenge our caution, and ask us to make more optimistic assumptions, but we tend to resist.  In this case we were even more cautious than usual, consistently using low estimates of unit costs saved when larger, well-evidenced estimates were available; assuming no sustainment of outcomes such as periods of employment;  and leaving many outcomes which potentially have value out of our analysis altogether.  The truth is that whenever we have done this type of exercise, the estimates we produce tend to be large because the costs of adverse outcomes – children in care, young people long-term NEET, older people needing hospitalisation for conditions that can be managed better at home – are themselves large, and much greater than many realise.

Finally, both the work we have done and the wider analysis by BSC seem to me to confirm that, whatever their other benefits and defects, these types of contract are delivering a pretty good ‘bang for buck’ and have leveraged a lot of value for not much spending. This is not just because of the benefit cost ratios outlined above, but also due to two other factors.  First, according to BSC’s figures these results have been achieved with the injection of around £71m in social investment. This is much less than many expected, and there has been criticism in some quarters that investment in SOCs has fallen well short of projections.  But a ’glass half full’ view would be that this is a good thing. The amount of working capital needed to smooth the wheels of these contracts (mainly to make the payment by results mechanism work for social sector organisations) has been much less than the total contract values, and this makes them pretty efficient.

The second point is that government and other bodies (notably the National Lottery Community Fund) have funded a high proportion of outcome payments made through SOCs, leading to criticism that such contracts only exist because of such funding. This is likely true (there have been very few contracts implemented without some form of subsidy from one or other so-called Outcomes Funds) but it does look like a reasonable investment, and it looks like a very good investment when one considers the particular case of the Commissioning Better Outcomes Fund and Life Chances Fund, which typically cover 20-30% of total outcome payments – with the rest coming from local commissioners. So the effective leverage of these contracts is maybe 3-4 times what it would be if they were wholly funded by government or the Community Fund.

And since many commissioners and providers have said that they would not have put up their own money without this pump-prime funding, what’s not to like?

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For the last two years I have been a Fellow of Practice at the Government Outcomes Lab (GO Lab) which is part of the Blavatnik School of Government at Oxford University. It has been an immense pleasure and privilege to have had this role, from which I step down at the end of the year.

The GO Lab is doing a great job in bringing together a wide range of thinking on how we better deliver pubic services and address complex societal issues, around a central focus on how we deliver better social outcomes.  This has also been pretty much the raison d’être of ATQ for the last seven years, which is in part why I ended up as a Fellow in the first place.

The Deputy Director of GO Lab, Nigel Ball, last week published this blog with some challenging reflections on whether and how a new government, with a substantial majority and clear mandate to govern for five years, will address the knotty problem of public service reform.  I am extremely loath to summarise Nigel’s complex and nuanced arguments, and would urge you to read his blog in full before you read this one, but his central thesis is that public services have, for several decades, drawn heavily on both private sector management practice and, through outsourcing and privatisation, direct provision.  This has led to a focus on top-down targets and contract-driven accountability for service performance and delivery.  Nigel argues that:

“Many people – and much recent research – would agree that these ideas, though once useful, are running out of steam. A new approach seems to be slowly emerging, with a very different core underlying idea: greater participation with communities. No longer should we view social problems medically, talking of a “treatment” at the right “dosage” which can be measured for its “effect”. Rather, citizens themselves, grouped by a shared geography, interest or need, can participate in designing and delivering public services. No longer should we use top-down contracting mechanisms, making both public and private delivery bodies answerable to government agencies for the services they run. Instead, government and its agents should give away some of their decision-making power, and work together hand-in-hand with communities and civil society organisations. This might mean they hand over more cash no-strings-attached, and trust people to be intrinsically motivated to do a good job. For some of the most evangelistic proponents of the new approach, even the idea that it is possible to “deliver” outcomes is misguided – if we focus instead on working out what a better system would look like, the outcomes we want will appear.”

My initial reaction to these ideas is that they have much merit.  In particular, I agree with the view that services should be designed with and for those they affect and are designed to help, rather than being imposed by those who think they know better; and that rigid contracting and commissioning models, backed by targets that distort delivery, can do as much harm as good. Beyond that, I would like to offer three ‘micro level’ observations and one ‘macro level’ thought.

At the micro level,  I think this sort of empowerment of communities can co-exist alongside some of the good things that have emerged from the prevailing models of the recent past, and that there are a few babies that I would not want to see thrown out with the bathwater.  These reflect both our own project experience and the evidence we have gathered through evaluations of others work.  They include:

  • The value of better evidence for what works (preferably supported by a thoroughly worked-through theory of change). Such evidence is far from perfect, and  there are many limitations to how robust it ever can be in a policy/social context, but it is I think better always to start from an evidence base where it exists.
  • The outcomes culture. Our consistent experience as both advisors and evaluators is that a focus on outcomes has benefits.  One of the major disappointments of national debate is that it focuses almost entirely on inputs, rather than on outcomes, or even outputs.  Witness endless bid and counter-bid throughout the election about who will build the most hospitals, recruit the most police officers, train the most teachers etc.  I have become a strong believer in the value of identifying, measuring and managing through outcomes, with and without monetisation, and would need some convincing that such outcomes-based approaches are a retrograde step
  • Strong performance management. By this I don’t mean the process of managing performance, which I agree can be over-driven by arbitrary targets. But much of the research I have seen shows clearly that any project – in-house or outsourced, contracted or grant funded, outcomes-based or conventionally measured – is crucially dependent on the effectiveness of those charged with its implementation.  At one level this is a statement of the obvious, but it is arguable that one of the biggest failures of the top-down, private sector-style management approaches we have adopted is that they still tolerate far too much poor performance; and one of the benefits of outcomes-based contracts appears to be that they encourage swifter and more radical action to address under-performance, often by strengthening and sometimes replacing existing operational management.

My big picture thought is to wonder whether government should start to treat spending to improve social outcomes truly as investment – and therefore closer to capital spending on infrastructure than current spending on services?  Many of the projects in which I have been involved in recent years have been supported by what is effectively an investment case – that spending on a preventative intervention will avoid or even reduce spending on a later, crisis-driven intervention.  The problem is that such projects are far too small to make much difference, and as a nation we never seem to have the resources to twin-track to scale – to spend enough on prevention to make a real dent in the long-term costs of poor outcomes, alongside the ongoing expenditure needed to deal with those outcomes.

But if outcomes-based contracts can be funded by external investors – and deliver them a return when they succeed – it should not be beyond the wit of government to adopt the same approach, and fund much larger programmes from borrowing rather than from taxation, underpinned by a business case that shows a return on that capital.  There are numerous areas where this approach could be adopted but how about targeted public health programmes, support to families with complex needs, and interventions to reduce substance misuse for starters? Done properly, such investment could be at least as justifiable as spending on infrastructure.

And yes of course I know that the Treasury would, to coin a phrase, rather ‘die in a ditch’ than allow this, but even an old cynic like me should be allowed to dream sometimes.

The current general election campaign has brought commitments from both main parties to increase levels of public spending to historically high levels – dramatically in Labour’s case.

How does Government ensure that any new monies for front-line public services are spent effectively and not wasted?

With the introduction of additional money, there are two possible ways ahead.  It is either a great opportunity for public services to invest in change and improve service outcomes or it can simply release the pressure and allow change to be put back into the ‘too difficult’ tray.

Necessity should be the mother of invention

In other spheres of activity, necessity is the mother of invention which drives innovation and changes in the way things get done.

In the public services arena, necessity doesn’t drive change in the same way.  This is because the spending taps have either not been turned off for that long or, as currently after 10 years of austerity, have arguably been turned off for too long.  Let me explain.

Public service managers act rationally.  Historically, spending cuts have been temporary within the usual five-year election cycle.  This means that the default response is salami slicing –  implementing small incremental cost savings, avoiding making any potentially significant changes in the way things are done and reverting to ‘normal’ when spending taps are turned on again.

The period from 2010 to 2015 can be characterised in this way, with most managers hoping/expecting that the next government would relax austerity.  Unfortunately for all of us, public finance conditions didn’t improve and austerity budgeting has continued up to now (late 2019).

So what effect did this have?  On the ground, front line public services have consistently reduced scope to meet only acute or statutory needs e.g. qualification for social care support, and change comes about largely through closure of provision and services e.g. Sure Start, youth centres, elderly care day centres, libraries etc.

At the risk of oversimplification, after five years of salami slicing there was not enough capacity left to plan, consult on and implement significant services transformation.  High staff turnover in times of low morale is another factor.  There have, of course, been some changes such as joining up between local authority teams in for example children’s services.  There has also been some innovative use of outcomes-based commissioning – something with which I have personally been involved.

However, these have been small scale.  The overall picture is one of services that are hunkered down coping with day to day demands with only limited commissioning and back office support to help introduce any changes.

So what should we do now the taps are about to be turned on again?  I have previously advocated three ideas for introducing change across the public services landscape.

Use an overarching theme – presumption of prevention – to drive change

For all public-sector organisations, I would argue for a presumption towards prevention as a sensible overarching hook or theme.  Every organisation should be encouraged to ask:

“what would we spend this budget on if the aim was to prevent the problem arising or getting worse?”

One of the positive consequences of looking at a social challenge from a preventative basis is that it forces organisations to look at outcomes and work out how to collaborate with other spending bodies to find ways of combining resources differently to now.  Equally importantly, it should be cheaper – but only if we can break the ‘safety first’ mindset of waiting until action is mandatory, and almost always much more expensive.

Explicitly invest in services R&D

If the answer in the private sector is R&D, why not the public sector too? One remedy could be to set an explicit Government services R&D budget allocation.  If say 1% of Departmental expenditure were top-sliced and allocated to R&D, this would be around £3bn per annum aimed at improving public service innovation and productivity gains.

This would require a complete rethink of the way we test and implement change.  Instead of scrutiny of policy initiatives after implementation with 20:20 hindsight, by the Public Accounts Committee, National Audit Office et al, we would be asking these or potentially different organisations to review an experimental spend and deciding whether to implement at scale.

Extend Individualisation and co-design 

Essentially give service users a voice in designing the services they receive.  Give them ownership of the budget and how it is spent.  The ideas of personalisation and choice have been around for over 10 years now but they have not gone anywhere near far enough, with control of budgets remaining largely with government bodies.

With some imagination, this principle could and should be more widely encouraged and extended to areas such as employability and skills (especially re-training), management of long-term health conditions, and parental support.

Conclusion

If 2020 onwards is going to be a great opportunity for public services to invest in change and improve service outcomes then, whatever colour the new Government, it needs to set the change agenda from the centre and quite possibly reinforce it with legislation.

How can we more easily replicate and scale social impact bonds (SIBs) and similar contracts?  This was the core question that newly published research by Ecorys and ATQ set out to answer.  In this blog, the main authors of the report, Rachel Wooldridge, Senior Research Manager at Ecorys and Neil Stanworth, Director at ATQ summarise the report’s key findings.

The enablers and barriers for commissioners

Central to understanding how to replicate or scale SIBs, writes Rachel Wooldridge,  is identifying the enablers and barriers that those who would lead their continued development – i.e. commissioners – face in developing them.  Our study began from this premise, and explored firstly what the challenges and benefits of the SIB commissioning process are for commissioners, before considering the wider implications for further developing the market.  We based this part of the research on detailed discussion with a sample of commissioners who had been involved in the development of SIBs, supplemented by a review of existing evidence from previous research.

Overwhelmingly we found that the greatest challenge commissioners faced was engaging with the various stakeholders needed to get the SIB developed, both internal to their organisation (key decision-makers, finance and legal staff,  and service leads) and external (investors and providers).  Sometimes these challenges were insurmountable: for example we found that lack of understanding about SIBs or misunderstandings about terminology prompted decision-makers to veto the development of the SIB.  But other times, the process of overcoming these challenges, through embedding a collaborative approach from the outset, benefitted commissioning organisations through fostering new and strengthened relationships.

Our report also found commissioners have struggled with the more technical elements of developing the SIB business case, particularly the financial modelling, accessing data and navigating tools and guidance.  Some commissioners have been able to engage advisors (using central programme development funding) to overcome these challenges, but the process of doing so led to up-skilled commissioning teams, that were more confident about considering outcomes-based approaches in the future.

Wider structural and cultural factors, like inflexible commissioning structures or organisational risk-aversion, also make outcomes-based commissioning difficult for commissioners.  However, plenty of procurement guidance is available and commissioners told us it is just a case of knowing about, and preparing for, these processes early on in the commissioning process to ensure success.  Investing time and resource into a high quality and flexible procurement process helps to establish a better contract.

Once we understood fully what commissioners had struggled with, and valued, about developing SIBs we then cast the net somewhat wider, as Neil explains further below.

The key routes to replication and scale

Having more clearly  established the barriers faced by commissioners, writes Neil Stanworth,  we moved on to the wider question of whether and how we can replicate existing contracts – or implement similar contracts at greater scale.  In my view this question has been around almost as long as we have had impact bonds, and certainly since we have had several previous examples to consider.

Our research into this question drew on the research with commissioners mentioned above, but we cast the net somewhat wider and beyond commissioners themselves, to capture the views of stakeholders with wider experience of multiple projects, such as investors, intermediaries and other advisors.  We spoke directly to many key stakeholders, and also issued a call for evidence inviting anyone with an interest in this question to let us have their views.

A key finding was that there are broadly two ways to replicate contracts, which might loosely be termed ‘bottom up’ and ‘top down’.  Bottom up replication happens most obviously when a commissioner copies what another commissioner has done, implementing a SIB in the same policy area with a similar (but rarely identical) approach and intervention; it also happens when the same commissioner implements further contracts in different or adjacent policy areas, either at the same time (by implementing what some are calling a ‘multi-SIB’) or later.  Top down happens when a specific type of contract is funded centrally (such as the Entrenched Rough Sleeping SIBs funded by the Department for Communities and Local Government); or when those delivering a contract on a specific model (usually a service provider or intermediary) engage other commissioners with a view to them adopting the same model.  Examples of the latter include HCT Travel Training and the Mental Health and Employment Partnership, both of which started with one commissioner or one contract and now have several.

What enables and what inhibits replication?

Whatever approach is adopted, our research found that there is scope to replicate or scale some, most or nearly all the features of a previous contract; our report gives examples of such features (everything from the intervention to the contract governance structure) and highlights where and to what extent we think they can be replicated. Stakeholders told us that that there is much we can do to make this process easier and quicker, by making more information publicly available on previous contracts, and deploying tools such as ‘plug and play’ financial models and template business cases for contracts in key policy areas.  Indeed the Government Outcomes Lab is already responding to some of the report’s key recommendations around this.  We believe that these kinds of tools will help successor commissioners get to grips with technical issues more quickly, avoid reinventing the wheel (or worse, the flat tyre) and reduce their need to rely on external advice and support, the cost of which itself inhibits growth.

But it is equally important to note the limits to replication – notably because the experts we spoke to all pointed out that any model, however well designed and ready-made, will need adaptation to local circumstances to reflect such issues as differences in the characteristics of the target group at which the programme is aimed.  Most importantly of all, any contract depends on a range of local stakeholders – from senior leaders to technical experts and front-line staff – being willing and able to engage positively in what can be a challenging process.  It is an obvious point, but one worth repeating, that just because a solution comes ‘out of the box’ does not mean that everyone will want to implement it, for a wide range of reasons.  Indeed we heard examples of models that had been enthusiastically and quickly adopted by some commissioners, and flatly and even more rapidly rejected by others.

Which is why there is considerable overlap between the barriers to commissioning in general, as outlined by Rachel above, and the challenges of replication.  Both depend crucially on positive stakeholder engagement and therefore on the narrative around outcomes contracts being easy to understand, and dispelling unwarranted suspicion and mistrust.  Some commissioners will have very good reasons not to copy or adopt what others have done, but it helps no one if those reasons are based on misconceptions or poor understanding. For this reason, we have made a number of recommendations on how the narrative around SIBs, and the language used to describe this type of contract,  might be changed. This is not easy to do, but we believe that it will make the type of contract that we call a SIB easier to understand, and potentially reduce some of the barriers to their acceptance.

I would also tentatively suggest that the ultimate goal of impact bond contracts becoming ‘mainstream’ will be best served in the long term by the ‘bottom up’ approaches outlined above.   Our research found that ‘top down’ approaches can make things happen more quickly, but they may not change attitudes to outcomes-based contracting as profoundly as multiple commissioners deciding for themselves that, in the right circumstances,  this is the way to go.

Since he became Prime Minister Johnson’s chief advisor there has been much attention on the musings of Dominic Cummings.  In one of his long and detailed blogs criticising Whitehall, he observes that:

“Whitehall …….is parochial about its own past. One of the most useful questions one can ask is not only ‘who has already solved this problem?’ but ‘have we already tried to do X and failed?’  In the DfE there is no system to answer this question reliably. Unless you get lucky with an old-timer, you cannot know and because they abolished their own library you can’t even go and study it.”

There is perhaps much to disagree with in Mr Cummings’ musings, but this strikes a chord. I have written before about the impact of lost institutional memory in the context of public sector productivity performance, and a couple of recent ‘lived experiences’ have prompted me to think further about this particular bugbear of mine.

It is perhaps a function of being 50-something years old that I am often by far the oldest person in the room – that old timer that Cummings writes about – and consequently have nearly always come across challenges that others appear to be encountering for the first time.

But it turns out it is not just a function of age – it’s a question of having any kind of institutional memory.

Lived experience #1:

At a recent meeting of around 30 commissioners and providers of children and young people’s (CYP) services, there was a presentation by a government policy lead which outlined what the policy team had found out over the preceding two years about effective CYP interventions. After around half-an-hour of discussion it emerged from the 30 or so professionals in the room that this two years of policy research and development had done little more than identify as best practice what everyone involved in youth work used to practice.

But as this kind of discretionary public expenditure had been cut back since 2008, much of this knowledge had been dissipated: there was no ‘institutional memory’ of youth work best practice and the policy team had to find it out all for themselves again. In fairness, the policy team were from a different Department of State to the one that led on youth work policy (and different again to the one that reduced local government spending on youth work) – but the effect of silos on cross-government learning is a whole other topic.

Lived experience #2:

Senior staff turnover at an organisation I have worked with for over five years means that I am one of only two members of the project team left with some ‘institutional memory’ of the detailed reasons why previous decisions were taken. In fact, and not unusually, both of us operate in external roles to the organisation and are the only ones providing any form of continuity.

What to do about it?

There is a huge amount of energy wasted when organisations find themselves having to invest time and resources re-learning lessons from before. Loss of institutional memory has to be a drag on productivity and innovation.

In my view, one of the keys is to ensure that there is a succession plan so that when staff move on from teams (usually through public sector promotion or role change), there is a successor who knows what’s what in that team or area of the organisation.

I call this my succession obsession and work with all my clients to ensure that they have identified individuals to develop and bring along as a way of ensuring at least some continuity.

Another good practice is to ensure that decisions are fully documented as projects and programmes progress. This is especially for when things go wrong as well as when they go right. Post implementation reviews are also an essential part of good project management and delivery but are often overlooked or done in only a cursory fashion – often because project teams have already moved on to the next challenge.

Finally, maybe part of the answer is to incentivise staff to stay in post longer and reduce some of the incentives to move so regularly in order to advance their careers. Would it be possible only to allow a staff move when they can apply what they have learnt elsewhere? In other words, when they start to become useful institutional memory themselves.

If we lived in less turbulent political times, Labour’s new policy on insourcing of public services might have attracted more attention than it has. Promising an ‘insourcing revolution to end [the] “scandal” of public service outsourcing’ it was launched through an interview with John McDonnell on the Today programme and was picked up by the Guardian and a number of specialist journals. But the coverage did not seem to do justice to what would be a major change – and challenge – for local government.

The BBC presented the story as Shadow Chancellor McDonnell’s revenge for Margaret Thatcher’s introduction of compulsory competitive tendering (CCT) of local services in the 1980s, when he was a GLC Councillor. But that seems to underestimate the thinking behind this: the detailed policy document runs to more than 50 pages, and sets out in detail why Labour believes services should be delivered in house.

Although some coverage implied that Councils would be forced to move services in-house, the document does not say this. What is does say is that when a contract expires there will be a presumption that it will be insourced, unless the Council can satisfy 10 tests of everything from its contract management skills to whether the contract involves ‘significant contact with at-risk groups’. If it fails these tests it can still outsource for ‘good reason’ – notably because it lacks in-house capacity or because there is a case for separation of services from the Council. However the Council must in addition ensure that its contract and chosen provider meet nine further conditions relating to legislative compliance, treatment of workers and past contractor ‘behaviour’.

The document acknowledges that there is much detail to work through to implement this policy – to which one might retort: ‘not half!’. A sensible short-term reaction might be to wait and see – since even if a Labour government were elected, it would take some time for this policy to be enacted in legislation, and much longer for it to bite as current contracts expire.

But is worth essaying a couple of observations, one political and one practical. The political point is that while it may be a stretch to call this ‘McDonnell’s revenge’, it is undoubtedly ideological. The conclusion to the policy paper says

“Local government is a key site in the struggle to unwind neoliberal reforms and democratise the economy………And through insourcing there is an opportunity to reassert at the local level the value of the collective ownership that is the hallmark of a socialist society.”

But arguably what we learnt from the Thatcher CCT reforms is that it is a mistake to impose a top-down, ideological blueprint on local democratic decisions; and take a simplistic ‘four legs good, two legs bad’ approach to service delivery and transformation. It was wrong of Thatcher to assume the private sector would always be better than the public, and equally wrong for Labour to now assume the opposite. Moreover a criticism that has been levelled at all UK governments, of whatever persuasion, since at least the 1980s, is that there is far too much control from the centre, not too little. Does a new Labour government want to be the one to shift that imbalance further?

The practical point is that it may not work. As Labour’s own policy paper ironically points out, more than a decade of Thatcherite and then Majorite compulsion had limited effect, with over two thirds of forcibly tendered services still in-house in 1993. Yet in the two and a half decades since then, predominantly under a Labour government that removed much of that compulsion, outsourcing steadily increased, as Councils made (mostly) rational and well-informed decisions on what to keep in-house and what to outsource. If they got it wrong it was their decision, not Whitehall’s.

So will a metropolitan authority that has contracted with a charity to deliver specialist support to vulnerable young people, through a service that is deliberately arm’s length from its Children’s Services Department, want to insource that service? And will a small District Council that has long benefited from the global capability of a large IT provider, want to start recruiting its own programmers and arranging 24/7 IT help desk support?

Either there will be much wriggle room in Labour’s legislative reforms, so those wanting to outsource will likely jump through the newly imposed hoops and carry on as before (and possibly extend their existing contracts by a few years before legislation is passed). Or the new regime will be more restrictive than it first appears, in which case many local officers, and I suspect many of their councillors, will end up being forced to make decisions that they do not necessarily believe to be in their best interests.

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