A Revolution Of Outcomes: How Pay-For-Success Contracts Are Changing Public Services

Should governments solicit private capital to fund social projects?

Across the country, and around the world, governments have been experimenting with a radical new way of delivering social services. They've begun "paying for success."

Pay-for-success (PFS) refers to when governments collaborate with outside investors who put up money for particular interventions that save money in the long run, such as therapies to help homeless mothers get back on their feet or programs to stop parolees from landing back in jail. The contracts, agreed between officials and "impact" funders and delivered by third-party nonprofits, pay returns if the interventions meet pre-agreed targets—for example, a reduction in the rate of recidivism by a certain amount. In theory, PFS represents a win-win for everyone: governments get to spend less money, while investors make a profit and have the satisfaction of facilitating new types of programs.

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