Traverse: the divide between Outcomes Based Commissioning and Social Impact Bonds

02 July 2018

Traverse: the divide between Outcomes Based Commissioning and Social Impact Bonds

Introduction

In two previous blogs in this series, we presented key findings from our survey of English Local Authorities relating to outcomes based commissioning (OBC) in general, and Social Impact Bonds (SIBs) specifically[1]. 32 out of 153 local authorities responded, representing a 21% response rate.

While SIBs are a specific form of OBC, it is telling that our survey identified not only similarities in experiences and perceptions, but also notable differences, between the two.

Key similarities

  1. While 72% and 53% of responding local authorities are currently implementing OBC and SIB, respectively; these forms of commissioning are still niche in comparison to overall commissioning practice. For example, OBC in general account for less than 10% of overall commissioning budget in the overwhelming majority of local authorities who currently implement OBC. As a specific form of OBC, the value of SIBs is unsurprisingly even smaller, with the majority falling within the range of £1million to £3.5million.
  2. Children’s Social Care is by far the service area where such commissioning practice is more commonplace. 65% of local authorities currently implementing OBC have some form of outcomes contracting in this area, while the figure is 76% of those currently implementing SIBs.
  3. Most respondents from local authorities currently implementing OBC generally (71%), or SIB specifically (59%), think that their authorities will implement more OBC and/or SIB over the next five years. Respondents overwhelmingly cite the backdrop of extremely challenging public finances as the key motivator for their greater likelihood of engagement with these forms of commissioning in the near future.

Key differences

  1. Only 13% of local authorities currently implementing OBC are doing so in ‘Education’ while none cited OBC in ‘any other service area’. In comparison 35% of those currently implementing SIBs are doing so in ‘Education’ while the same proportion indicated that they have SIBs in ‘any other service area’. When the figures for this latter category are examined, the bulk relate to ‘Employment’. It is likely that ‘Education’ and ‘Employment’ are linked in the context of SIBs where we know that there is a significant cluster of SIBs in the UK around NEET groups (i.e. young people not in education, employment or training).
  2. 39% of local authorities currently implementing OBC indicated that they were motivated to do so with the aim of ‘saving money’. In contrast, 71% of those with SIBs have this as a key motivation. It is notable, therefore, that SIBs are much more widely perceived to be a mechanism for achieving fiscal objectives than OBC more generally. The conceptualisation of ‘outcomes’ may be different for SIBs than for general OBC.
  3. Almost half (48%) of respondents agreed that OBC contracts had worked well in their local authority, with a quarter (26%) disagreeing with the statement that OBC contracts “have worked well”. In contrast, those in local authorities that are currently implementing SIBs tend to be more ambivalent or unsure, where 35% ‘neither agree nor disagree’, while 29% were ‘unsure’. Only 18% ‘agreed’ that SIB contracts have worked well.
  4. While OBC in general, and SIBs specifically, are still experienced and/or perceived as being complex and difficult, the types of support needed exhibit important differences. For OBC more generally, local authorities predominantly want to learn from one another either through case studies of how other authorities have done it (75%) or through peer learning networks (63%). In contrast, local authorities tend to desire access to independent expert support and advice (65%) from credible sources when it comes to SIBs. This is likely to be the result of the recognition that SIB knowledge and expertise are still thin within local authorities. At least within the short term, there is a need to lever in such skills from external respected sources to build up the capacity within local authorities to be able to sustain SIB development and implementation over the longer term.

Implications of these

The National Audit Office’s review in 2015 made it clear that OBC is challenging and may not be appropriate in all instances. Our survey demonstrates that OBC is still rather niche (especially for SIBs) and account for a tiny proportion of overall commissioning. At the same time, OBC and SIBs are both perceived to be complex, and disproportionately time- and resource-consuming in relation to their role in wider commissioning practice. Hence the ‘case for change’ may be difficult to make even when commissioners may be dissatisfied with conventional fee-for-service commissioning, or may aspire to be more outcome-focused.

There is an urgent need for those in the arena of commissioning support to offer technical and relational support that account for how local authorities (and other public bodies) access trusted information and advice.

At the same time, while not disputing that OBC and SIBs are complex, it is important to point out that public bodies have proven that they are able to engage with complexity. For example, integrated commissioning in health and social care is arguably more complex and operates at a much larger scale in comparison to the majority of OBC and SIBs. Yet most, if not all, local authorities and their health partners are engaged in the former. Therefore, the ‘complexity’ narrative should not necessarily be taken at face value, particularly as there is evidence indicating that resistance towards OBC and/or SIB can arise from other factors (e.g. ideological opposition, misinformation, etc.).

It is instructive to note that SIBs, much more so than OBC more generally, is widely seen by local authorities (and potentially other public bodies) as a vehicle for helping to achieve financial savings. This has fundamental impact on how and where SIBs are used in the UK, with a real risk that they do not fulfil their early promise of transformation and innovation in public services. For example, it is not surprising that SIBs are overwhelmingly used in children’s social care where local authorities tend to have a much clearer ‘line of sight’ between their investment and resultant budgetary savings that accrue back to them. We are still relying on central government outcome ‘top-up’ payments to help overcome some of the inertia and the challenges around resolving the ‘who pays’ and ‘who saves’ conundrum confronting public service transformations that require genuine collaboration and co-investment across different public bodies.

Dr Chih Hoong Sin, Director


[1] This was part of a wider international comparative study led by the Institute of Nonprofit and Public Management Studies (INPMS) at Meiji University (Tokyo, Japan), supported by the Japanese Ministry of Education, Culture, Sports, Science and Technology (MEXT).

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