Healthy Brains Global Initiative (HBGI) Lecture: Outcomes Based Contracting (4th Session)

Introduction

Key Challenge: Delay in payments until outcomes are achieved
Objective: Understanding the need for working capital to begin mobilizing and delivering programs

Richard Johnson: CEO of HBGI, 25+ years in outcomes based contracting
- Background and options for working capital in outcomes based contracts
Amit Shah: Investment Director at Bridges, experience in outcomes based contracting from Social Finance and Bridges
- Perspective on impact bonds and investors' perspective

Problems with Traditional Grant-Based Programs:
- Example: Women’s Economic Empowerment Program in Afghanistan by USAID
  - Cost $60 million, resulted in employment for only 12 women
Traditional Training Program Funding Workflow:
- Funders prescribe program -> Government implements -> Receipts collected for reimbursement
- Example: Road building in Afghanistan, roads built but not connected anywhere
Proposed Structure: Attach payments to delivery of outcomes
- Agree on outcomes, set payments for those outcomes

Components: Inputs, Outputs, Outcomes, Impact
- Example in Employment Context: Training delivered -> Qualification achieved -> Job secured -> Increased economic prosperity
Importance of Outcomes-Based Payments:
- Aligns incentives of contractors and service providers with service users
- Drives cultural shift focused on performance and meaningful success

Key Elements:
- Define and attach payments to outcomes
- Implement proactive performance management
- Build capacity within contracting and providing bodies
- Example of meaningful activities: Mosquito nets, employment programs, health services

Methods to Address Cash Needs:
- Borrow from banks
- Use organizations' reserves
- Commissioner provides interim outcome payments
- Social investors (e.g., social/development impact bonds)

Structure:
- Government/commissioner pays for outcomes
- Service provider delivers services funded by social investor's upfront working capital
- Investor reimbursed upon achieving outcomes
Criticisms:
- Perceived complexity and expense
- Views that it prioritizes quantity over quality
Counterpoint: Simplicity of focusing on achieving measurable outcomes rather than managing complex inputs

Key Points:
- Connect money to meaningful delivery
- Understand costs and build costed operating models
- Develop bottom-up solutions and empower service users
- Practice proactive performance management and transparency

Bridges: Fund manager managing money on behalf of other investors
Approach: Provide working capital for outcomes contracts and operational support for delivery organizations
Examples of Success:
- Positive Families Partnership - London family therapy
- Village Enterprise - Economic empowerment of women in East Africa
- Social Prescribing - Reducing hospital costs via non-medical prescriptions

Dynamic Change: Shift from input-based grants to outcomes-based models
Partnerships: Strong relationship between commissioner, funder, and delivery organization
Mitigation: Addressing the initial slow pace of delivery through iterative improvements

UK and International Applications:
- UK: Multiple local authorities collaborating on outcomes-based projects
- International: Development impact bonds in education, homelessness, employment

Final Thoughts: Outcomes-based contracting as a means to effective service delivery
Open Discussion: Addressing queries on cost-effectiveness, funding structures, and cross-sector applications

Feedback and Future Sessions: Open for suggestions and feedback on the series
Contact: Shamia Ali, HBGI