As departments seek to make more use of payment by results contracts, a panel of experts at Civil Service Live discussed the elements which will decide whether they're a success. Suzannah Brecknell listened carefully.
Payment by results featured heavily in this week’s public services white paper, which said that these contracts would be the default in a number of specific areas. At last week’s Civil Service Live, a panel of experts convened to discuss how to make payment by results (PBR) work, and to explore further opportunities to use the approach within government. Already, panellists explained, the term covers a wide range of contract types and sizes – from the Department for Work and Pensions’ multi-billion pound Work Programme through various Ministry of Justice pilot schemes to a £10m Innovation Fund, recently launched by the DWP, which will support smaller-scale projects. Geoff Llewellyn, director of public sector at business services firm Wipro, mentioned the use of profit-sharing models and joint ventures in developing technology solutions as another example of PBR in use.
As well as making effective use of limited public sector funds, contracts which specify an outcome rather than a process leave more room for innovation and can be an effective way to start tackling wicked problems which cross departmental silos. Mark Fisher, director for jobseekers and skills at the DWP, noted that the Work Programme deliberately avoids setting prescriptive contract terms so that employment-support providers can work “collaboratively at ground level”. The next challenge for PBR, he suggested, will be not only to adapt the approach to different outcomes, but “how you can get this approach into multiple outcomes, whereby there’s a health outcome, an offender outcome, there’s an employment outcome”.
Rebecca Endean, director of analytical services in the MoJ’s finance and corporate services directorate, agreed, but cautioned that “we do need to remember what our responsibilities are in terms of protecting public money.” She said three things will be required before departments can responsibly use PBR models: departments must be able to measure success; they must be able to write a contract; and they must be able to transfer some risk to external providers. “If those three basic conditions aren’t fulfilled, then we probably are in a little bit of trouble in terms of managing public money,” she said.
Adrian Kamellard, director of the commercial portfolio in the Cabinet Office’s Efficiency and Reform Group, emphasised the importance of putting in place the right metrics by which to measure success, adding that these must “reference the industry serving you as well as the policy you’re trying to deliver”. Civil servants embarking on PBR projects, he warned, “really need to make sure you have a proper and deep understanding of your supplier base.” To make PBR a success, he continued, the team working on it must “bring together commercial, financial, operational and policy skills” – and that team must “be very rigorous in thinking about commercial constructs and measures [at an early stage] because it’s quite difficult to tailor some of these things [later in the process].”
Fisher commented that the civil service is in the “foothills” of developing PBR contracts, and “we’ve all got some work to do with the Treasury” because “public expenditure control does require some quite simple systems, and all these are inherently complicated systems”.
This work with the Treasury will be crucial, he suggested, to the longer term success of PBR: “I just hope by the time the next spending review comes around, we’ve all garnered enough evidence to have a real go at putting these themes into the spending review, because that’s the only way that these things will really get life and breath other than as little experiments around the edges.”