GAO Studies Pay-for-Success Contract Structure
Pay-for-success creates better outcomes for Federal, state, and local governments, according to the Obama Administration.
By Andrea Fox, EfficientGov Senior Editor
WASHINGTON, DC -- In 2014, Massachusetts launched a $3.5 million pay-for-success initiative to address chronic homelessness with capital investment from Santander Bank N.A. and philanthropic funding by the Corporation for Supportive Housing and United Way of Massachusetts Bay and Merrimack Valley1. The 6-year project is building 500 units of stable supportive housing for up to 800 chronically homeless people.
Two years before, Massachusetts became the first state to authorize pay-for-success contracts with its $50 million Social Innovation Financing Trust Fund. Since that time, other states have created similar programs, some to address homelessness and recidivism. The Obama Administration likes pay-for-success, too.
Since 2010, the administration has purported that permanent supportive housing lowers public costs by minimizing use of “crisis services”— prisons, jails, emergency rooms, and homeless assistance programs. Last year, the U.S. Department of Justice and Department of Housing and Urban Development thought of a way to help fund it when they set aside $8.7 million for pay-for-success projects that pay for housing for the chronically homeless2.
According to the White House website, pay-for-success creates “better outcomes for Federal, state, and local governments.3” These contracts specify the outcomes to be achieved, how they will be measured, and the schedule of payments that will be made as milestones are achieved.
In September 2015, the Government Accounting Office (GAO) recommended that OMB coordinate federal agencies and guide states and local governments in how to negotiate and manage these contracts. GAO performed a comprehensive study of the Massachusetts Chronic Homelessness Pay-for-Success Program, similar programs in the United Kingdom, and others. Report highlights include pay-for-success contract design and the structure of oversite management.