How do I start a PFS project? (Urban Institute)

By Kimberly Walker

A common question we at Urban receive is how to get started with pay for success (PFS), a model well-known for both its potential benefits and its complexity. Benefits include shifting risks of innovating or scaling social services from government to private or nonprofit investors; raising new capital; advancing collaboration across government agencies; and focusing stakeholders on outcomes over outputs. However, projects often take years to get from initial conversations to launch; many stakeholders may be working together for the first time and/or in a completely foreign context; and PFS itself is still relatively new.

Even with these caveats, there are ways to plan for success when it comes to PFS. We encourage sites to approach PFS as one potential solution to their community’s problems, rather than a panacea. In our experience, communities that have a clear problem that they’d like to solve rather than just an interest in the mechanism itself will make more meaningful progress on a potential PFS project quickly. 

In order to make that progress:

1. Start with the problem. Ask yourself: what problems loom largest in your community? Where are there clear inefficiencies or gaps in services? Where are people being underserved or not served well given local capacity? What research has already been done by local foundations, government agencies, universities, and so on about the costs (financial and otherwise) of certain social problems in your community? Answering these questions and discussing the information you find with other interested parties is a good place to start.

2. Secure key partners for planning and initial strategizing. Pay for success projects require a range of partners from the public, private, and nonprofit sectors. Based on the problem identified in Step 1, think through who affects and is affected by the problem. Not all partners need to be at the table to move things forward, but it is wise to have at least 2 or 3 involved in early planning discussions. Generally, this at least includes the entity that ultimately pays for services (usually a government agency) for the population, a service provider who interacts directly with the target population, and, ideally, individuals in the target population.

Once you have these partners in place, it’s time to talk about the “what” of the project: the intervention(s). This stage should be heavily informed by the problem selected and the partners involved. Any changes made to the partners, the problem, or the intervention is likely to affect the other elements. Service providers and/or other partners can follow up on a review of the evidence on the proposed intervention by engaging with the people they wish to benefit to find out what services are actually needed.

3. Try out some assessment tools. Next, move to the “how” of the problem’s fit with pay for success. The field has a plethora of tools to help you start on the journey of designing and testing out the strength of your potential PFS project. For example, Urban’s Project Assessment Tool can assist communities with this process by helping to identify and address potential weaknesses in the project. If the project has too many weaknesses to be addressed in the short-term, partners should talk about regrouping again in a few months or coming up with a new strategy to address the problem.

4. Expect plans to change. Pay for success projects often take unpredictable turns. For example, what happens if the government champion for the project is voted out of office? While some strategic planning can help the process go more smoothly, being prepared for the unexpected is a good idea.

Do you feel ready to get started with PFS?  If you’re right at the beginning of this process and have lots of questions, use our Ask an Expert toolto begin to find some answers. If you are in the midst of an existing PFS planning process, you can also apply to Urban for free technical assistance for your project!
 

Have a Pay for Success question? Ask our experts here

As an organization, the Urban Institute does not take positions on issues. Scholars are independent and empowered to share their evidence-based views and recommendations shaped by research. Photo via Shutterstock.