Outcomes-based contracting of public services

There are two trends associated with outcomes-based contracting that make performance management increasingly essential for social purpose organisations. The first is that publicly funded services to vulnerable or disadvantaged people are increasingly outsourced. The second is that payments for public sector contracts are increasingly based on the achievement of outcomes or results for clients (rather than more traditional cost-reimbursement models or activity-based payments). In order to participate, social purpose organisations need to understand whether they can reliably produce the outcomes that trigger payments, how they are progressing towards them, and how to improve their service delivery as they go[i].

Performance management processes and systems are essential for all services designed to deliver social outcomes, not only for services delivered outside government. Increasingly, government agencies are seeking to design and implement performance management systems in order to enhance the impact of their own services.

The diagram above illustrates the performance analyst’s use of data from many individual client journeys to try and discover trends. Their job is to go deeper into the question of ‘does this service work?’ and ask ‘which part of this service works for whom to achieve what?’ For example, in this diagram, a good proportion of those who received mental health services early did not experience admissions to accident and emergency departments (A&E), arrests or roughsleeping, unlike the majority of those who received mental health services later in their journey. In this situation, the response of the service may be to investigate how to introduce mental health services earlier.

[i] North, J. (2014). Payment by Results can work – but only with impact at its heart. Impetus-PEF.