Comprehensive literature review that details the benefits and best practices of implementing a Pay for Success funding strategy.

“The term ’Pay for Success’ (PFS) refers to an innovative method of financing social services that shares risks and rewards through collaboration of public, private, and nonprofit sectors. PFS is based upon two core premises: first, that government should pay only for services that are demonstrably effective; and second, that the risk of providing social services—which may or may not prove to be effective—can be transferred from local and state governments that usually fund these services to the private sector” (p.1).

“The purpose of this document is three-fold: (1) To provide a brief historical context of PFS projects and descriptions of the six PFS projects currently being implemented in the United States, based on publicly available documentation; (2) To provide a brief summary of key formative and conceptual literature in the PFS field to date, and various themes and recommendations that may inform the continued development of the PFS model; (3) To provide information that can be used as a reference for [Corporation for National and Community Service] and stakeholders interested in the Social Innovation Fund’s PFS Grant Program” (p.3).

(Abstractor: Author)

Major Findings & Recommendations

“[The] initial literature search on the subject produced thousands of citations on this model of social finance: an initial search of peer reviewed and gray literature using the search terms ’pay for success,’ ’social impact bonds,’ ’social benefit bonds,’ ’impact investing,’ ’social impact partnership,’ ’social impact financing,’ and ’development impact bonds’ yielded over 25,000 results. It is clear from this literature base that the PFS model has captured a great deal of attention, and there is great interest in the field and its future” (p.31). “Data-driven analysis is a key element of PFS initiatives. This includes data-based analysis of the social policy landscape, key players, and of community, government, and investor priorities” (p.31). “Not all social interventions are well suited for PFS arrangements. Feasible interventions will offer: proven track records of success at small (and ideally large) scales; potential scalability; cost-effective programming able to produce fiscal savings for the government; measurable outcomes; credible approaches to impact assessment; and well-defined treatment populations” (p.31-32). “Sustained cooperation and commitment of all key players are key to implementing and maintaining a long-term PFS program. This includes government actors, intermediaries, investors, service providers, and evaluators” (p.32). “PFS arrangements should take into account the range of risks assumed by each key actor involved with a PFS transaction. This includes risks to investors as well as risks to nonprofit service providers” (p.32). (Abstractor: Author)