“Pay for Success” (PFS) deals provide a new route for state and local governments to tackle challenging human service problems. However, as transformational tools, these projects require governments to reset their thinking toward paying for results, while allowing the innovation and flexibility needed to achieve those results. Contracts between government and service providers have to acknowledge this flexibility, while also guarding against potential unintended consequences.
In the four years since PFS was introduced to the domestic US market, deals worth over $70 million have been launched. States, counties and municipalities nationwide are actively exploring PFS deals as a way of merging evidence and capital to address critical human service needs.
Based on experience to date, it is clear that, to be successful transformational tools, PFS projects require government to focus on three priority areas: valuing outcomes and budgeting for results, procuring for results, and rigorously measuring performance and outcomes.