Social outcome contracts (SOCs) is a relatively new type of mechanism in public service procurement. It focuses on harnessing the resources of the public, private, philanthropy, and civil society sectors to jointly implement effective interventions in the public domain. This tool should provide potential to modernise public services and European welfare regimes: by encouraging a culture of performance measurement, supporting cross-sector partnerships and allowing new intervention models to be piloted and scaled — thereby fostering learning and social innovation. Nevertheless, little empirical research compares SOC models with traditional financings (TF) mechanisms such as subsidies, grants, fee-for-service contracts, block contracts and in-house delivery. Therefore, the study aims to assess the effectiveness and efficiency of outcomes-based contracts in comparison to interventions delivered under traditional financing and evaluate the outcome measurement methods applied to determine their impact. Furthermore, the study focuses exclusively on social services rather than public services more generally.The study investigates two types of SOCs: Social impact bonds (SIBs) and other Payment-by-Results (PbR) schemes. We define SIBs as funding mechanisms in which investors provide up-front funding for a programme. The investors bear the risk of losing their investment if the programme fails to achieve its target outcomes but are repaid in full, with an additional interest payment from the commissioner if the SIB is successful. Some SIBs also include an intermediary, which helps find the service providers, investors, and/or evaluators. In contrast, PbR programmes do not involve an external investor or an intermediary. Instead, service providers only receive payments from commissioners if the providers achieve the target outcomes. PbR models typically vary in terms of how much of the total payment to service providers is based on outcomes. In pure PbR models, 100% of the payment is based on outcomes. This is not the case in mixed PbR models, in which part of the payment is financed traditionally.
PPMI, Politecnico di Milano