Investing in What Works: Federal Agency Awards Inaugural Pay for Success Grants

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Posted by Jonathan Greenblatt and Michael Smith on October 03, 2014 at 06:23 PM EST

This week, the Corporation for National and Community Service’s Social Innovation Fund (SIF) announced the federal government’s most robust action to date in support of Pay for Success (PFS), a promising model for expanding innovative, highly effective social programs that achieve better results and can save tax payer dollars.

Doubling down on its remarkable successes to date in advancing the President’s Innovation Agenda, the SIF is providing $12 million in new grants to support PFS solutions, a move that was enabled through broad, bi-partisan congressional support.

PFS is a presidential priority that offers new ways to support social sector innovation, driving better results while conserving government resources. It is a type of performance-based contracting that allows governments to pay providers for rigorously measured outcomes, not just the promise of success, as is often the case. PFS strategies often involve PFS financing, sometimes referred to as “social impact bonds”, through which mission investors fund the cost of preventive services and can be repaid from government savings that are generated when the services reduce demand for more costly safety net programs.

After a highly competitive process launched in June, today the SIF announced eight grantees, which will help communities develop Pay for Success transactions, while expanding diversity in the PFS field in terms of new intermediaries, geographic reach, social issue areas and approach. The inaugural cohort of SIF Pay for Success grantees is a group of high-performing organizations with experience in evidence-based policy, including: theCSHGreen & Healthy Homes InitiativeHarvard Kennedy School Social Impact Bond Technical Assistance Lab,Institute For Child SuccessNational Council on Crime and DelinquencyNonprofit Finance FundThird Sector Capital Partners, and University of Utah David Eccles School of Business PFS Lab.

Announced at an event co-hosted by the U.S. National Advisory Board on Impact Investing, SIF, and the Beeck Center for Social Impact and Innovation at Georgetown, the SIF’s PFS investments aim to address limited availability of funds for planning, feasibility studies, deal structuring, and pipeline development, all of which have constrained growth of the field. The investments have the potential to lead to dozens of Pay for Success transactions across the country, which can increase capital flow to solutions that work while strengthening communities and transforming lives.