Payment by Results and the voluntary sector

The National Council for Voluntary Organisations (NCVO) has published a report suggesting that Payment by Results, the government mechanism to boost innovation in public services could be preventing rather than promoting new ways of working.

Payment by Results, where a contractor is paid for a successful outcome rather than for undertaking specified activity, has been seen as an important tool for public service reform. It is intended to give providers the freedom to decide how to achieve results, rather than requiring them to follow directions from government.

However NCVO has warned that the instability created for providers by Payment by Results is in danger of making them more risk-averse and less inclined to experiment with new ways to achieve results.

Among the problems with typical Payment by Results models identified by the report are:

  • Binary payment models, where payment is only made when a target is achieved and no payment at all is made for progress towards the target;
  • The potential for failings in related services outside the provider's control to reduce the chances of their targets being achieved and hence their payment;
  • Insufficient payments to facilitate work with the hardest to help; and
  • Payment arrangements that mean smaller and specialist organisations are excluded because they don't have the reserves to cover the period between starting work and receiving payment.

For charities in particular, the cash flow problems that Payment by Results contracts create can be a major barrier to taking on contracts at all, even in areas where a charity could be very successful.

Among the recommendations in the report are that:

  • Commissioners should make use of up-front payments to ease cash-flow barriers, and provide payments for intermediate outcomes to facilitate working with service users who are further from achieving end outcomes;
  • Charities should develop an internal check to ensure that contracts they are bidding for and undertaking will allow them to work to their values, and not mean harder to help clients are uneconomic to work with; and
  • Government should ensure coordinated evaluation of different PbR models and sharing of good practice.

To download the full report visit