Payment by results: coming to a project near you

KPMG: Rock solid

In June 2010, KPMG published a report called Payment for Success. It was about how to reform UK public services, by shifting power from the supply side to customers. It was rock solid in its conclusions:

“Payment by results should be implemented across the public sector without exception – where it exists already, it should be made more forceful and sophisticated, where it does not exist, it should be introduced with very limited transitional periods.”

Wow. That’s certainty, whatever else you might think. Why does it matter? This February, one of the authors, Paul Kirby, was appointed to Number 10 as the Prime Minister’s Head of Policy Development. The rock solid conclusions are at the heart of government. This thing is real.

It’s taking root in development. ‘Payment by results’ is singled out for special mention in DFID’s Changing lives, delivering results – the summary of DFID’s aid reviews published this month. It includes a current trial in Ethiopia:

… offering local schools a financial reward for every extra girl that completes secondary school. The approach is simple – no extra girl completing secondary education, no funding. Payments are only made once the results have been independently checked.”

It’s a direct application of Cash on Delivery, promoted by the Centre for Global Development.

In general, I’m a fan. I’ve argued strongly for shifting incentives to focus on the demand side rather than supply side. It’s a reform that’s needed to improve aid.

But there are real risks. One is that development should be about supporting local initiatives, not achieving externally imposed goals. So the way that ‘results’ are negotiated up front matters.

Another is how results are measured. It’s fundamental to the whole approach. There’s a real opportunity to measure results based on what local people value. They need to be involved in (a) defining what results to aim for, and (b) assessing how well they’ve been achieved. That’s development in practice – literally.

Payment by results is coming. If we can’t come up with good ways of measuring results, then bad ways will be used. Which would be disastrous. Aid could be allocated on supply-side measures like the numbers of nurses trained or length of road laid. We already know how much that misses – around access, equity and impact.

The need for sector specific, demand-side measures is more urgent than ever.

One Response

  1. The challenges that this agenda faces are substantial, and I wonder if Paul Kirby will be able to maintain the focus on “success” when public services are subjected to real-terms cuts. Strong vested interests are hostile to this argument and will attempt to present cuts as wholly bad, so the need for mechanisms to measure and demonstrate success – and value for what money there is – is clear.

    The challenge is to create and share standardised performance measurements that have utility across public services, even though the outcomes sought by each service vary widely, so that resource allocation is properly informed and debated on its relative merits.

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