There are key questions to ask when working out whether a particular programme is suitable for Payment by Results. Early experience indicates that when considering if Payment by Results is the best mechanism to get value for money, 2 questions are key:. Considerations include:. What results can be measured? What proportion of payments should be linked to delivery? What is the right type of organisation to work with and what level of control do they have over the results in question?
What are the implications of these choices for costs and benefits? Payment by Results is part of cross government reform, and several other government departments are using Payment by Results to transform the delivery of public services.
Payment by Results is also starting to gain momentum in international development, with DFID one of the leaders in the field. Several aid organisations are starting to pilot or scale up the approach, with organisations such as the World Bank using exciting new Payment by Results approaches including the Program-for-Results , where governments are paid on the delivery of results and the Health Results and Innovation Trust Fund , where service providers are paid on the improvement of key health results.
By paying on delivery of real results rather than upfront, Payment by Results helps DFID to improve value for money for citizens of the UK and developing countries. Payment by Results can be used to:. Evidence about how Payment by Results can be most effective is still at an early stage. This is primarily because these are relatively new mechanisms and to date there have been few good evaluations of those programmes that have been in place. This is particularly true for more innovative mechanisms, where payments are linked to outcomes.
In addition, the majority of past activities and evaluations have been in the health sector and related to payments to suppliers Results Based Financing rather than to partner governments Results Based Aid or investors Development Impact Bonds. There are early indications that in the right circumstances Payment by Results can lead to better delivery of services [footnote 9].
A DFID sponsored report, published in , synthesised findings from Payment by Results evaluations to date and concluded that we need to develop better evidence about when and how these incentives work in practice. Evaluations will be prioritised in those areas where evidence is most lacking, and in a way that brings together learning from across activities. We will also make use of evidence generated by others, including partners in the UK and those working internationally.
The examples above provide some early indications of the benefits of Payment by Results in practice. In Uganda, local government teams check the results data for consistency prior to payment. This has led to early indications of a reduction in discrepancy rates between reported and verified data.
In Rwanda, every year, the Rwandan media publishes league tables on the number of children passing exams in each district. This year, the media also reported the percentage that sat exams out of those that registered to do so, encouraging a public debate around the causes of drop out and school completion. There is also early evidence of implementing organisations using results information to focus effort and resources where they are needed most.
In Rwanda the Director General of the Rwanda Education Board said that he could use it to push his team to achieve more and better results by using data to identify where further improvements in results could be made. In Uganda, there are early indications that the tool is leading to more efficient use of resources and better value for money.
In the 12 months to end September , 71 per cent of contracts for services issued centrally by DFID have a performance-based element, where payment is conditional on verification of a result being achieved.
These indicators are situated at various points in the results chain see Figure 2 , including at outcome level. The use of these performance tranches has been increasing over the past few years, and continues to increase. Roughly one third of general budget support funds are already tied to performance. Our work with governments also includes Results Based Aid, one of the most innovative forms of Payment by Results, where payments are linked to outcomes such as improved completion in education, encouraging governments to deliver more results in the most pressing areas.
A strong pipeline of potential new Results Based Aid programmes is developing, in sectors such as health, infrastructure, and water and sanitation. We use Payment by Results in our contribution to global funds. As global funds are able to innovate in a way that other organisations can struggle with, we are funding some global funds to push the boundaries of Payment by Results, exploring payment by outcomes in areas like health, infrastructure and education.
One example is explored below in Box 4. It pilots and evaluates the ability of Payment by Results approaches in the health sector to increase the quantity and quality of child and maternal health services. HRITF currently supports 32 pilot grants in countries, impact evaluations of these, and smaller learning and evaluation programmes in non-pilot countries. A further 3 programmes are in the pipeline.
Assessments, case studies, papers, and evaluations plus an impact evaluation toolkit can all be found at www. Early results are now available for 11 grants, with data showing initially positive results. For example between and For example, the Girls Education Challenge Fund GEC , which is helping up to a million girls transform their lives through education, uses Payment by Results extensively across its programmes: currently 25 out of 37 projects have a Payment by Results component, many of which are CSO implemented, with others being run by private sector contractors.
These will be measured through the Tracking Tool. Work is currently ongoing to determine which results will be measured. Through local grassroots organisations, beneficiaries will have a role in rating the ministries through a scorecard on the Web Portal, which will help determine the levels of payment to those ministries. Number of cattle treated output ; reduction in prevalence of parasite determined by blood sampling outcome.
We have started the inception phase This will be followed by presentations to investors and contracting. Programme implementation could take place in early What problem are we trying to solve? Sleeping sickness is a parasitic infection which attacks the central nervous system and can prove fatal. It is estimated that 9 million are at risk in Uganda and over 60 million in sub-Saharan Africa. Drugs and insecticides have been shown to be an effective control.
Historically the key challenge has been the sustainable delivery of this control. The Development Impact Bond could offer DFID a more flexible contracting structure: implementers could choose how they deliver the treatment. DFID will fund the pre-implementation phase baselining, piloting and setting of output and outcome targets. The bond could then be offered to the market if it offers value for money. Social investors would be approached with a detailed proposal inviting them to fund the delivery of the programme.
DFID would make repayments on the basis of an independent verification of outputs and outcomes see opposite. If the outcome is not achieved the investors would make a significant loss, but if it is achieved, they would make a modest return.
As Development Impact Bonds are so new, it is particularly important to get evaluation right. We are therefore commissioning a study to identify the most appropriate evaluation approaches and methods. The most innovative kind of Payment by Results links payments to outcomes although outputs are often used as proxy indicators — see Figure 2 for more information on how outputs differ from outcomes. DFID is at the forefront of global efforts to build the evidence base for this kind of Payment by Results in international development.
As of June there were 21 outcomes-based programmes that use DFID financing underway, including seven funds which constitute around separate projects. These involve working with governments and suppliers to deliver a wide range of outcomes, from children completing education, to safe deliveries for women, and to families having access to water points.
There are also at least 17 more outcome-based Payment by Results programmes still at the planning stage. These are in a wide variety of different countries and sectors. They are at various stages of development. For our most innovative Payment by Results projects, we have independent evaluations in place, which are investigating both results achieved and the processes used to achieve them.
DFID is building up Payment by Results relevant skills and changing systems through the following measures:. Payment by Results is already an important part of how we do business and ensure value for money. This provides us with a solid starting point for expansion into new areas. We will focus on the following areas because they address gaps in the domestic and international body of evidence about how, when and where Payment by Results works most effectively.
We will strengthen our support and direction of evaluations, with special attention devoted to the most innovative projects. We will start by scoping out the options for making central resources available for learning and evidence-building, and by commissioning a study on the best ways to evaluate Development Impact Bonds. We will provide a framework for Payment by Results evaluations to ensure a strategic and consistent approach. We will synthesise the results of these evaluations, and integrate our findings with evidence from other organisations.
Value for money will be our primary focus throughout. We will remain at the forefront of international work on Payment by Results, focused on the most innovative kinds of projects, where most gains are to be had in influencing our partners. We will continue to make the most of formal and informal networks within DFID, across UK government and across the world to build the evidence base, share knowledge and promote best practice.
We will adhere to best practice on transparency, taking into account the principles underpinning UK civil service reform and emerging international standards on transparency.
In particular, we will ensure relevant guidance, project documentation and evaluation lessons are published openly for all who would benefit from them. We will update this regularly with lessons learnt as a result of our continuing work to build the evidence base on Payment by Results.
We will ensure that the guidance is accessible to all who need it. We will also use our internal and external networks to build and share experiences, evidence and expertise. We will ensure our funding and management systems are better suited to managing and financing Payment by Results. Payment by Results has the potential to transform every part of DFID, and so we will continue with our extensive two-way internal engagement.
We will communicate throughout our departments and country offices, and seek further input on what we need to do to make successful the strategy outlined here.
We will steer and obtain buy-in from corporate, policy and regional divisions to drive cultural change. And we will continue to further develop Payment by Results approaches with implementing organisations, including scoping out use of the mechanism with other government departments where appropriate.
Key questions include:. We also set out some wider risks of PbR, such as its effect on the diversity of the market of NGOs who may be able to bid for PbR contracts, the risk of skewing aid priorities, inhibiting open relationships and learning among aid partners, and undermining organisations intrinsic motivations to achieve results. We outline the importance of collaborative design with donors to avoid unintended consequences and mitigate programmatic and financial risks, and provide further practical recommendations both for donors and NGOs to help ensure that PbR is used appropriately.
For a quick introduction to the paper and to debates about Payment by Results, see our guest blog on From Poverty to Power , and a response to our paper from the Center for Global Development. Contact Groups My basket Login. Post a job Careers advice. Resource library Coronavirus Covid Covid advice and resources. Safeguarding progress. Members Groups Staff. Secondary menu Contact Groups My basket Login. You are here Home. Payment by results Payment by Results PbR contracts involve suppliers delivering activities, and payment by donors for some or all of the costs is only on the verified achievement of agreed results.
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