Value creation,cost-benefit and public service innovation in Social Impact Bonds: The potential and limitation of new contractual relationships

Social Impact bonds(SIBs) can be defined as outcome contract based at public private partnerships with using financial mechanism. To be more concretely defined, “SIBs combine some component of results-or performance-based... [ view full abstract ]

Social Impact bonds(SIBs) can be defined as outcome contract based at public private partnerships with using financial mechanism. To be more concretely defined, “SIBs combine some component of results-or performance-based financing and public-private partnerships, which have been used to fund public services for many decades” (Gustafsson-Wright, Gardiner and Putcha 2015: 2). SIBs have been increasingly recognized as vehicles for public service innovation around the world since the first SIB was launched in the UK in 2010.

   SIBs have drawn not only enthusiasm but also criticism over the actual impact and limitations. For instance, Rangan refers to the difficulty in aggregating social benefits and correlating them with cost savings (Rangan and Chase 2015). In terms of comparison to existing service delivery model, there have been very little rigorous counterfactual comparison of SIBs versus alternative methods of finance to deliver the same services to the same type of users (Fraser, Tan, Lagarde and Mays 2016: 13). More importantly, SIBs tend to focus on achieving social outcomes rather than continuity of service outputs (Edmiston and Nicholls 2017: 14).

In our view, the goal of SIBs is not just creating fiscal value but creating social value via resolving social problems. In addition, bringing about public service innovation is the essential element. Nevertheless, SIBs in the UK and other countries tend to focus in social outcomes which are directly connected with fiscal values such as cost saving. In fact, social benefits cannot be restricted to just social outcomes bringing about cost saving. Social outcomes can result in increase of the cost of public services. However, it can be seen positive impact from social value view if it contributed to improvement of wellbeing.

For this reason, we examine existing SIB programs in the UK from fiscal and social value, and public service innovation perspectives. We conduct our research with using both quantitative and qualitative surveys. That is, we conduct survey by questionnaire for 353 local authorities in England. Such comprehensive survey of  all local authorities in England will be the first case even in the UK. In addition, SIB cases in Essex(family support) and Devon and Plymouth(alcohol dependency)will be examined with using semi-structural interviews.

In conclusion, limitation of fiscal value model as well as the potential of SIBs over public service delivery is raised.  

References

Edmiston, D. and Nicholls, A.(2017) Social Impact Bonds: The Role of Private Capital in Outcome- Based Commissioning. Journal of Social Policy

Fraser, A., Tan, S., Lagarde, M., and Mays,N.(2016) Narratives Promise, Narratives of Caution: A Review of the Literature on Social Impact Bonds. Social Policy and Administration.

Gustafsson-Wright, E., S, Gardiner., and V, Putcha.(2015）The Potential and Limitations of Impact Bonds-Lessons from the first five years of experience worldwide.  Brookings.

Nicholls, A. and Tomkinson, E.(2015) The Peterborough Pilot Social Impact Bond in Nicholls,A., Paton,R., and Emerson, J.(eds).(2015) Social Finance. Oxford: Oxford University Press. 335-380.

Rangan, V.K. and Chase, L.A.(2015）The Payoff of Pay-for-Success. Stanford Social Innovation review. 13(4): 28-36.

OPM(2014)Evaluation of the Essex Multi-Systemic Therapy Social Impact Bond- Interim evaluation report. London: OPM.