Payment By Performance: Commentary on payment mechanisms for policy outcomes

Gary Sturgess, June 2010

Introduction

 

'If policy analysts carry bumper stickers, they should read: Payment by Performance.'

The great American political scientist, Aaron Wildavsky, wrote these words almost forty years ago, and yet politicians have only recently begun to give them serious attention.

For the most part, governments pay for process and promises. Despite ambitious statements about anticipated policy outcomes and annual budget papers, daily news papers remind us that what governments buy from their agencies, most of the time, are inputs – quotas of teachers, police officers and hospital beds.

And public servants are inclined to measure how well they have complied with the rules, since due process is safer and easier to deliver than due performance.

The vast majority of public service contracts are little better – specifying inputs or at best low-level outputs, hemmed in by policy settings that make bold innovation difficult, if not unthinkable.

In recent years, this has begun to change, with the emergence of new contract models, where government pays when there is clear evidence that an outcome, or at least a high-level output directly linked to that outcome, has actually been delivered.

The attractiveness of such a model to Ministers and to Treasuries is not difficult to explain. Done well, it is not difficult to explain to the public at large. And yet the challenges are immense.

It is often difficult for public officials to state clearly in advance what the key outcomes of a particular programme are – to reduce the complexities and uncertainties of the future policy environment to a single set of performance conditions.

Download the full article
Payment by performance makes complete sense and has been part of the political rhetoric for forty years, however, it is difficult to achieve.

Related articles

The Structure and Future of the UK Public Services Market

The public service industry in the UK – that part of the market made up of non- government suppliers – accounts for almost 6 percent of GDP and employs some 1.2 million people. However, virtually nothing is known of the supply side of this market.
4th December 2012

Integrated Commissioning: Building a better model for the delivery of social value through diverse networks of local providers

Decentralisation has been identified as an important key to unlock more productive and responsive public services. The closer the services are to service users, the more accountable they are for addressing users’ diverse and individual needs. As such, increasing the impact of public services means devolving control and providing more choice.
30th June 2012

Frugal Innovation: Learning from social entrepreneurs in India

Over the last 60 years, innovation and improvements in India's public services have frequently emerged in the absence of state intervention or involvement. Social enterprises have stepped in to address the challenges where the government has failed.
29th February 2012