Payment by results ‘hampering public service innovation,’ say charities

Gurjit Degun
26 April 2014

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27 April 2014 | Gurjit Degun

The government’s payment by results (PBR) scheme could be “hampering public service innovation”, the third sector has warned.

National Council for Voluntary Organisations (NCVO) report said the instability created for providers by PBR is “in danger of making them more risk-averse and less inclined to experiment with new ways to achieve results”.

Under PBR, elements of payment for public service contracts are made once the work agreed has been completed. “It is intended to give providers the freedom to decide how to achieve results, rather than requiring them to follow directions from government,” the NVCO said.

The NVCO highlighted problems with PBR such as cash flow problems which can be a “major barrier to taking on contracts at all, even in areas where a charity could be very successful”. The report recommended up-front payments from commissioners would ease such barriers.

It also called on charities to develop an internal check to ensure that contracts they are bidding for and taking on will allow them to work to their values. The NVCO added that government should "ensure coordinated evaluation of different PBR models" and share good practice.

Sir Stuart Etherington, chief executive of the NCVO, said: “Charities want to play their part in public service reform and have great potential to develop truly innovative solutions, improving services and reducing costs. But current PBR practice risks excluding the specialist charities we really need to involve in order to develop public services.

“Few people object to the principle of paying for an outcome, but putting it into practice effectively when it comes to complex services for people with multiple needs is challenging. Many of the current models of PBR still need significant development before they are truly fit for purpose.

“Commissioners and providers must take action to improve their PBR arrangements and to learn from best practice. We mustn't let a mechanism designed to drive innovation instead undermine it.”

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