In this post James Ronicle, Associate Director at Ecorys UK, describes the findings from the latest research collaboration between Ecorys UK and the Policy Innovation Research Unit (PIRU). The two research teams examined the reasons why 25 areas did, or did not, set up a social impact bond (SIB), and summarises the four factors that were essential in ensuring whether a SIB was launched.
Over the past year Ecorys UK and PIRU have been researching the reasons why some sites that expressed an interest in commissioning a SIB ultimately did not do so. We have been examining 25 sites that were developing SIBs – five that launched a SIB and 20 that did not. Our aim was to examine what was present in the five that launched and were absent in the other 20, to try to explain what factors may determine whether a SIB is launched.
The research found four factors that seem to determine whether a SIB is launched, creating the LOUD model: collective Leadership, clear Outcomes, shared Understanding and Data, as described below.
All the SIBs that were launched were driven by a strong leadership team across all the organisations involved in the development. In contrast, in 16 of the 20 SIBs that were not commissioned, this leadership was either not strong, or not present in all the organisations involved. Strong leadership is necessary because SIBs are novel for most stakeholders; they can be complex to develop, and require the establishment of new relationships and trust between individuals and organisations that often share little prior collective experience. Some stakeholders can be concerned about the impact of the SIB, and so strong leadership is necessary to drive the process and bring other stakeholders on board.
Defining a very clear cohort of target beneficiaries, and choosing outcomes that are clear and attributable to the intervention is an important part of the development process of any PbR contract, including SIBs. Ultimately, the commissioner needs to be satisfied that the outcomes are worth paying for, and the providers (and investors) need to believe that the outcomes are achievable. In 15 of the 20 SIBs that were not commissioned this was partly because they were unable to develop a set of clear outcomes to attach payments to. Challenges included:
Not being able to calculate the added value of the SIB – i.e. the outcomes that would be achieved over and above those that would have happened without the intervention
Identifying outcomes that could be defined clearly and measured objectively
Finding outcomes that would be achieved in a relatively short time period; some outcomes would not occur for at least five years, which was unattractive to some commissioners (because it spanned electoral cycles) and/or investors (as it was too long for them to wait for returns).
In eight of the 20 SIBs that did not get commissioned there was a lack of shared understanding about a) how the policy problem could be addressed; b) whether the proposed intervention had a strong enough evidence base; and c) whether the intervention was appropriate for the local area.
A substantial amount of data is required to develop a SIB. This is primarily because a SIB or PbR contract requires an estimate of what outcomes are likely to be achieved, on what scale and at what point. This is so the business case can be developed, and the commissioner can calculate what the potential outcomes are worth to them.
In order to build the SIB business case, it is necessary to have data on:
- The eligible cohort, including the size of the cohort, the outcomes they are currently achieving and the current cost of supporting them; and
- The outcomes likely to be achieved by the intervention, including when these would take place and for how long they are likely to be sustained.
Without these data, it is very difficult to develop the business case for a SIB, and 13 of the 20 areas that chose not to set up a SIB lacked the data to build a business case.
These factors should serve as a useful framework for future stakeholders to assess whether their intended SIB is likely to be feasible. Further work would be required to test fully the feasibility of the SIB, and even if a SIB lacks these factors, it does not necessarily mean it cannot be set up (though the experience of others would suggest it is less likely to succeed). However, this model will help stakeholders understand which aspects are missing, and where limited resource should be focused.
For more information, read the LOUD report.
This research is a part of two evaluations into SIB programmes. Ecorys UK, in partnership with ATQ Consultants, is evaluating Big Lottery Fund’s Commissioning Better Outcomes Fund, which aims to support the development of more social impact bonds (SIBs) in England – for more information visit here. PIRU is evaluating the Department of Health’s Social Enterprise Investment Fund (SEIF), which provided seed funding for nine SIB Trailblazers to explore the potential for SIB development in health and social care. – for more information visit here.