Pay for Success - An Innovative Approach to Improve Results and Save Money

This week, the President met with his Cabinet and other senior officials to lay out his vision for building a smarter, more effective government. The President challenged his Administration to build on the progress made over the first term and improve government even further.

To help meet that challenge, the White House gathered a diverse array of leaders from the private sector, nonprofits, philanthropy, academia, and federal, state and local government to advance one of the ways that this Administration is thinking outside the box – “Pay for Success.”

Pay for Success offers innovative ways for the government to partner with philanthropic and private investors to fund proven and promising practices, significantly enhancing the return on taxpayer investments. Under this model, these organizations provide the up-front capital for social services with a strong evidence base that, when successful, achieve measurable outcomes that improve the lives of families and individuals and reduce their need for future services. Government pays when these measurable results are achieved.

For example, the Department of Labor has launched a Pay for Success competition through the Workforce Innovation Fund designed to model new and more effective strategies for delivering workforce development and preventive social services that cut across existing program siloes, increase job placement and improve job retention.

In the Fiscal Year 2014 Budget, President Obama proposed a nearly $500 million investment in Pay for Success, including the creation of a new $300 million Incentive Fund at the Treasury Department. The Fund is designed to empower cities, states and nonprofits to support more public-private partnerships that produce measurable results in their communities.

In addition to the Incentive Fund, another $195 million is proposed to support Pay for Success programming in nine programs across three different Federal agencies: the Departments of Labor, Justice and Education.

The White House Pay for Success convening highlighted examples of innovative work underway at state and local levels across a wide array of sectors including workforce development, reducing recidivism, homelessness, aging, asthma management, disability and early childhood education. Currently, Pay for Success efforts are in some form of development in at least 14 states across the nation and that number continues to grow.

Pay for Success is a promising strategy for scaling programs that work and enhancing the return on taxpayer dollars in new, measurable ways. It is certainly one way this Administration is working to build a smarter, more innovative government for the American people.

Steven VanRoekel is the Acting Deputy Director for Management in the Office of Management and Budget and Federal Chief Information Officer and Jonathan Greenblatt is Special Assistant to the President and Director of the White House Office of Social Innovation and Civic Participation