CSH SIF Pay for Success Families Round RFP, December 2017
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Section III. Definitions and Background
A. Overview of the Pay for Success Model
The Pay For Success Concept
Pay for Success (PFS) initiatives are often public-private arrangements that enable a government to test
or expand innovative programs while paying only for those that achieve agreed-upon target outcomes.
PFS initiatives are typically associated with preventive social solutions and are put in action through
contracts between a government (or other payor for social outcomes) and a nonprofit social service
provider. PFS initiatives involve payors and service providers who agree that all or some portion of
payment for services will not be paid until an agreed-upon set of outcomes or level of impact has been
verified. Such payments for outcomes are known as success payments. Achievement of outcomes is
typically verified by an independent evaluator agreed upon by all parties to a contract.
Under PFS initiatives, it may take several years to verify the outcomes that trigger success payments. In
many cases, service providers will not have the resources to self-finance the costs of implementing a
preventive intervention during this verification period. For this reason, the service providers may
require upfront private financing from third-party funders (often philanthropists or community-based
lenders). Often referred to as a “social impact bond,” this financing helps service providers bridge the
financial timing gap between when intervention services are rendered and outcomes are verified. Such
third-party financing is typically at-risk, with their return of capital (and any potential return on
investment) dependent, in whole or in part, on the achievement of the outcomes identified in the
Phases of a PFS Transaction
Typically, PFS initiatives go through three distinct development phases:
1. Feasibility assessment – in which interested parties identify a priority target population, an
intervention to implement, social outcomes to target, and the capacity of key parties to
implement a contract
2. Contract structuring – in which the PFS initiative stakeholders, including the PFS
government payor, the service provider, third-party investors (where applicable), and the
outcomes evaluator, negotiate the specific terms of the contract.
3. Contract implementation – in which the contract is executed, initiating the
implementation of services to the target population, the on-going evaluation/validation of
contract outcomes, and the payment for achieved outcomes by the government payor.
B. Supportive Housing
Supportive housing is a combination of affordable housing and supportive services designed to help
vulnerable individuals and families use stable housing as a platform for health, recovery and personal
growth. Supportive housing can take many forms, including an apartment, a duplex or a single family
home. Tenants in supportive housing have a lease, just like any other tenant, with all the rights and
responsibilities of leaseholders. The services available in supportive housing are flexible, voluntary and
tenant-centered. Depending on the needs of the target population, services can include case
management, mental health services, primary health services, substance abuse treatment, employment
services, parenting skills, and trauma-informed care.