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Payment by results makes data a closed shop

By John Copps 19 November 2012

If you’ve had anything to do with government commissioning or public services over the last few years, you will know all about the clamour around payment by results.

Payment by results is a method of contracting by which the relationship (and, of course, the payment terms) are based on achieving a given outcome or outcomes, tightly defined and specified in a contract.

The standard-bearer for this approach is the Department for Work and Pensions’ welfare-to-work scheme, the Work Programme, although other departments are desperate to get in on the act.

The principles behind payment by results make a lot of sense. In the Work Programme, contracts are designed to give providers clear incentives to get people into sustained work placements, whilst shifting financial risk away from the public sector. Implementing these principles is another issue entirely and I have sympathy with the criticisms voiced by charities and the preponderance of lawyers in the process.

One of the distinguishing features of the Work Programme is what the DWP describes as the ‘freedom’ for providers to personalise support. ‘Rather than asking providers to make one-size-fits-all services work… government is providing freedom for providers to personalise support for the individual in a way that fits the local labour market’, it says.

In what has been termed the ‘black box’ approach, the organisation issuing the contract—in this case the DWP—is only interested in whether or not the contractor achieves the final outcome, not how it gets there. The process of achieving the outcome is in the black box.

What worries me about this is the potential loss of data from the public sphere. Already, we don’t have enough information on what makes welfare-to-work programmes work. What happens in the black box is the proprietary knowledge of the contractor, and is unlikely ever to see the light of day. In theory, it will be used by contractors to run their own programmes better, establish a competitive advantage, and win market share. In practice, as staff move between providers, is it really going give anyone the edge?

What we do know is that data in the black box can’t be used by researchers or policy-makers to improve or learn from. Civil servants I have spoken to acknowledge this issue but don’t have an answer—the Work Programme is still regarded by many as a test case. I think this is one to watch—it is in no-ones interest that data on public services becomes a closed shop.