Pay for Success Glossary

PFS Construction

A phase of the PFS process, during which all stakeholders align towards executing the key elements of a PFS contract. Services include managing project workstreams, financial structuring, economic modeling, multi-party contract formation, and fundraising from philanthropic and commercial sources.

Control Group

Individuals in the target population who do not receive the intervention. In an evaluation, their results are compared to the treatment group to calculate the impact of the intervention.

Counterfactual

Outcomes of a group that represents "what would have happened" in the absence of an intervention. It may refer to any comparison group, including control groups in a randomized trial, or comparison groups created through some other means such as a historical analysis or propensity score matching.

PFS Enabling Legislation

Laws that allow a government to appropriate for the purposes of Pay For Success contracting. Usually to provide exceptions to restrictions on the timing or purpose of funds.

End Payer

The party who agrees to make success payments upon the achievement of agreed upon outcomes. This is usually a government entity, but can also be private enterprises such as Managed Care Organizations or a philanthropy.

Evaluation

A measurement of agreed upon outcome metrics to determine the success of a given intervention. While the results of the measurement along many outcomes will be tied to success payments, some outcomes may be measured simply for future policy purposes. The precise details of the evaluation design is contained in the evaluation plan.

Evaluation Plan

A detailed document describing the methodology for evaluating outcomes, including: how participants are enrolled into the program, whether randomization occurs, what databases are accessed, how the counterfactual is established, what the power of the analysis is, etc.

PFS Feasibility Study

An exploratory process to determine whether a PFS project can and should be implemented in a given context by assessing readiness on several PFS areas (i.e. target population, data access). Feasibility usually ends in a decision whether or not to go forward with project construction.

Financial Intermediary

An arranger or manager of funds for a PFS project, which can also involve fiscal agent services. Usually negotiates financial documents.

Financial Model

A model that projects the financial costs and benefits of a PFS project over time.

Institutional Review Board (IRB)

Committee established to review and approve research involving human subjects. The purpose of the IRB is to ensure that all human subject research be conducted in accordance with federal, institutional, and ethical guidelines. Approval is usually necessary to implement an evaluation plan.

Intermediary

A party who provides program management for the PFS project after it is launched. This program manager could also be the fiscal agent, which could also be a separate entity. More loosely, an "intermediary" is sometimes also used to refer to the transaction coordinator.

Intervention

The services offered to a target population. In a PFS project, the intervention should have a compelling evidence base that demostrates the potential to achieve outcomes.

Notice of Funding Availability (NOFA)

A notice published each year in the Federal Register that describes additional sources of funding available on a competitive basis. Includes information on application requirements, eligibility requirements, selection factors, etc.

Observation Window

The time span during which the success of a PFS program is evaluated for an indiviudal in the program. An evaluation would last longer than the evaluation period if individuals are enrolled over time (e.g. each person has a 3-year observation window in each of three annual cohorts, so the total evaluation lasts 5-years). In many cases, the PFS project could have benefits that last for decades, but the evaluation only observes benefits created within a short timeframe, as PFS projects need to make outcome payments in a timely manner to funders.

Outcome

A metric that demonstrates the change that occurred as a result of an intervention, i.e. being stably housed.

Output

A metric resulting from the implementation of an intervention, i.e. the number of people served.

Partial PFS

A project in which only a portion of the costs will be paid through contingent "Success Payments" that depend on social outcomes being achieved. The remaining costs are funded by conventional means that do not depend on social outcomes being achieved.

Pay for Success (PFS)

Pay for Success is an innovative contracting model that drives government resources toward high-performing social programs in areas such as poverty, education, child welfare, recidivism, homelessness, and wellness. PFS contracts track the effectiveness of programs over time to ensure that funding is directed toward programs that succeed in measurably improving the lives of people most in need.

Performance Management

An ongoing process of evaluating the outcomes of a given program, allowing for continuous fine-tuning of the intervention and programming.

Performance-Based Contract

A contract that has contingent payments based on metrics. PFS raises the bar on performance-based contracts by tying contingent payments to outcomes rather than outputs.

Pilot

A small-scale project that is meant to test a new concept or implementation. In a PFS context, a pilot is a separate phase from the main PFS project and is usually philanthropically funded without success payments tied to outcomes. The main objective of a pilot is to obtain performance data.

Pre-Development Fund

The loan or grant funding raised from diverse funders to pay for feasibility and project construction expenses. These may include financial, legal, evaluative, provider, and/or advisory expenses. Funds are generally required to be repaid or recycled if PFS projects launch properly.

Process Evaluation

The assessment of an intervention's operations, implementation, and/or service delivery.

Proxy Outcomes

Predictors of the actual outcomes of interest. They are used when it is not feasible to measure the actual outcome (due to time, data availability, etc.)

Quasi-Experimental Design

An evaluation methodology used to identify a comparison group that is as similar as possible to the treatment group. There are different techniques for creating a valid comparison group, such as propensity score matching.

Ramp Up

A ramp up is a short phase at the start of a Pilot or PFS project that gives a service provider time to scale up and refine operational systems before the bulk of participants are due to receive services. There are usually no outcome payments tied to results produced during the ramp up phase. In contrast to pilots, ramp-ups are direct leads into a full-scale PFS project.

Randomized Control Trial (RCT)

A rigorous experimental design process in which individuals are randomly assigned to either a control group or treatment group. RCTs are often considered the "gold standard" of evaluation because difference in outcomes between the control and treatment groups allows for inference about the causal impact of the intervention.

Rate Card

A list of outcomes with corresponding monetary amounts that a government is willing to pay in a PFS project upon achievement of those outcomes. An advantage of using a Rate Card is that it allows a government to set outcome payments across multiple PFS projects simultaneously. The rate card could stipulate payments on outcomes achieved above that of a control group, or there may not be a control group involved.

RCT Overlay

A way to structure a PFS project in which outcome payments are not based on RCT results but runs at the same time as the project. The results of the RCT are used to inform future policy decisions.

Referral Pathway

The method for enrolling the target population in services (or assignment to a control group in certain evaluations).

Remedial Programs

Programs that correct for negative social outcomes after they occur. PFS projects typically favor preventative programs over remedial programs.

Request for Information (RFI)

A document usually issued by a government agency requesting informational submissions such as issue areas, intermediaries, etc. No contract results from responding to an RFI. An RFI is is usually done in preparation for a RFP.

Request for Proposal (RFP)

A document usually issued by the end payer of a PFS contract requesting detailed plans from a Service Provider for implementing a PFS intervention. RFPs occasionally ask Service Providers to respond in partnership with an Intermediary and/or Transaction Coordinator.

Request for Qualifications (RFQ)

A document issued by a government during the early stages of the procurement process. RFQ gathers high-level information about specific respondents, who, if qualified, can participate in a more formal procurement process later in the PFS feasibility. The exact process may vary by jurisdiction.

Secondary Evaluation Methodology

Alternative evaluation that forms the basis of success payments should the primary methodology not be deemed valid.

Social Impact Bond (SIB)

A type of social innovation financing. A SIB is not usually structured as a bond, but can refer to any loan to finance the timing gap between a service provider paying to deliver a service and a government measuring and paying for an outcome.

Social Impact Guarantee (SIG)

A type of performance-based contracting model where government pays for services upfront and is repaid by funders if the services do not achieve specific outcomes.

Social Innovation Financing (SIF)

Financial instruments used to mitigate issues generated by PFS contracting, such as the timing gap between service delivery and payment and the risk of non-performance. SIBs are a type of Social Innovation Financing.

Social Innovation Fund (SIF)

A key White House initiative and program of the Corporation for National and Community Service (CNCS) that combines public and private resources to grow the impact of innovative, community-based solutions that have compelling evidence of improving the lives of people in low-income communities throughout the United States. The SIF uses federal funding as a catalyst for private and public collaborations in three priority areas: economic opportunity, healthy futures, and youth development.

Special Purpose Vehicle (SPV)

A separate entity that acts as the legal infrastructure for a PFS project’s contracts and flow of funds. This creates liability protection for the parties of the contract.

Target Population

The population that is being served through an intervention. In a PFS project, the target population should ideally be large enough to support a rigorous evaluation, specific enough to merit a directed intervention, and have reliable data collected by the end payer.

Transaction Coordinator

An advisory organization that helps move a PFS project after the feasibility process, through the construction process, and into project launch. Transaction Coordinators usually provide expertise including: data analysis, financial modeling, fundraising and facilitating multi-party negotiations. The transaction coordinator is at times called the "intermediary," but more specifically the role of the transaction coordinator usually ends once the project launches, whereas the "intermediary" includes project management functions that occur after project launch.

Treatment Group

Individuals in the target population who receive the intervention. In an evaluation, their results are compared to the control group to calculate the impact of the intervention.

Wrong Pocket Problem

A commonly faced challenge in PFS projects wherein a government agency funding a preventative program does not then see the resulting savings on its own budget.

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