Performance-related payments ‘too risky' for charities, analysis warns

A report published today by the charity umbrella body says that the amount of working capital required to deliver contracts tendered under the payment-by-results (PbR) funding mechanism makes bidding too great a risk for many voluntary sector organisations (VSOs).

NCVO said it carried out the research due to the increased use of the payment model in high-profile government programmes across children and young people’s services, such as Improving Access to Psychological Therapies, Troubled Families and children’s centres.

For example, under the Troubled Families programme, councils and local providers front 60 per cent of the cost of working with families, with the government paying the remaining 40 per cent based on results against seven improvement criteria.

The NCVO report, which draws on interviews with VSOs involved in delivering a number of government children’s programmes, also says some PbR models fail to provide sufficient incentives for working with service users who require more complex, sustained and costly interventions.

It calls for service commissioners to consider how payment models can be developed that provide enough upfront funding to ensure VSOs are not excluded from the bidding process. An example it cites is for payments to be staggered so that providers receive money for achieving intermediate outcomes.

Stuart Etherington, chief executive of NCVO, said: “Charities want to play their part in public service reform and have great potential to develop truly innovative solutions, improving services and reducing costs. But current PbR practice risks excluding the specialist charities we really need to involve in order to develop public services.