Emerging Themes In The Use Of Pay-For-Success Contracting

The term “Pay for Success” (PFS) refers to an innovative method of financing social services that shares risks and rewards through collaboration of public, private, and nonprofit sectors. PFS is based upon two core premises: first, that government should pay only for services that are demonstrably effective; and second, that the risk of providing social services—which may or may not prove to be effective—can be transferred from local and state governments that usually fund these services to the private sector. As in private-sector markets, the assumption of risk is rewarded or penalized in proportion to the degree . . .