Many times we
face situation that nobody is interested in what exactly have been
achieved within the projects, not was envisaged but what really
happened after the project is concluded and funds spend. But just the
result of the project is what’s the most important for all of us.
So why we don’t focus on it? There are some methods and tools that
can be used on this issue – our office in Poland support government
in implementation payment by result in development cooperation
projects.
Poland
is now after first phase of integration with European Union,
integration is also ace to huge funding under European funding
instruments including European Social Fund (ESF)
(http://ec.europa.eu/esf/home.jsp?langId=en
) During this days is starting negotiation and discussion about new
financing period for EU funds between 2014-2012 and this is good time
to summarize good and also bad experience. This will be just a
background to present experiences in Payment by Results (PbR)
implementation within the development projects.
The
system, that we have today, is based on the open call for proposals
announced in the context of specific actions and priorities, and also
the control based on the financial reporting of expenditures. So
functioning system requires a “well-oiled” control, supervision
and evaluation structure that projects can be implemented efficiently
and effectively. The biggest problem lies somewhere else – no one
is really interested in what the project has been achieved in
relation to assumptions, substantive control is limited to checking
by two auditors of the application and guidelines, and if financial
situation is correct, then given project is considered to be fully
realized. Trainings are good examples on how the various results are
unequal. The most of projects under the ESF and non only ESF are
based on different types of training and courses the best instrument
to develop skills (eah!), which can significantly differ with the
respect to quality. You can organize a training, during which speaker
is reading presentation in which is copy&paste from some other
presentation report and legal acts - how many of us were on such
training! and you can also do the training, by which participants
will get a job a new job and you get your fee after the get the job ?
So the
key is real effect of the project, and not what the applicant
described at the beginning before the start of the project only to
fit the guidelines written in the criteria for the competition
(though equitable).
Is “payment by
result” better solution?
Just the result of
the project is what’s the most important for all of us. So why we
don’t focus on it? There are some methods and tools can be used on
this issue. It is so-called “payment by result”. The principle is
simple: money is paid when the anticipated output is achieved. This
may seem simple, but as soon as you will enter deeper into details
the situation becomes more complex.
Imagine that we have
a project, whose goal is to raise the professional qualifications of
50 disabled persons. The result in this situation should be to find
work by the beneficiaries, and thereby to raise their social
integration and self-esteem. This is an example of standard project.
Currently, given organization makes such application, recruits
participants, conducts trainings and accounts from time to time with
the expenditures reporting demand for the next installment. After
completing all trainings our project is completed, settled
financially and over.
However, imagine an
alternative situation: the organization described above makes such
application, but only gets money if, for example half of declared
group will work and keep it for at least 12 months. Why not? From the
viewpoint of public authorities it would be a very good solution
that would bring measurable benefits. You can easily calculate how
much the local budget will save: no disability payments, income taxes
paid by new employees etc.
Unfortunately,
except some benefits of this approach, also for NGOs, there are
several significant problems. First, there is a danger of so-called
“cherry picking” by recruiting of beneficiaries, who are “better”
to deliver given result. In our example above, you could select those
who would find it easier to enter labor market.
How to ensure
financial stability for operators – good question ?
The second issue is
to ensure the financial stability of organizations that will receive
funding only after achieving the result. Interesting research showing
the opportunities and risks this solution were carried out in the
United
Kingdom about services directed to families.
How to secure
financial stability, when we would be paid only for results? One of
the most interesting solutions is currently being tested in Great
Britain, where is conducting a very large pilot program based on a
system of social bonds (Social Impact Bond). The British government
ordered the ethical Social Finance Investment Bank a reduction of
prison return rate over six years (by at least 7,5%) among 3000
inmates who are undertaking short sentences at the prison in
Peterborough.
Social Finance has
acquired funds for the project by issuing bonds among several private
investors and NGOs. It has commissioned the work to organizations
specializing in reintegration of prisoners. If you success in
achieving these rates, the Social Finance will receive a reward from
the British government, and investors who contributed capital to the
project are likely to gain profit appropriate to the obtained result.
Experience from United
Kingdom
UK have the longest
record in implementation of PbR rules and personally I think the most
interesting and impressive, they using this method in health sector,
social care, family
protection programmers
projects and now the biggest project in reducing
re-offending in one of
regions. Idea is simple operator will get fee if re-ofendering in
region will reduce at least 7% in some period of time. In this case
also second interesting approach was used local authorizes calculate
portentional savings and this “savings” will be a part of success
fee if the goal will be achieved.
How it’s could be
implement in aid projects?
In UNDP project it’s a
little difference especially if they are funded by internal resources
but this could also be internet let’s imagine that TRAC will be
allocated based on progress in achieving MDG or other development
indicators , maybe it’s like this now ?
But more interested
potential in using Pbr model will be in concrete projects when we
(UNDP implementing some concrete task in limited area and time.
Let’s take one
simple example mine and UXO action project in Lao Pdr
(http://www.undplao.org/whatwedo/crisisprev.php).
Project is concentrate on two components
Improving Safety
through UXO Removal and Increasing Awareness through Mine Risk
Education. Now main indicator is of course project delivery and how
many land was cleaned from UXO, but why don’t set other important
indicators using PbR model which represent real goal which should
achieved under this measures i.e
- Decrease by 80% number of deadly and have accident with UXO by the next 24 months in comparison with last year.
This approach is
more focused on delivering final results than showing intermediate
operational steps, project goal is clear and this approach is
mobilizing operator to use all available methods and tolls to achieve
result, maybe land cleaning isn't the best solution? This also move
responsibility and risk on operator who is more focused to achieve
result than in standard project when after contract signed he can
“sleep easily” in most of the cases.
And the 100% budget for
project will be transferred only if the goal will be achieved, or if
operator achieves more for example 60% will get success fee
calculated based on total project budget accordingly the achieved
percent.
