General Procurement

Buyers support the use of Payment by Results

In the latest SM100 survey of buyers, 68% of respondents supported the use of Payment by Results (PBR), as a form of contract management.

The findings come despite concerns raised by the Social Market Foundation think tank, over the proposed use of PBR to manage Ministry of Justice (MoJ) contracts to reduce reoffending. The think tank say the proposed mechanism – involving a ‘margin of error’ where payments or penalties were not triggered for performance 3 per cent above or below a baseline –could “reward failure”. This was because weaker providers that doubted their ability to cut reoffending by more than 3 per cent would be tempted to reduce their efforts in order to trigger enhanced payments as reoffending would have to increase by 3 per cent before penalties kicked in.

Some of the concerns raised by the buyers relate to “excessive” clawback and reconciliation clauses which would “undermine any good intent”; the reduction of targets by commissioners due to “mitigating factors”. However those concerns were offset by having a service contract, that was flexible and realistic and where the contract was complemented by regular outcome reconciliation. So if there was a contract that wasn’t working out for either party as expected, alternative arrangements or business continuity measures could be instigated.

Surely one of the most important factors, if not the most important is to reach a deal through agreement not imposition, so as to ensure that all the parties are genuinely incentivised. It is agreed that all results need to be accurately measured, but is the MoJ tolerance levels the best way to achieve that?

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s