General Procurement

Third Sector report says payment by result contracts are flawed

A report, commissioned by the National Council for Voluntary Organisations (NCVO) and authored by legal specialists Bates Wells Braithwaite , found the payment by results (PBR) mechanism in contracts to have “suffered from crude implementation” which has led to missed opportunities to improve public services.

Sir Stuart Etherington, chief executive of the NCVO, said: “Implementing PBR effectively requires intelligent thought and carefully crafted incentives, but many PBR contracts fall well short of this. Crudely designed targets and contracts risk pushing expert voluntary sector providers out of public service provision”.

The study found support for PBR as a concept, but some charities believe PBR contracts have been brought in by commissioners as they are “political flavour of the month”. Other findings showed contracts contained targets that were either “irrelevant or detrimental to the desired outcomes”, and failed to relate to the complex nature of the service.

Sir Etherington said “Paying public service providers for the outcomes they achieve rather than the activity they undertake is a worthwhile principle, but commissioners must work with them in order to design effective contracts.”

Poor contracts are detrimental to all parties, not only the service providers and service users, but also the commissioners, so it is crucial that input is sought from providers and service users at the start of the process.

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