June 25, 2012
In February 2012, the federal Department of Labor, Employment & Training Administration (ETA) held a National Listening Session to share information about the goals for the pilot Pay for Success (PFS) projects, and to invite interested organizations to share their thoughts about the PFS model and how it could be used to address workforce development challenges. Following the Listening Session, ETA developed this FAQ, designed to help organizations – including state, local and tribal governments, intermediaries, funders, and service delivery providers – better understand the basic underlying concept of the Pay for Success financing model.
Subjects covered in the FAQ include: 1) What is Pay for Success?; 2) What entities are involved in projects funded by the PFS model?; 3) Why might state, local, or tribal governments use the PFS financing model?; 4) What is the difference between Pay for Success and Social Impact Bonds?; 5) How is the PFS financing model different from performance-based contracting?; 6) How is ‘success’ measured in the PFS model?; 7) How are savings to the government measured in the PFS model?; 8) Are the intermediaries, service providers, or government allowed to make a profit on the return on investment?; 9) What are some of the negative effects, or perverse outcomes, that could result from poor target population selection or a poorly designed PFS approach? How are they avoided?; and 10) Where can I learn more about Pay for Success?