Taxpayer Victory: Paying for Performance

Written by Jeff Johnson on September 22, 2009. Posted in Taxpayer Victory

victoryBoard Unanimously Requires Pay-for-Performance Contracts

The County Board last week unanimously passed a resolution I proposed which will require the county’s Human Services Department and Corrections Department to more widely use pay-for-performance contracts with hundreds of county vendors.In essence, this means that many of the organizations hired by the county to provide services will be paid based upon their ability to prove they have achieved measurable, long-term changes for the people they serve. In my opinion, this constitutes basic accountability in government spending.

The county has been using pay-for-performance contracts with select vendors for the past several years. It is not, however, a widespread practice. Many of our contracts are based solely on “outputs” – how many people a particular vendor served.

For example, if we are paying a vendor to provide re-entry services for criminals who are exiting jail (helping them find a job, a place to live, etc. in order to keep them from returning to jail in the future), vendors are usually paid based upon how many people they attempt to help. Using a pay-for-performance model, we might offer a base payment for numbers served, but a portion of the payment would be made later (maybe six months or a year later) and would be based upon whether the people this vendor served were still holding a job or, more importantly, had returned to jail.

The vendor will only receive that additional payment for those who stayed out of the correctional system for a set period of time, thereby creating an incentive for the vendor to do more than just the bare minimum necessary to receive payment.

This will be a major culture change for many of our vendors and some will not like it, but it is a good step in the direction of accountability and results-oriented government spending. I’m hopeful that this initial project will lead to more pay-for-performance contracts in other areas of government.

The Star Tribune covered this story well last week.

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