For Immediate Release - August 01, 2012

Massachusetts First State in the Nation to Announce Initial Successful Bidders for 'Pay for Success' Contracts

Commonwealth pursues next steps for performance-based investments to spur innovative solutions to social issues, achieve better outcomes and save money

BOSTON – Wednesday, August 01, 2012 – The Patrick-Murray Administration today announced the initial successful bidders for two Social Innovation Financing (SIF) initiatives using pay for success contracts.  As part of an ongoing effort to improve the way government does business, the Commonwealth has taken the next step toward finalizing these agreements to address juvenile justice and chronic homelessness.

“We need to invest in innovative ideas and strategies to tackle challenging, long-term social issues,” said Governor Deval Patrick. “The results-oriented nature of Social Innovation Financing contracts will help us improve services and build a better Commonwealth for the next generation.” 

“Our Administration is pleased to partner with these innovative organizations who share our commitment to providing quality service and care for Massachusetts residents,” said Lieutenant Governor Timothy Murray.  “We continue to think innovatively to solve complex issues such as addressing housing and homelessness, and we look forward to further addressing the needs within the community, creating positive results, and delivering savings for the Commonwealth through these partnerships.”

The Executive Office for Administration and Finance (A&F) – in partnership with both the Executive Office of Health and Human Services and the Department of Housing and Community Development – has started negotiations, and hopes to enter into contracts this fall, pending final agreements.  The Legislature passed a bill to establish a mechanism for the state to fund this initiative, which Governor Patrick signed into law in July.

“We are thrilled to reach this important next step in the process, and we look forward to productive negotiations,” said Secretary of Administration and Finance Jay Gonzalez.  “Through this innovative public-private partnership and financing arrangement, the Commonwealth will pay only if better social outcomes are achieved at lower cost- a true ‘win-win’ for taxpayers.”   

The Commonwealth will pursue pay for success contracts in two initial areas:

Juvenile Justice

The Administration will be partnering with social entrepreneurs to support youth aging out of the juvenile justice and probation systems so as to assist them in making successful transitions to adulthood. This contract will be designed with the specific goal of reducing recidivism and improving education and employment outcomes over several years for a significant segment of the more than 750 youth who exit the juvenile justice system, and the several thousand who exit the probation system annually.

“This innovative program will ensure that our most at risk youth can transition from the juvenile justice system into adulthood, with more opportunities for success in education and employment,” said Secretary of Health and Human Services Dr. JudyAnn Bigby.

Third Sector Capital Partners, in partnership with New Profit Inc., has been selected to negotiate with the Commonwealth as Social Innovation Financing Intermediaries for the Juvenile Justice contract.  Requests for responses for these initiatives were posted in January 2012.   

Roca and Youth Options Unlimited have been selected as providers for the juvenile justice initiative.  United Way of Massachusetts Bay and Merrimack Valley will also participate in this initiative.  

Third Sector Capital Partners is a nonprofit organization that delivers strategic financial solutions in support of evidence-based programs that serve the nation's most vulnerable communities. Using a customized and collaborative approach, Third Sector provides advisory services to governments, funders and service providers interested in exploring social innovation financing and nonprofit growth capital services. Third Sector will serve as lead Intermediary for the juvenile justice project. Third Sector Capital Partners is not affiliated with Third Sector New England.

“Our communities deserve to receive the most effective social services available, and innovative financing techniques can help make that happen. Third Sector is excited to build collective leadership around this new concept to generate better outcomes for Massachusetts’ most vulnerable populations. We are delighted to have been selected to support both the juvenile justice and chronic homelessness initiatives in the Commonwealth,” said George Overholser, CEO and Co-Founder of Third Sector Capital Partners.

New Profit Inc. is a 14 year-old nonprofit organization devoted to finding and growing new ways to scale the most effective solutions to our nation’s most pressing social problems.  As a venture philanthropy firm, New Profit provides large, multi-year operating grants, strategic support and robust networks to outstanding leaders seeking to grow and strengthen their impact, and transform the fields in which they work.  New Profit also drives a social innovation policy agenda aimed at finding ways to align private and public resources to direct resources to the solutions that create the greatest results for communities.  

“We are extremely pleased to play a role in advancing this groundbreaking effort,” said Tripp Jones, Managing Director. “The time is ripe for more public and private sector leadership and collaboration focused on pay for performance and social financing innovation.”

United Way of Massachusetts Bay and Merrimack Valley (UWMB) brings communities together to help improve people’s lives and strengthen neighborhoods. Working with key partners, UWMB facilitates the mutual exchange of research and best practices, with an emphasis on proven strategies intended to shape the work of all nonprofits in the region.

"Social Innovation Financing takes our shared values of collaboration, innovation and measurement of success to a whole new level in the Commonwealth," said Michael K. Durkin, president of United Way of Massachusetts Bay and Merrimack Valley.  "We are proud to partner in this ground-breaking work by applying United Way's expertise in measuring nonprofit performance and helping to bring together the people and organizations with the research, resources and passion to significantly improve people's lives and create transformational change that will impact generations."  

Roca’s nation-leading intervention model has been successfully helping the most high-risk young people break the destructive cycles of poverty, violence and perpetual incarceration. Using data and performance measures to guide all its efforts, Roca’s model pushes young people to identify, confront and overcome destructive behaviors and learn the skills needed to re-engage and succeed in society, education, and the economy.  

“Roca is pleased to join the state, Third Sector, New Profit Inc., and our other partners in this nation-leading endeavor to transform the way we work to change  the lives of the highest risk young people,” said Molly Baldwin, founder and CEO of Roca. “Our efforts combine the hardest, most intensive street work with data-driven performance management focused on only the best outcomes. We think this new model will benefit the state, those who back these programs and, most importantly, the young people and communities we intend to transform.”

Youth Options Unlimited (YOU), a program of the Mayor’s Office of Jobs and Community Services, provides a broad range of services to court and gang involved youth including case management, transitional jobs programs and educational placement assistance. 

“I believe we cannot leave behind any young person, and I believe in second chances,” said Mayor Menino.  “In Boston we are determined to put out a helping hand leading back to education, work, and positive behavior to those who want to turn their lives around and become productive citizens – that is the mission of Youth Options Unlimited.  Boston is ready to fully participate in the Social Innovation Financing initiative and I applaud our state partners for finding a pioneering way to support youth violence prevention programming.”

Chronic Homelessness

The Administration will also be partnering with social entrepreneurs to provide stable housing for several hundred chronically homeless individuals. The goal of the initiative will be to improve the well-being of the individuals while simultaneously reducing emergency shelter and Medicaid costs.

“We are excited to launch this innovative partnership that will leverage private resources to address chronic, individual homelessness in the Commonwealth,” said Department of Housing and Community Development Undersecretary Aaron Gornstein. “This contract will advance our housing-first strategy and inform our approach to other housing issues in the future.”

The Massachusetts Housing and Shelter Alliance (MHSA) has been selected to negotiate with the Commonwealth as Social Innovation Financing Intermediaries for the Homelessness contract. MHSA is developing innovative solutions to the state’s homelessness crisis with multiple human service providers statewide.  MHSA will partner with the Corporation for Supportive Housing (CSH), Third Sector Capital Partners and the United Way of Massachusetts Bay and Merrimack Valley.  Provider partners will be announced in the coming weeks. 

“MHSA has long advocated for the replication of outcome-based strategies to end homelessness,” said Joe Finn, Executive Director of MHSA. “All of us are excited for the opportunity to bring permanent supportive housing solutions to scale for some of the poorest and most disabled persons in the Commonwealth.”

For over 20 years, Corporation for Supportive Housing (CSH) has led the national supportive housing movement. It helps communities throughout the country transform how they address homelessness and improve the lives of very vulnerable people. CSH develops innovative program models, provides research-backed tools and training, offers development expertise and capital, and collaborates on public policy and systems reform.

“It’s imperative that states work to pull people with the most complex issues out of the revolving door of homelessness and costly crisis health services,” said Deborah DeSantis, President and CEO. “Research shows supportive housing’s promise in dramatically improving health outcomes for tenants. This tremendous partnership and the Commonwealth’s leadership offer an exciting and innovative way to bring this solution to the most vulnerable people in Massachusetts and a new model for the nation.”

Massachusetts is the first state in the nation to issue a competitive, transparent procurement to obtain services using social innovation financing. While final details of these contracts are still under negotiation, funding for the Commonwealth’s program would be paid from budgetary resources, but only if the programs deliver better social outcomes and savings to the state budget.

President Obama’s FY 2012 budget included a proposal to invest $100 million in “pay for success” projects in seven pilot areas including job training, education, juvenile justice and care of children with disabilities. As the first state to carry out this sort of procurement, the Commonwealth expects to be well-positioned to compete for any federal funding that may be available in the future. 

Performance-based investments will help encourage innovation and tackle challenging social issues. New and innovative programs have potential for success, but often have trouble securing government funding because it can be hard to rigorously prove their effectiveness. Social innovation financing allows the government to partner with innovative service providers and, if necessary, private foundations or other investors willing to cover the upfront costs and assume performance risk to expand promising programs, while assuring that taxpayers will not pay for the programs unless they demonstrate success in achieving the desired outcomes.

The Commonwealth has received analytic help for this initiative from the Harvard Kennedy School's Social Impact Bond Technical Assistance Lab, which was established with seed funding from the Rockefeller Foundation. 

“This new approach to financing social programs has the potential to accelerate progress in addressing social ills, and is also designed to provide that the Commonwealth will pay only if the project succeeds,” said Harvard Professor Jeffrey Liebman, who heads the Technical Assistance Lab.

Nixon Peabody is providing pro-bono legal counsel to the Commonwealth for this initiative.