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Watch out for Payment by Results!

2013 April 11

At the Politics of Evidence conference we will be discussing how certain approaches to accountability may undermine the sector’s potential to support transformative development.  Payment by Results (PBR) is one to watch out for. But we have been here before.

PBR in the 19th Century

As Europe and North America industrialised and proceeded to colonize the rest of the world, mind the positivist power of numbers appeared to tame uncertainty in an era of such rapid change. In Britain, site the fondness  for measurable facts led the introduction of ‘payment by results’ (PBR) into elementary schools in the middle of the 19th Century. PBR (aka Cash on Delivery) is when commissioners of services (e.g. a government) pay the service providers only after a pre-determined result has been achieved and independently verified.  The logic of PBR is that there is a manageable level of risk in achieving the result and that service providers must be incentivised to play a more active role.  150 years ago – like today –   the buzzwords were efficiency, value for money (VfM), competition and a balanced budget. At the time PBR was criticised for its mechanistic approach that impeded children’s educational development and sacrificed long term benefits for short term achievements.  By the end of 19th Century PBR was abolished partly due to the increased bureaucracy and administration costs of verifying the results.  PBR had been proven to be inefficient! Fast forward to 2013 when ‘Public bodies seem to be pursuing the use of payment by results with the vigour of a drunk in search of the next bottle of alcohol’, Jon Tizard writes.

Results and New Public Management

‘Results’ discourse reappeared in the mid- 1990’s as part of a broader shift in public-sector management approaches, commonly known as ‘New Public Management’ (NPM). Increasingly dominant since the late 1970s, today NPM in various forms prevails in most OECD countries and is exported through their development agencies to aid-receiving countries. In addition to a strong focus on delivering pre-defined results, NPM includes linking resource allocation to performance, competition between providers of services, greater discipline and parsimony in resource use, and adoption of what is represented as private-sector management practices. Critics argue that performance indicators, when used for control are unreliable: they do not measure performance itself, distort what is measured, influence practice towards what is being measured and cause unmeasured parts to get neglected.

Accountability for results or performance against pre-established objectives is a response to the ‘principal-agent problem’. Because individuals are assumed to be always in pursuit of their selfish interests, policy intentions are likely to be subverted by those designated to implement them.  PBR is becoming increasingly popular in those OECD countries where NPM was first adopted and where less rigorous systems to combat the principal-agent problem have been found wanting. PBR in education has returned. Reporting on one such scheme in the USA the Economist commented ‘ You are transferring from a system where the agents are (to a degree) public-spirited individuals to one that motivates agents to be self-interested’.

Interpreting accountability as ‘the delivery of results’ has also been challenged.  The methods demanded of us to be more accountable can make us less responsible for seriously learning how we can most usefully contribute to transformative social change and be held accountable for our commitment in that respect.

The British Prime Minister has stressed that PBR can tackle intractable social problems, used in the UK and USA to find jobs for the long-term unemployed, break the cycle of re-offending; tackle drug addiction etc.  PBR is used with the front line working with citizens with the least voice and the greatest social distance from those in power. PBR ignores the root causes of their marginalisation. This may explain why PBR is now entering the development sector where people in poverty risk being treated similarly.  In both instances, people are silenced from challenging the technocrats’ framing of ‘the problem’ and from offering alternative ways of thinking about the causes of their poverty.

PBR enters the development sector

In 2008 the World Bank’s Health Results Innovations Trust Fund (HRITF) was established, supported by the governments of Norway and the United Kingdom.  USAID is rolling PBR out across the world in health and family planning programming; the Global Partnership for Output-Based Aid, set up by the World Bank and DFID, is financing PBR projects in a variety of sectors and countries and is also is supporting AusAid and the Asian Development Bank in developing such projects. DFID sees PBR as a ‘promising new instrument’.

Meanwhile, in the UK, PBR is running into difficulties. Tackling long term unemployment is not like ensuring efficient refuse collection. It’s the difference between what Jake Chapman calls unbounded and bounded problems.  The likely effect, notes Tizard, should there be a high risk of not ‘delivering the results’ not for profit organizations will decline bidding for public contracts –  nervous about borrowing the capital for the upfront implementation costs.  I wonder what will happen in the development sector should PBR really take off?   Politicians appear to have forgotten the lessons of history.


2 Responses
  1. David permalink
    April 22, 2013

    We often note that one of the challenges of debates over development is that they neglect the key role of politics in the delivery of services and in channels of accountability. I wonder what the underlying role of politics is in the New Public Management that you note. Several of the theoretical foundations – public goods issues as principal-agent problems, the value of competition to drive solutions, and the Economist’s comment that this lens does not place a value on public-spiritedness of implementing agents by explicitly structuring that they should value only self-interest – sound very similar to typical Chicago-school, neoliberal economic rationalism. In the US, at least, this is strongly linked with a conservative political stream of thought. Several of the critiques implicit in the BPR debates are also similar to the criticisms of rational economics as a model made by behavioral economists. Another article here notes the difference between the utilitarianist-inspired Anglo-Saxon stream of thought and the German stream of thought; this could also describe a difference between more typically right-wing and left-wing perspectives on how societies function in many countries of Europe.

    Do you consider the results-based agenda to be reflective of donor country politics? If so, can we seriously discuss it without discussing the political impulses of political leadership that values (or doesn’t) certain approaches? For bilateral and even multilateral donors, it seems like this debate is part of a larger political discussion.

  2. rosario leon permalink
    April 15, 2013

    El Pago por resultados provoca amensia

    Si,cuando Rosalind Eyben señala que parecería que en la industria del desarrollo no se tiene memoria de lo que este modelo causo en el siglo 19 y se repiten en las ultimas decadas con insistencia y rigurosisdad sistemas depago por resultados no puedo sino pensar que esta practica produce amnesia.
    Entonces ciertamente puede ser que el mismo ejercicio este destinado a ignorar la memoria para enfocar permanentemente el presente como hecho empirico unico. y ser refundadores permanentes de actividades y productos-resultados para seguir dominando un sistema de rendicion de cuentas “siempre positivo.”Siempre triunfalista. La reflexion no cabe en los puentes que van de cualquier parte a ninguna parte ,si los metros y la resistencia del de los materiales del mismo cumplen los requisitos planificados y si la contabilidad del proyecto es implecable.

    Durante los años de trabajo en desarrollo se hicieron y hacen grandes esfuerzos por cumplir e imaginar los resultados y sus indicadores de medicion y verificadores nos volvimos amnesicos o estamos a punto de serlo. Mientras como dice Rosalind estamos olvidando las cusas de la pobreza y sus transformaciones.

    Hace unos dias asisti a la planificacion de un plan estrategico de un organizmo de desarrollo y las bases de las que se partieron fueron muy bien medidas en millones de dolares invertidos -ejecutados, y la alta taza de retorno de los creditos asignados a personas pobres. Tambien se mostraba con orgullo la calidad de clientes que tenian “los que siendo tan pero tan pobres, cumplian con los intereses sin retrazos problematicos . lOS POBRES SON BUENOS CLIENTES ” asi concluyo su presentación, mientras sali de la sala a conseguir un poco de aire a la calle. Me acerque a una vendedora de dulces y cigarrillos, ella amamantaba a su hijo mientras otra niña pequeña dormia en un cajon de carton. Convese con ella y !que casualidad! ,era cliente de un programa parecido de credito para pequeños negocios. Volvi a la sala pensando que lejos estamos de entender los costos de ser buena cliente y que facil resulta impresionar con numeros de tazas de retorno y millones destinados para los pobres.

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