Traditional grant processes seek programs which can demonstrate they are most likely to succeed, though they do not pay a proportion of that success. Funding levels are capped for all in the application process so that applicants can submit costed activity plans within the cap. These levels are determined by how much the grantor is willing to give at the outset, it cannot grow when funded programs start to return savings. Especially in times of debt and deficit these ‘capped activity’ processes do not reflect actual value of effective programs and are akin to keeping them in Captivity.

It became clear to some in aftermath of the Global Financial Crisis (GFC) that this was self-defeating and so ‘pay for success’ options started to emerge with the intention that the best programs could escape their Captivity. The idea was to have larger contracts based on value and outcomes negotiated between interested program providers and the governments which saved from avoided response costs. These are called Pay for Success contracts in the US or Social Impact Bonds elsewhere. An overview of every such contract since the GFC is on the Impact Bond Database. The contracts have so far mainly been with governments in developed countries. The main issues addressed to date are recidivism, welfare dependence and homelessness – issues with immediate cost savings from a defined cohort.

While most of these completed contracts have achieved their target outcomes, the model has not grown as quickly as hoped because it takes too long to negotiate each contract. While the capable program providers could be quickly selected, it then often took more than a year to determine the metrics, calculate the value of each outcome and research other technical details for an agreement. That approach has been called ‘Ready, Fire, Aim’. Even after all that work, the usual result is only one contract.