Designing a Pay for Success/SIB Pilot

Case Study: Massachusetts Juvenile Justice

25 September 2014

The information is materially sourced from Third Sector Capital Partners and Roca, Inc.; the two private sector firms selected to lead and implement the largest PFS/SIB transaction in the U.S. to date (and globally).

Risk Mitigation

Significant Unmet Needs

and Targetable Population

Net Financial and/or Social

Benefit

Interventions that Work

Track Record of Credible

Data

Leadership from

Stakeholders

Service Providers with

Capacity to Scale

Reminder: The Key Criteria for a PFS Project

Outputs and Outcomes

Outputs Outcomes

1,302 Youth Served Through Roca Social Impact (Base Case)• 45% reduction in bed days of

incarceration• 30% increase in employment

Rigorous Random Control Trial (RCT) Evaluation)

Government Procurement Tied to Results and Savings

Government Procured Project Management

Path to Sustainability for High Performing Organizations

A New Paradigm for Philanthropy

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Roca’s Record of Reduced Incarceration and Increased Employment

Recidivism Employment

33% Reduction

66%

Reduction

100%

Inc

reas

e

Funds will allow Roca to serve 1,302 very high risk young men through 4.75 years of enrollments.

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A Significant Need: Young Men at High Risk of Incarceration

Each year, approximately 4000 high-risk young men “age out” of the juvenile justice system or are released from probation in Massachusetts.

60% Percent who will be incarcerated at least once within five years of release.

$47,500 Estimated annual average cost per prisoner to Massachusetts; marginal cost is $12,410.

2.55 years Average time spent in correctional facilities.

$291 million

Total incarceration expenses incurred by Massachusetts per cohort of 4,000.

Based on study of 10 years of criminal justice data by the State and completed in 2012. Subsequent studies show slightly different incarceration rates and average sentences.

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Breaking the Cycle of Incarceration

Engagement Behavioral Change

Sustainable Employment

2 Years: Intensive Services 2 Years: Follow Up

Roca’s Intervention Model

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Roca Risks and Opportunities

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OPPORTUNITIES• Expanded level of service delivery including new communities• Expanded service delivery in Boston• Participation in randomized control trial evaluation• Access to public data systems to demonstrate success of model• Establish predominant public funding source• Attract future support and position Roca for future project• Potential for future scale and sustainability• Significant government change

RISKS• Increased public attention, scrutiny and interest• Pitfalls associated with random control trial evaluation• Need to scale up institutional relationships in new communities• Challenges associated with working with MA Probation

Massachusetts Potential to Achieve Savings

Savi

ngs

PFS Payments

Base Case45%

Reduction

Target Case65%

Reduction

Sr. Loan Repayment22% Reduction

There are additional PFS sources not included here.

Incarceration Savings and Payments

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Government Leadership

• Governor’s Announcement• Engagement of State Secretary of Finance

& Administration• Legislative changes to procurement rules• Engagement with Harvard’s Center for

Social Impact Financing• Issuance of Request for Information• Issuance of Request for Proposals• Time & Resources committed to design and

implement

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Commitment of all Stakeholders: The Timeline for Massachusetts PFS/SIB

State announces

program for $27 M of PFS

payments backed by

“Full Faith and Credit”

Structure & Negotiation

s Completed

State makes success

payments for:

- Reduced incarceratio

n - Increased employment

- Job readiness

Roca delivers services Rigorous

and ongoing

evaluation

Success payments replenish working capital

2012

Fall 2013

Years 1-6

Years 5 + 6

Year 6

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Entities Involved in the Project

ENTITY RESPONSIBILITIES

Office of the Commissioner of Probation Refer Youth to Program

Hampden, Middlesex, Suffolk and Essex County Sherriff Depts.

Refer Youth to Program

Department of Youth Services Refer Youth to Program

Exec. Office of Public Safety and Security Refer Youth to Program

Dept. of Criminal Justice Information Services Provide CORI data for a) screening youth and b) measuring success

Exec. Office for Administration & Finance Oversee procurement and payment

Exec. Office of Labor and Workforce Development

Serve as fiscal agent for US DOL grant; provide employment data to measure success

Exec. Office of Education Provide data to measure educational impact

Roca Deliver services to youth

Youth Services, Inc. Serve as fiscal intermediary and project manager

Sibalytics Implement evaluation plan

Public Consulting Group Verify correct implementation of evaluation plan

Investors Provide working capital to YSI

Blue shading: Commonwealth Entities

Yellow shading: Non-governmental entities

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A Public-Private Partnership

- Is the government’s main counter-party- Ensures an integrated service delivery- Is accountable for the outcomes- Arranges the private financing

- Provides service delivery- Scales its operations to serve more youth- Builds upon proven intervention program- Focuses its own staff on outcome metrics

vs. inputs/outputs

Commonwealth of Massachusetts- Moves from prescriptive contracting to outcome-based

contracting- Does not provide service delivery funding- Coordinates among various government agencies to

facilitate service delivery and monitoring- Uses its existing administrative data as basis for

evaluation, thereby lowering M&E costs

Goldman Sachs, Arnold Foundation,

Living Cities, etc.- Take on performance risk- Do “due diligence” on

capacity to deliver outcomes

- Ensure sufficient funds are in place

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