The Performance of Performance-Based Contracting in Human Services: A Quasi-Experiment

Abstract

Performance-based contracting (PBC) is becoming increasingly attractive to public human service agencies. By linking contract compensation to contractors’ performance, PBC is expected to foster quality services, to improve outcomes, and to reduce government monitoring. However, empirical evidence on the effectiveness of PBC remains both limited and mixed. Based on a case study of the Indiana vocational rehabilitation program, this article employs a quasi-experimental design to evaluate the effectiveness of PBC for individual employment outcomes over the 2004–09 period, with the Michigan vocational rehabilitation program as a control. Using propensity score matching and difference-in-differences regressions to control for the imbalances between the two states, this article finds that PBC significantly improves employment results and reduces time to employment, two measured performance indicators. However, the impact of PBC on unmeasured employment quality, as indicated by working hours and wages, is trivial. This article further suggests relational contracting as a supplemental mechanism for PBC in human service provision.

Outcome-based contracting for human services

“…There were three quasi-experimental studies (Lu 2014;McBeath and Meezan 2009;Washington et al 2009), two of which looked at the impact of outcome-based contracting on clients, one in child welfare and one in employment. Both found improvement in performance on measures related to payment, but worse performance or no improvement on measures of desirable outcomes not related to payments.…”

“…Most outcome-based employment services contracts have tiers of payment, where people who face more difficulty finding and sustaining work attract higher payments (Department of Employment 2015; Lu, 2014). Despite this, several studies found that the incentives to service the most difficult clients were insufficient: these clients had poorer outcomes, were underserved, or 'parked' (Business Council of Australia 2014; Koning and Heinrich 2013;National Audit Office 2015).…”

“…For example, it is estimated that up to 80 percent of US human services are now being delivered under government contracts with external providers, many of them not-forprofits (Collins-Comargo et al 2011;Koning and Heinrich 2013;Martin 2005). Payments for these services increasingly include a component that is dependent on some measure of outcome (Collins-Comargo et al 2011;Lu 2014;Martin 2005). Outcomes can be defined as changes made to people's lives, or according to Martin (2005, 66) "results, impacts and accomplishment".…”

“…This review focuses on contracts where payments are triggered by some measure of the desired outcomes. The enthusiasm of governments to adopt outcome-based contracting has outpaced the production of evidence on its effect (Collins-Camargo et al 2011;Lu 2014). There has been a reluctance to capture and build on lessons from previous regimes, with new Governments presiding over rounds of consultation and re-launch of contracts, rather than conducting a program of incremental, informed improvements (Abetz 2015).…”

Desempenho do contrato de gestão e a situação econômico-financeira dos hospitais gerais administrados por organizações sociais de saúde: uma análise no Estado de São Paulo

“…Importante destacar que a primeira justificativa para a utilização dos outputs deve-se ao fato de ser o item mais representativo do contrato de gestão, isto é, praticamente todo o desenho e especificação do contrato baseia-se na produção assistencial a ser realizada pelos hospitais gerais. Em segundo lugar, a contratualização baseada em desempenho também pressupõe o foco na produção realizada, ou seja, o contratado é remunerado após a entrega dos serviços pré-estabelecidos no contrato (Lu, 2015 …”