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Pay for Success Contracting: The Emerging Paradigm

Pay for Success (PFS) contracts provide a way for governments to test human service programs through the private sector and only pay if the program delivers on its promised results. Although they have been in existence for just five years, PFS contracts have generated a great deal of interest around the world in that short time. There are now more than 50 PFS contracts underway or completed globally, with 11 in the United States. As more PFS contracts start and conclude, elected officials and government employees will have more case studies and data available to guide their decisions. This paper is intended as a primer for policymakers on the emerging paradigm of PFS contracting. The first section describes how PFS contracts work, section two provides a brief history of their development, section three considers the rationale for these contracts, section four describes a three-part valuation method, section five considers challenges, section six looks at some examples, section seven at lessons, and section eight has concluding thoughts.

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