Pay for success (PFS) offers an alternative approach to investing in the future, including early childhood education (ECE). An innovative mechanism for public-private partnership, PFS scales an evidence-based social program through up-front capital provided by a private or philanthropic funder. If a rigorous evaluation shows that the program achieved agreed-upon outcomes, the government repays the funder.
Evaluation is perhaps the most critical element in a pay for success (PFS) project's design. Evaluation measures the impact of a program on the people it serves. This is important, not just to determine whether the project met the outcome targets that form the basis for repayment, but also to help estimate whether the program itself caused those outcomes, building the underlying evidence base of the intervention. Regardless of whether the intervention achieves its outcome targets, the evaluation gives us the knowledge we need to further understand what works and what does not.
Procuring a service provider and implementing an intervention in a pay for success (PFS) project require a greater focus on outcomes, performance management, leadership, and organizational strength than in a business-as-usual project.
This report describes key elements of program implementation in early childhood education (ECE) PFS projects. It is part of a larger toolkit for states, localities, and investors considering early childhood PFS projects. Its content is based in part on stakeholders’ experiences with ongoing PFS projects.
Identifying reliable revenue streams for repaying PFS project funders is critical to attracting the up-front capital that shifts risk away from government. To secure both private and philanthropic investors, governments must ensure they can repay funders throughout a project’s life as outcomes are met and success payments come due. Different funders—given their different motivations for becoming involved in PFS—will be willing to tolerate different levels of risk and, therefore, may require different safeguards against a failure to repay according to the terms of the contract.
This report summarizes the available evidence on the impact of selected early childhood education (ECE) programs. Understanding and quantifying the outcomes likely to result from a given intervention is an essential part of planning a pay for success (PFS) project.