Boston, MA. As part of an ongoing effort to improve the way government does business, Massachusetts Governor Deval Patrick has announced the initial successful bidders for two Social Innovation Financing (SIF) contracts, commonly known as “pay for success” contracts. Nixon Peabody, under the leadership of Navjeet Bal, counsel and former commissioner of the Massachusetts Department of Revenue, is providing pro-bono legal counsel to the Commonwealth for this initiative. Nixon Peabody lawyers from a variety of disciplines are working together to structure this innovative “pay-for-success” contract.
Massachusetts is the first state in the nation to issue a competitive procurement to obtain services using social innovation financing. Funding for the Commonwealth’s program would be paid from budgetary resources, only if the programs deliver better social outcomes and savings to the state budget. As the first state to carry out this sort of procurement, the Commonwealth expects to be well-positioned to compete for any federal funding that may be available in the future.
Performance-based investments will help encourage innovation and tackle challenging social issues. New and innovative programs have potential for success, but often have trouble securing government funding because it can be hard to rigorously prove their effectiveness. Social innovation financing allows the government to partner with innovative service providers and, if necessary, private foundations or other investors willing to cover the up-front costs and assume performance risk to expand promising programs, while ensuring that taxpayers will not pay for the programs unless they demonstrate success in achieving the desired outcomes.
Third Sector Capital Partners and the Massachusetts Housing and Shelter Alliance (MHSA) are the two organizations selected to negotiate contracts with the Commonwealth as social innovation financing intermediaries for reducing youth recidivism and chronic homelessness, respectively.