Payment by results schemes – advice for the Government and advice for contractors

Advice for the Government
I heard on the radio today that the Government will establish a payment by results scheme for a service to reduce recidivism among offenders after a short (less than one year) jail sentence. Currently, approximately 60 per cent1 of such offenders are re-incarcerated within one year – the so-called ‘revolving door’2. Contractors will help released offenders find their way in life; for example by making a deal with housing associations to provide accommodation and providing other sources of support. These contractors will be remunerated in proportion to their success in reducing reoffending. However, the scientific evidence that this will work is not strong3 and there are a number of potential challenges to implementing such a scheme4. These include the potential for gaming of the system and ‘cherry-picking’ certain cases to maximise returns; the difficulty in measuring outcomes that cannot easily be defined or evaluated; where to obtain the payments from as not all savings made from a reduction in crime would be available as money, and that which is, would be from both public and private sectors; and the scale of change possible, as most successful interventions have only produced small changes in outcomes4,5.

More important, from the point of view of the remuneration, is that the extent to which it could work – the effect size – is poorly calibrated. This is because insufficient head-to-head trials have been conducted of different interventions to reduce recidivism. This places the taxpayer at considerable risk of either under and over paying for the service. The corollary is that – payment by results schemes should only be introduced where there is a good way of calibrating cause and effect consequences of the service. I know of what I speak, since I chair the scientific advisory committee for the payment by results scheme for the multiple sclerosis drugs. The idea here is that the drug companies would repay some of the costs of the drugs if they underperform, or the Treasury would provide a retrospective enhanced payment if the drugs worked better than expected. The problem here is that the effect of the drugs has only been properly calibrated after two years of use, whereas the scheme runs for ten years and is concerned with longer term outcomes. So, we have to try and work out whether the drugs are working better or worse than expected, not by means of a proper experiment (head-to-head trial), but by simply observing how well people do on medicine and trying to compare this with a retrospective cohort of patients. This is a very tricky and uncertain business. This problem, of working out how effective interventions are, leads me to advice for contractors.

Advice for contractors
As a contractor, I would choose my ground very carefully. I would try to provide services, in situations where there is likely to be a positive underlying trend. In that case, the underlying trend would contribute to my ‘results’. With the wind behind me I would have a very good chance of making a sturdy profit.

A third way
There is of course an alternative proposition. This would be to bring in the payment by results scheme as part of a prospective, carefully designed study. For example, the intervention (payment by results) could be rolled out sequentially across different parts of the country, where the order was determined at random – a so-called cluster stepped wedge design6. Such a study, if large enough, could be used not only to tell if the general idea of payment by results works, but also to determine which type of scheme is most effective. In other words, it would be possible to get a handle on which types of service provides best outcomes. The Cabinet Office has advocated such experimental approaches to public policy7. I strongly urge the Government to look at its own excellent plan of making policy on the basis of empirical evidence.

1. Ministry of Justice. Table 19a: Adult proven re-offending data, by custodial sentence length, 2000, 2002 to March 2011 in Early estimates of proven re-offending: results from April 2011 to March 2012. 2012 Available from: (accessed 9 May 2013).

2. Cutherbertson P. The failure of revolving door community sentencing. Centre for Crime Prevention. 2013. Available from: (accessed 9 May 2013).

3. Nicholson C. Rehabilitation Works: Ensuring payment by results cuts reoffending. London. Centre Forum; 2011.

4. Fox C, Albertson K. Is payment by results the most efficient way to address the challenges faced by the criminal justice sector? Probation Journal. 2012; 59(4):355-73.

5. Fox C, Albertson K. Payment by results and social impact bonds in the criminal justice sector: New challenges for the concept of evidence-based policy? Criminology & Criminal Justice. 2011;11:395.

6. Brown CA, Lilford RL. The stepped wedge trial design: a systematic review. BMC Medical Research Methodology 2006, 6:54

7. Haynes L, Service O, Goldacre B, Torgerson D. Test, Learn, Adapt: Developing Public Policy with Randomised Controlled Trials. Cabinet Office. Available from (accessed 9 May 2013).


2 thoughts on “Payment by results schemes – advice for the Government and advice for contractors

  1. proxy

    An fascinating dialogue is worth a comment. I feel that it’s best to write more on this matter, it may not be a taboo subject but usually people are not brave enough to talk on such|this kind of} topics. To the next. Cheers


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