Fit for purpose or fit for payment?

Should payment by results be the new normal in programme funding? In this guest post, Nathaniel Mason, Research Fellow at the ODI, considers the experience of the SWIFT Consortium (Sustainable WASH in Fragile Contexts). He looks at what this funding approach means for the communities that SWIFT works with, and the challenges it presents for donors and implementing agencies.

I’m involved in a payment by results programme providing roughly 850,000 people with drinking water, sanitation, and hygiene (WASH) services in Kenya and the Democratic Republic of Congo. The consortium, called SWIFT (Sustainable WASH in Fragile Contexts), is led by Oxfam and includes Tearfund, ODI , WSUP and a host of other NGOs.

…payment by results reveals how little we know about causal pathways.

Payment by results – what is it and why does it matter?

Payment by results means the donor, the UK Department for International Development (DFID), pays us only once we can prove the work is already done: some payment for completing key activities; some for setting up water and sanitation services and hygiene promotion outreach; and the last portion only if we can show that services are lasting, one and two years down the line. No evidence, no payment.

Justine Greening wants payment by results to be ‘a major part of the way DFID works in the future’. There’s plenty of heated discussion in the research and policy community on payment by results and its variants, but fewer views from the sharp end of delivery.
Clearly, we need to know not just what payment by results means for donors like DFID and the organisations they fund, but also for the people we are trying to reach.

What are we learning from first-hand experience?

A recent event co-hosted with the other consortia funded under this programme (led by SNV and Plan International) gave us a chance to take stock.

What does payment by results mean for the most important client – the communities we are working with?First, the positives. There was broad agreement that the basic principle makes sense: audit what comes out of development programmes, rather than just the money going in. This has important implications. One is that, while collating and verifying evidence places a heavy burden on frontline staff, it generally seems to be driving stronger monitoring and evaluation.

Another is that payment by results reveals how little we know about causal pathways. Committing to results means making a high-stakes bet that intervention X will produce result Y, often on the back of limited evidence. Routinely assessing sustainability, before the provider gets paid in full, should dramatically increase our understanding of what works, when and where.

A focus on evidence, monitoring and evaluation can increase effectiveness over time. But these are broadly about internal ways of working. What does payment by results mean for the most important client – the communities we are working with? I’d highlight four key concerns:

  • Sustainability: We all know how important it is to build local and national capacity if services are to last beyond short NGO programmes. Getting paid only for what you can prove you’ve done discourages working with and through local organisations including governments and utilities, who might be working to different funding arrangements, incentives and deadlines.
  • Voice: What counts as a result, and how it should be measured, is often defined by donors, implementers and verification agencies. Instruments such as household surveys give a crude user perspective, but boil programmes down to a few simple causal chains and indicators. This risks missing what different groups want from services and how they experience them. We strive to define objectives and monitor progress in a more reflective, participatory way, but blunt payment indicators
    earn the money and inevitably attract more attention.
  • Innovation: As our SNV colleagues put it, ‘If we are going to make this commitment at this scale with this level of risk, it can only be to scale what already works’. It’s hard to square that reality with the hope that payment by results could foster innovation, by setting the end destination, while leaving it open to implementers to choose how to get there.
  • Incentives: If adopted widely, payment by results could radically change the internal culture of NGOs, affecting how they relate to both governments and local communities in the places where they work, as well as donors and taxpayers in their headquarter countries. If this funding approach becomes the new normal, will those delivering basic services view their efforts as commitments to be weighed in human dignity, or as commercial transactions to be weighed (and priced) in terms of risk? And what does pricing for
    risk mean for reaching the hardest to reach?

The road ahead

These are the factors that will determine whether services are used, equitably and for the long term, and whether we will find better ways of doing things in future.

Donors and implementing agencies need to find ways around these challenges, either by design or – better – by making sure we have room to learn and adapt as we go. It’s not an either/or choice between up-front grants on the one hand, and payment by results on the other. To my mind, fit-for-purpose means taking the best of different options. That could mean keeping an emphasis on paying for service outcomes, while also providing space (and up-front funds) to try new things, to partner, to adapt and to
innovate – and even to fail occasionally.

Read more

Photo: Pipe-laying in Turkana. Credit: SWIFT’s Oxfam team in Kenya

Author: Nathaniel Mason
Archive blog. Originally posted on Oxfam Policy & Practice.