Canadian Government Executive - Volume 25 - Issue 03

not only respond to financial pressure. SIBs are also expected to alleviate issues with existing contracting regimes for ser- vice delivery. SIBs offer service providers – typically nonprofit organizations – stable, long-term funding, and greater flexibility in use of the money. This contrasts sharply with government contracts with nonprof- its, which are often project-based, short- term, with restrictions on the use of funds. From the government’s perspective, the characteristics of government contracts are practices of good governance and fi- nancial accountability. However, from the nonprofit service providers’ view, these practices can be rigid, onerous, and often limiting in terms of providing humanis- tic, effective, and individualized services. Without these constraints, SIBs offer ser- vice providers more autonomy and stabil- ity, and less red-tape, all of which are ben- eficial in achieving outcomes. In comparison to social enterprises, SIBs’ not-for-profit social dimension and the for- profit business dimension are relatively separated. One greatest peril of social en- terprises is the constant struggle to balance the social mission with the profit business dimension. In SIBs, the two dimensions are separated via the intermediary agency and through contracts, and they do not reside within one organization. Therefore, one can expect service providers will only expe- rience the conflicts of the two dimensions to a minimal degree. Then a new problem is raised from the perspective of the service provider: if the service provider does not bear financial risk, what mechanism would keep them accountable to achieve the expected out- comes? Three mechanisms can be identi- fied. Financially, failure will lead to the loss of funding in the future and termina- tion of the program. However, a govern- ment contract is also not necessarily per- manent or sustainable; therefore, SIBs do not necessarily offer a larger incentive for service providers to achieve performance targets than the conventional government contract arrangement. Instead, because SIBs frequently have longer terms than government contracts, service providers can perceive non-performance to be less risky under the SIB arrangement rather than under a government contract. A sec- ond mechanism to keep service providers accountable might be their internal val- ues and mission. Similar to a government contract, the government relies on non- profits’ trustworthiness and their internal altruistic values to provide quality ser- vices. Lastly, the intermediary agency in- volved with a SIB can function as an exter- nal monitoring agency. In sum, one may argue that accountability of service pro- viders remains an issue for SIBs, as there is no solid financial accountability mecha- nism except for the first one described above. Nonetheless, due to the influence of the profit motive, service providers may engage in “cherry picking” – intentionally choosing “easy to treat” clients in order to achieve outcomes. The two different targets designed in the Peterborough SIB were there to prevent cherry picking. The “Impact” in “Social Impact Bond” is also a desirable feature of the SIB to both the government and to service pro- viders. What are targeted by a SIB are not conventionally used “performance indi- cators” in government contracts, which are often “inputs” or “outputs” indicators. Instead, “outcomes” are assessed in SIBs. The number of staff members hired is an input measurement. The number of work- shops carried out or the number of clients seen are output measurement. Neither input nor output is necessarily positively associated with the “outcome” of the pro- gram: whether the quality of life of the client is improved, whether the employ- ment workshop did lead to employment. Outcome measurements are more aligned with the objectives of social services, and more accurately reflect program effec- tiveness. Outcome measures can only be achieved if the funding is offered in a long term in a more stable fashion. However, measuring social impact or program out- comes are notoriously difficult, because many social service outcomes are difficult to quantify. How can we identify who are the people that did not die from lung can- cer because of a quit smoking campaign? How can we measure whether the seniors are happier and enjoy healthier lifestyles because of certain services offered? The major promise of the SIB is to bring private investment into the realm of so- cial services. The SIB also brings other expectations: boosting social innovation, stable and flexible funding, cost-savings, risk transfer, evidence-based outcome measures, and quality services. However, there are obstacles lying in the path to achieve these promises: costly arrange- ments, ideological and political chal- lenges, technical challenges in measuring outcomes, and accountability monitoring, just to list a few. The SIB remains a highly promising tool, although more fine-tun- ing and crafting will be needed to further perfect it. The rise of the SIB not only re- sponds to governmental budgetary pres- sure, but it also cannot be possible if pri- vate investors are not interested in social investing. The SIB reflects the trend of the global movement of corporate social re- sponsibility and a business cultural shift toward more ethical practice. Businesses are becoming increasingly more con- scientious of ethical and environmental practices and the consideration of double bottom-lines. Governments that can fos- ter and harvest from this desire can not only gain sustainable financing, but im- portantly, can yield societal benefits in the areas of responsible citizenship, so- cial inequality, and achieve cross-sectoral collaborative governance. Wenjue Knutsen, PhD is an Associate Professor at Queen’s University in Kingston, Ontario. She holds a joint ap- pointment at the School of Policy Stud- ies and the Smith School of Business. Her current teaching and research interests include social enterprises, social investing, and nonprofit and public management. Her research has appeared in various top ranked academic journals. GOVERNMENT 16 / Canadian Government Executive // August/September 2019 The SIB also brings other expectations: boosting social innovation, stable and flexible funding, cost-savings, risk transfer, evidence- based outcome measures, and uality services.